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"Timely" Reminder On Missives

"Timely" Reminder On Missives

If a contract states it may no longer be enforceable after two years then beware - this is what may really happen.

In a recently decided but as yet unreported case, a court has agreed with the arguments put forward by Burness Paull & Williamsons, that a contract purporting to be for a ten year lease could in fact be terminated after only five.

In this case a fairly standard contract (missive) for a ten year lease contained a fairly standard clause.  This stated that the missives would cease to be enforceable after a period of two years, except in so far as they had already been founded upon in court proceedings. The contract also provided a timetable for issue and signature of the principal lease by the parties shortly following the entry date. 

However, the principal lease was not in fact issued or signed, and the contract simply continued on the basis of the missives. 

Two years down the line and the lease had still not been signed and no court proceedings to enforce this had been initiated.  The court agreed that the formal written lease as constituted by the missives therefore came to an end, two years following the entry date - not ten.

BUT - the lease continued. 

The Scottish common law doctrine of “tacit relocation” means that certain leases are automatically renewed on a year to year basis, on the same terms, until either party formally terminates the arrangement.  In this case, while the formal contract ended after two years, tacit relocation meant the lease continued yearly until, finally, a formal notice to quit was issued by the tenant terminating the lease after a total period of five years– not ten.

The court agreed that both parties had allowed the original missives to fall.  Although both had the opportunity to enforce the terms, including relating to signature of the ten year lease, no action was taken. 

This case is a timely reminder to us all to set our alarms to ensure that important contractual dates are not forgotten and, where necessary, court action is taken to enforce terms to avoid significant rental loss.

Audrey Harrow
Associate

Alan McMillan
Partner

LChalmers