D wanted to renew lease (was renewal clause). D proposed rate. P never replied. On day lease expired P said they would not accept rate and wanted more money. Rent was to be market rate agreed by the parties
If a clause was clearly intended and understood to have legal effect by both parties, the courts will try, wherever possible, the give the clause the proper legal effect.
Contracts where the parties say something will be agreed – are not enforceable (still must look at other circumstances cause there is exceptions).
Diff types of clauses were certainty might exists:
1. Clauses where it says the rent it to be ’agreed’ are usually not enforceable.
2. Clauses where rent is to be established by a formula, but no machinery is supplied for applying formula – courts will apply the machinery (ex machinery could be arbitration clause).
3. Clauses where machinery is set out but formula is defective – machinery used to cure the defect.
D had not negotiated in good faith. P won
This case falls into category 2.
Whether it said market rate, or market rate agreed by parties – it doesnt matter – same result – because the obligation to negotiate in good faith would result.