Plaintiff, mortgagor, borrowed from Defendant, mortgagee, in an agreement that gave Defendant 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.
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.
An option to buy is only valid where it doesn’t form part of the mortgage agreement but is separate (Reeve v Lisle). 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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