UK: A Lidl More Certainty In Commercial Negotiations

Last Updated: 6 June 2018
Article by Keith Conway

Most Read Contributor in UK, December 2018


The case concerned a 'subject to contract' arrangement between Generator and Lidl to buy land at an Industrial Estate in Brentwood, Essex for the purposes of developing a supermarket and a number of residential units. After extensive negotiations and efforts, Generator allowed Lidl to buy the land on behalf of the proposed joint venture knowing the terms of the joint venture were still being negotiated between Lidl and Generator. Once Lidl acquired the land it subsequently reneged on the proposed joint venture, denying Generator any interest in the land and its future development.

We discussed the 2016 High Court decision in an earlier Real Estate Bulletin. The Court of Appeal has very recently considered and rejected Generator's appeal.

The Law

Put simply, a Pallant v Morgan equity will arise when two parties agree that one will acquire property (with the other refraining from the acquisition) for the joint benefit of both, on terms which are not yet finalised. In such circumstances, a constructive trust may arise.

This was the case in the Banner Homes Holdings Ltd v Luff Developments Ltd (No 2) [2000]. There was an informal agreement to form a joint venture and develop a site. However, Luff changed its mind without informing Banner and acquired the site in its sole name and then reneged on its informal agreement with Banner. The court held that a constructive trust was created in favour of Banner. Subsequent courts have been reluctant to apply Banner to commercial negotiations. The facts of Banner were quite unique; including a 'Texas Shoot-Out' in the event the contemplated development did not proceed and the facts suggested that Luff deliberately misled Banner into thinking that an agreement had been made so as to prevent Banner bidding against Luff for the site, resulting in unconscionability.

Following on from Banner was Crossco No 4 Unlimited v Jolan Limited [2011] EWCA Civ. This case side-lined the Banner case, stating that the constructive trust created in Banner was a common intention constructive trust, mostly found in family cases rather than in commercial relationships. Unconscionability was needed to create such trusts. In Crossco, there was no unconscionability, rather carelessness on behalf of the Claimant. The court was reluctant to interfere in negotiations between legally advised parties at arm's length and refused to imply a constructive trust.

Generator's Appeal

On Appeal, Generator was unsuccessful. The Court of Appeal mostly agreed with the Judge's first instance decision. The unanimous judgment delivered by Lewison LJ, dismissed the appeal on eight grounds.

  • The arm's length negotiation of the parties was emphasised. The parties had in fact never reached an agreement on many significant aspects in the contract. Both were advised by lawyers and both were aware that they were not legally bound
  • The proposed joint venture was expressly labelled 'subject to contract'. This was repeatedly used in the draft contracts passed between the parties and their advisors. Therefore, the parties knew there was always a commercial risk that one of the other parties might terminate the relationship and negotiations
  • Generator was aware of the risk that Lidl might contract with another developer
  • There was a draft 'Joint Venture Lock out Agreement' which expressly stated that the parties were in negotiations "with a view to agreeing" or "seeking to agree". It also stated that Generator could "decide not to proceed with the transaction" and give notice to Lidl and withdraw from the Agreement
  • Another important factor was that Lidl's Board had not yet approved the potential joint venture and Generator was aware of this. Again an experienced and well advised property professional would therefore know there was a real commercial risk
  • There was no pre-existing duty or relationship between Lidl and Generator. In previous Pallant v Morgan cases a constructive trust was usually found on the basis of agency, there was no such relationship in this case
  • Unlike Banner, there was no finding of Generator's reliance on an assurance or expectation that they would receive an interest in the land. Furthermore, Generator made no contribution to the purchase price
  • The court stated that as the parties agreed that any arrangement was 'subject to contract'. It followed that the parties should be able to exercise the right not to contract


This case reinforces the importance of formally setting out agreements in writing. In addition, lawyers should be involved in the early stages of negotiations to advise on the potential enforceability of any informal agreements. It is clear that the courts are limiting the application of Banner Homes, in favour of a stricter and narrower approach to the Pallant v Morgan cases. This case is a clear attempt of the courts to generate "a lidl more certainty into commercial negotiations."

The article first appeared in our Real Estate Bulletin - June 2018.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions