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Co-operative Insurance v Argyll Stores

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Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1997] 2 WLR 898

Contract law – Specific performance – Covenants

Facts

The plaintiffs granted a lease to the defendant for the use of a unit in a shopping centre for the period of thirty-five years. A clause in the lease required a covenant to keep the premises open for trade during regular business hours in the local area. The premises were used as a supermarket and happened to be the biggest attraction in the shopping centre. The defendants subsequently reviewed their business and closed 27 of their supermarkets, with this particular supermarket being one of those. The plaintiffs allowed the defendants to remain in the marketplace, offering a concession on the rent but without response, the defendant closed the supermarket accordingly. The plaintiff brought an action seeking specific performance and/or damages. The judge found in favour for damages but rejected specific performance. The plaintiffs appealed and the Court of Appeal ordered specific performance. The defendants appealed.

Issue

The issue for the court was whether the clause in the contract was specific enough to enable the plaintiff to enforce specific performance of the contract by the defendant. Specifically, it was important for the court to consider the position of the parties if they found specific performance possible.

Held

The House of Lords allowed the appeal on the basis that the defendant would likely suffer greater loss by being forced to perform the contract than the plaintiff would if the defendant did not carry out the contract as agreed. This would place the plaintiff in an unfair bargaining position. Moreover, the clause in the agreement was not specific enough to be capable of specific performance.

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