Thomas Hughes owned property leased to the Metropolitan Railway Company at 216 Euston Road. Under the lease, Hughes was entitled to compel the tenant to repair the building within six months of notice. Notice was given on October 22, 1874 from which the tenants had until April 22, 1875 to finish the repairs. On November 28, the tenant railway company sent a letter proposing to purchase of the building from Hughes. Negotiations began and continued until December 30th, at which point nothing was settled. Once the six months had elapsed the landlord sued the tenant for breach of contract and tried to evict the company. The tenant completed the repairs in June. Hughes was successful at trial but was overturned on appeal.
- Was there an implied promise that the six month term would be suspended during the negotiations?
The House of Lords affirmed the Court of Appeal
Cairns, writing for the court, says that it would be unfair for the plaintiff to take advantage of the defendants by negotiating with them and stalling, allowing the six months to expire and then suing them. However, he finds that this was not the case. They did not intend to take advantage of the defendants; they simply thought that the six month period was over. The judge states that through their dealings both parties made it inequitable to count the time of the negotiations as a part of the six months. The defendants relied on this promise, and therefore it would be unfair to make them liable in this case. The implied promise is enough to allow estoppel to apply.
If a promise is implied in negotiations and one party relies on that promise then it is inequitable to allow the other party to act as though the promise does not exist.