In Davies v Jones, Mr Jones contracted to sell a property to the supermarket, LIDL. At the time the contract was entered into, the property was owned by the claimants, who were trustees. Mr Jones subsequently entered into an agreement with the claimants to purchase the property from them (the "Jones-trustees contract"). Prior to the completion of both contracts, Mr Jones assigned his right, title and interest in the Jones-trustees contract to LIDL. The original contract between Mr Jones and LIDL was terminated. The claimants transferred the property direct to LIDL.
Clause 18 of the Jones-trustees contract provided that Mr Jones would retain the sum of £100,000 from the purchase monies until certain works had been carried out by him following completion. Mr Jones was entitled to keep half of the cost of the works from the retention. The balance was to be released to the claimants.
In the event, the works were carried out by LIDL, not by Mr Jones. On completion of its purchase, LIDL had paid the claimants the purchase price owing under the Jones-trustees contract. The claimants had then returned £100,000 to LIDL as the retention. In these proceedings, the claimants were seeking to recover the retention from LIDL.
The High Court ruled that LIDL was bound to observe the terms of clause 18, and therefore to pay the £100,000 to the claimants. Its reasoning was that this was a burden which was dependent on the benefit LIDL took under the Jones-trustees contract. LIDL appealed to the Court of Appeal.
The claimants relied on the case of Halsall v Brizell. That case concerned a right to use roads and sewers, subject to payment of part of the cost of upkeep. The defendants, who were successors in title to the original grantees, refused to pay their contribution. The High Court ruled that the defendants could not take advantage of the benefit of the deed (the right to use the roads and sewers) without undertaking the obligations in it (contributing towards maintenance).
The Court of Appeal in Davies v Jones agreed that conditions can be attached to the exercise of a right. However, it ruled that:
- the condition must be imposed by the same transaction as the grant of the right
- the benefit must be conditional on, or reciprocal to, the burden
- the person on whom the burden is alleged to have been imposed must have, or have had, the opportunity of rejecting or disclaiming the benefit.
Here, the assignment of the benefit of the Jones-trustees contract was not made conditional on LIDL performing the obligations of Mr Jones under that contract. Neither did the transfer from the claimants contain an obligation on LIDL to carry out the works.
On that basis, LIDL was not bound by the provisions of clause 18 of the Jones-trustees contract.
Things to consider
It is an established rule of English law that an assignment of a contract can only transfer the benefit of that contract, not the burden.
If the claimants' consent to assign the Jones-trustees contract was required, the claimants could have given their consent subject to a condition that LIDL entered into a separate contractual relationship with the claimants, in which LIDL agreed to perform Mr Jones' obligations relating to the retention.