Rachel Walbourn
- Partner
- Housebuilders & Residential Development
Termination clauses: start as you mean to finish
Nobody wants to kick off a contract negotiation with a discussion about what to do if everything goes wrong. But the recent Court of Appeal decision in Henley Developments 211 Limited, Henley Property Investments (UK) LLP v Weston Homes Plc [2025] EWHC 3200 (Ch) serves as a reminder that termination clauses do need careful consideration –and ideally long before you need to rely on them.
What happened?
The Seller, Henley Developments, obtained outline planning permission for a residential development site in Ebbsfleet, Kent and exchanged contracts to sell one of the development parcels to Weston Homes for £14,500,000. Weston Homes paid a 5% deposit on exchange.
The sale contract was conditional on Weston Homes obtaining satisfactory reserved matters approval. It imposed on Weston Homes a fairly standard set of planning obligations, including a general requirement to use “all reasonable and commercially prudent endeavours” to satisfy the planning condition as soon as practicable. If Weston Homes breached any of its obligations and did not remedy that breach within a reasonable time of being asked to do so, Henley could terminate the contract and keep the deposit.
The contract also provided for a long stop date: if satisfactory planning permission was not obtained within six months of the reserved matters application being submitted, either party could terminate the contract and Weston Homes would get its deposit back.
The long stop date came and went. The planning application was still pending. Weston Homes accordingly terminated the contract and requested its deposit back. Henley claimed that the only reason planning permission had not yet been granted was Weston Homes’ failure to comply with its planning obligations, and that Weston Homes should not be allowed to profit from its own breach by terminating the contract and getting its money back.
Key takeaways
This case illustrates the importance of thinking through how and why a contract might come to an end, and what the consequences should be in each scenario –even though this is often the last thing on everyone’s mind in the run-up to exchange
Any party wanting to terminate for breach should always check what other rights to terminate exist under the contact –both to see what its own options are, and in case it needs to act quickly to prevent the other party getting in first.
Planning extension wording can make a real difference: if the contract had allowed the long stop date to run on until a planning decision notice had been issued, then the question of termination might never have arisen.
The court’s decision
The Court of Appeal acknowledged that there is a general presumption in contract law that a party should not be allowed to rely on its own breach to extricate itself from its contractual obligations. However, this is only a presumption, not a hard and fast rule, and the parties to a contract are free to agree something different. The starting point in any dispute will therefore always be the wording of the contract itself, particularly where that contract has been professionally prepared and heavily negotiated.
In this case, the parties and their advisers had clearly given a lot of thought to termination and its consequences in various different scenarios. The termination right which Weston Homes had relied on stated clearly and unequivocally that either party could terminate if planning had not been obtained by the long stop date. There was nothing to suggest that this right should be taken away if one party happened to be in breach at the time. In fact, there was a separate, detailed clause dealing with termination for breach -and this is the route which Henley should have used if it wanted to hold on to the deposit. Weston Homes was therefore within its rights to terminate the contract, and if it had breached its planning obligations then Henley could claim for damages.
This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.
Meet the team:
Liam Floodgate
- Partner
- Housebuilders & Residential Development
Harriet Forster
- Partner
- Housebuilders & Residential Development
