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Samuel v Jarrah Timber

[1904] AC 323

Case summary last updated at 09/01/2020 18:00 by the Oxbridge Notes in-house law team.

Judgement for the case Samuel v Jarrah Timber

P, mortgagor, borrowed from D, mortgagee, in an agreement that gave D the option to buy the mortgaged stock within 12 months of the mortgage commencing. HL held the option to buy invalid as an impediment to redemption. 
Earl of Halsbury LC: He is bound by authority due to “a principle of equity, the sense or reason of which I am not able to appreciate”. He believes such an agreement as this is “perfectly sensible” and ought to be, but is not, allowed by law. 
Lord Macnaghten: He says that he is bound by 150 years of precedent, but criticises the rule on redemption and collateral advantage as allowing escape from fair bargains. 
Lord Lindley: An option to buy is only valid where it doesn’t form part of the mortgage agreement but is separate (Lisle v Reeve). Again, he criticises the situation. Also, the validity of a contractual term should not depend on whether it is framed as part of the mortgage agreement or as a separate one: it is a purely artificial distinction with no substantive merit. 

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