The ongoing dispute between Marks & Spencer (M&S) and their landlord - BNP Paribas Services Trust Company (Jersey) Limited (BNP) - relating to repayment of rent after exercising a break clause was finally decided by the Supreme Court in December 2015.
Background
The break clause included conditions:
M&S paid the break premium and a full quarter's rent as well as other sums due, to ensure that their four leases were effectively terminated on the break date.
M&S argued that, whilst there was no explicit wording in their leases to this effect, the rent that they had paid for the period from 24 January 2012 until the end of the quarter should be returned to them. Initially, the High Court found for M&S, although this was reversed on appeal as the test for implying a term into the contract was not met.
The Supreme Court's Decision
M&S appealed to the Supreme Court and they recently gave judgement on the matter, in which they comment on when a term may be implied into a contract.
For a new provision to be implied in a contract it must:
The Supreme Court also agreed with previous judgements that the implication of a term using the last two tests above was not critically dependent upon proof of the actual intention of the parties at the time the contract was entered into.
Approaching these tests by reference to what the parties would have agreed, requires consideration of notional reasonable people in the position of the parties at the time of contracting. Furthermore, if considering these tests by reference to the officious bystander, it is vital to formulate the question to be posed with the utmost care.
As M&S found, it is difficult to imply terms into a contract to deal with a previously unforeseen situation.