King’s Motors (Oxford) Ltd v Lax

King’s Motors (Oxford) Ltd v Lax [1969] 3 All ER 665

Contract – Option for Renewal – Void for Uncertainty

Facts

The parties had a lease for seven years. The lease contained an option for renewal for a further term of seven years on the same terms as the existing lease, ‘at such rental as may be agreed upon by the parties. When the lessor gave notice to terminate, the lessee sought a declaration that the notice was void for uncertainty because the main provision of the agreement in the form of the rent payable was only to be agreed in the future.

Issues

Whether or not the option for renewal was void for uncertainty. Whether or not the phrase ‘at such rental as may be agreed between the parties’ was meaningless, considering the option also stated that the terms would be ‘the same’ as the existing lease and so could be disregarded.

Decision/Outcome

The option for renewal was void for uncertainty. The major part of the rental agreement in the form of the amount of rent payable could not be determined. The clause was therefore no more than an agreement to agree and was as a result unenforceable. The court was not able to imply a term suggesting that the rent be ‘reasonable’ as in Foley v Classique Coaches Ltd (1943) 2 KB 1 because in that case there had been an arbitration agreement contained within the contract which allowed a mechanism for the settlement of this issue, whereas in this instance, there was no such agreement. In these circumstances, the court was unable to uphold the renewal clause, as it was no more than a mere agreement to agree and not an enforceable contract.