When is consent "unreasonably withheld"?

Porton Capital Technology Funds and Others v 3M UK Holdings Ltd and another [2011] EWHC 2895 (Comm) (7 November 2011)

This was a company sale and purchase in which the sellers made claims for payment under the earnout provisions. See News bulletin of 23 November 2011. During the case the judge had to explore if and when the sellers had ben unreasonable in withholding their consent under the earnout provisions. The judge confirmed that principles developed in landlord and tenant cases are applicable to commercial situations. Therefore this case provides useful guidance in determining whether or not consent has been unreasonably withheld in commercial agreements.

In determining whether a refusal of consent is unreasonable, the following principles apply:

  1. the burden is on the party requesting the consent to show that the party refusing consent is acting unreasonably;
  2. the party refusing consent does not need to show that such refusal is right or justified. It is only necessary to show that the refusal is reasonable under the circumstances, which will be a question of fact in each case;
  3. the party refusing consent may have regard to its own interests; and
  4. the party refusing consent need not balance its own interests against the interests of the party requesting consent, unless they are entirely disproportionate.

So there we are. Simple.

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