Arnold v Britton

Clear contractual words will be given their natural meaning even if the result is a bad bargain for one party.

Citation
[2015] UKSC 36, [2015] AC 1619
Court
UK Supreme Court
Year
2015
Subject
Contract Law
Topic
Terms of the contract

Facts

Oxwich Leisure Park in the Gower Peninsula contained holiday chalets let on 99 year leases granted from the 1970s onwards. Many of the leases required the tenant to pay a service charge in the form of a proportionate part of the landlord's costs, in the yearly sum of £90 for the first year, increasing by 10 per cent compound every year. Because inflation fell after the leases were granted, the charge became huge: by 2072 it would be over £550,000 a year for each chalet. The tenants argued that the clause should be read as requiring them only to pay a fair proportion of the landlord's actual costs, subject to a maximum of £90 increasing by 10 per cent a year.

Legal principle

The Supreme Court held, by a majority, that the clause meant what it said, so the tenants had to pay the fixed escalating sums. Lord Neuberger said that the court must focus on the meaning of the relevant words in their documentary, factual and commercial context, and that commercial common sense and surrounding circumstances should not be used to undermine the importance of the language of the provision. The clearer the natural meaning, the more difficult it is to justify departing from it. Commercial common sense is assessed at the time the contract was made, and the court should not rewrite a contract to relieve a party from a bargain that has turned out badly. Lord Carnwath dissented.

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