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Break Clauses: comply with express requirements of the clause or else

In a significant judgment on Thursday this week, given in Friends Life Ltd v Siemens Hearing Instruments Ltd [2014] EWCA Civ 382, the Court of Appeal overturned the law relating to break clauses and ruled that in the field of unilateral contracts there was no room for notices to only be substantially complied with. It was held that without satisfying the express requirements of the clause then the notice would be invalid.

The case concerned a lease for 25 years with a break clause which stated that any notice given by the business tenant exercising the break “must be expressed” to be given under section 24(2) of the Landlord and Tenant Act 1954 (the “Act”). The tenant served the notice of its intention to break the lease within the appropriate time period and in compliance with the break clause in all other respects, however, failed to explicitly refer to section 24(2) of the Act. The judge at first instance found that the notice, despite not referring explicitly to the Act, would not be invalidated.

The Court of Appeal overturned the judgment and did not accept the tenant’s argument that there was sufficient compliance with the requirements of the clause to demonstrate what the intention of the notice was. It was held that because the break clause required that the notice be “expressed” to be given under s24 (2) of the Act then it would not be enough to conclude that it conveyed the message implicitly. A requirement that the notice “must” be expressed in a particular way could not be downgraded to a permissive provision.

The decision highlights the importance for tenants to comply with the express requirements of a break clause and emphasises the fact that emphatic and imperative wording cannot be ignored. A half hearted attempt to comply with the conditions of the clause will not be good enough and could be costly.