The case of Rennie v Westbury Homes (Holdings) Limited involved a ten-year option to buy land granted to Westbury by Mr Rennie. The option could be extended if Westbury served a notice requiring an extension and paid a further option fee of £20,000 to Mr Rennie.
The initial option expired at midnight on 16 September 2002. Westbury’s solicitors, however, believed it to expire on 17 September 2002.
On 12 September 2002, Westbury’s solicitors wrote to Mr Rennie’s solicitors saying that they would shortly be placed in funds for the extension of the option for a further five years. A request was made for bank details to be provided. There was no response and the money was duly transferred on 17 September 2002.
Mr Rennie argued that the option had not been extended as Westbury had been a day late. Westbury, however, argued that the letter was sufficient to amount to notice to extend the option.
The Court held that the letter, which merely requested Mr Rennie’s bank details, was enough to amount to a valid notice extending the option period for a further five years even though it was never intended to be a notice extending the option period and even though the £20,000 payment was not made before the expiry of the initial option period. Indeed, it seems that there had not even been any formal board authority for the extension.
The Court found that the relevant clause required the notice to be served by the end of the option period but did not require payment to be made by that time. Instead, an implied term was inserted requiring payment to be made within a reasonable period.
Better drafting could certainly have avoided the problems in this case. For example, steps could have been taken to agree in advance the form of notice to be served. Also, there could have been more precision about the date and manner of payment. Furthermore, any correspondence could include reference to whether or not it amounted to a contractual notice. As already mentioned, Westbury’s board had not actually approved the extension of the option and the correspondence could have made reference to that fact. The final point to note is that any notices should be served at the earliest opportunity so as to avoid any errors, missed deadlines or doubt as to whether a notice has been served in time.