The case of Gold v BDW Trading (formerly Barratt Homes) concerns a Development Agreement entered into in August 2007 for the development of houses and flats under which Gold (the land owner) and Barratt (the developer) would share the revenue, subject to the sale price of the units. The Development Agreement required work to commence in June 2008 with completion in January 2011.
Barratt did not start work as required and argued that the “Minimum Price” provisions for each unit were a pre-condition to commencement. As it had received advice on the falling property market it was not obliged to start work. It also argued that the Agreement had been frustrated by virtue of the fall in property prices and that Gold was in breach because it had failed to renegotiate the Minimum Price provisions.
Gold argued that there was no reason why Barratt should refuse to start work, and therefore Barratt was in repudiatory breach of contract.
The Court decided that the Minimum Price provisions were there to protect both parties and apportion risk. They were not a condition precedent and were contrary to other terms requiring Barratt to carry out and complete the works.
The Court also rejected the frustration argument on the basis that: (1) both parties contemplated the fall in property values; (2) the Minimum Price provisions could have been renegotiated; and (3) the falling property market was not an “event” which could frustrate the contract.
Therefore, Barratt was in breach of the Agreement for failing to commence and carry out the works and its obvious inability to complete by January 2011. This amounted to a repudiatory breach, but subject to Barratt’s arguments that: (1) Gold might also be in breach of contract for failing to renegotiate the Minimum Price provisions; and (2) it was unclear whether Gold had accepted the repudiation.
COMMENT
Whilst the decision turns on the particular provisions of the Development Agreement the messages to take away are that (1) Development Agreements should be carefully drafted and should anticipate future events which could affect their financial viability; (2) it is unlikely a Development Agreement can be frustrated by the falling property market; and (3) if one party alleges a repudiatory breach, the innocent party should use clear language to demonstrate that the repudiation has been accepted so that it can assert its right to claim damages.
