The Potential Pitfalls of Overage

Overage provisions can be complicated, and the recent case of Sparks v Biden [2017] EWHC 1994 (Ch), offers some useful reminders of the potential pitfalls that can arise when drafting overage agreements and the scope of the Court’s ability to imply terms into a contract.  In this article we examine the issues that can arise and suggest some practical points for consideration when negotiating an overage agreement.

In this case, the drafting did not expressly oblige the buyer to market newly built houses for sale once the development was completed, nor was there any mechanism for the payment of overage if the houses failed to sell within an appropriate time. The parties’ intentions were assumed – including that the buyer would want to sell the houses as soon as they were completed in order to realise his investment as quickly as possible.  However, this did not happen, and the agreement did not provide for such a turn of events, leaving the seller at a disadvantage.

  1. Facts of the case
  2. Decision of the court
  3. Points for practice

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