Industrial Equity Ltd v Blackburn

Industrial Equity Ltd (the appellant) sought to recover possession of land from the respondent, Ms Blackburn, who occupied the land under a lease. The dispute concerned the interpretation of a clause in the lease agreement which stipulated that the rent payable would be "such sum as shall be agreed between the parties from time to time". The appellant argued that this clause meant that the rent was to be determined by agreement, and if no agreement was reached, the lease was void for uncertainty. The respondent contended that the clause provided a mechanism for determining rent, and that in the absence of agreement, the rent should be a reasonable rent. The matter came before the High Court of Australia.

The High Court was required to determine whether the rent clause in the lease agreement was void for uncertainty, and consequently, whether the lease itself was void. Specifically, the court had to consider whether the phrase "such sum as shall be agreed between the parties from time to time" constituted a binding obligation to agree on rent, or whether it rendered the agreement on rent, and thus the lease, unenforceable.

The High Court, by majority, held that the clause was not void for uncertainty. The court reasoned that where a contract contains an agreement to agree, and that agreement is essential to the performance of the contract, the contract may be void for uncertainty. However, in this instance, the court found that the parties had intended to create a binding lease, and the agreement to agree on rent was a mechanism to facilitate the continuation of the lease. The court applied the principle that courts will endeavour to give effect to commercial agreements where possible, and that an agreement to agree on rent, in the context of a lease, implies an obligation to negotiate in good faith. If good faith negotiations failed, the court indicated that it might be open to implying a term for a reasonable rent, or that the parties would be bound to reach an agreement.

The High Court allowed the appeal, finding that the lease was valid and enforceable.