Common Sense Prevails In Contract Termination Case

A party to a bilateral conditional contract is not allowed to exercise a right to terminate the contract because a condition has not been satisfied, where failure to satisfy the condition was caused by the party seeking to terminate.

The High Court in England and Wales reached the foregoing (but seemingly not foregone) conclusion in the case of Extra MSA Services Cobham v Accor UK Economy Hotels.

Background

The case concerned a development agreement for lease in relation to a hotel.  It was a condition of the agreement that Extra would procure the necessary permissions, consents, etc. for the development. Extra undertook to use all reasonable endeavours to satisfy that condition as soon as possible after the date of the agreement. There was a mutual right to terminate in the event that the condition had not been satisfied by a longstop date.