12.3. Contractual rights to property interests

472Property Law

in these circumstances equity treats that present right to acquire a property interest in the future as a present property right. It is a sui generis right, consisting only of a right to call for the future property interest when the time comes, but it is proprietary in the sense that it is enforceable against third parties.

As far as the rule in Walsh v. Lonsdale is concerned, it comes into operation at the later stage when you satisfy the contingency by performing your part of the bargain. At this point you are entitled to specific performance of the agreement: equity will now order it as soon as you ask for it. Equity treats as done that which you are entitled to ask it to do – it treats you as already having what it will order me to give you. Hence you have the equitable fee simple from that point.

This was the principle established in the case of Walsh v. Lonsdale (1882) 21 ChD 9 (Extract 12.4 below). A mill owner agreed to let a weaving shed to a tenant for seven years at a fixed rent payable annually in advance, to be calculated according to the number of looms run by the tenant. The lease was never actually granted, but the tenant did go into possession of the weaving shed and started paying a rent at the agreed level, but he paid it in arrears rather than in advance. This continued for about three years until disagreements arose and the mill owner started proceedings for distress for rent. The issue was whether the rent was payable in advance or in arrears. It was (and is) a general principle of landlord and tenant law that, if a landowner allows someone into possession of her land and accepts rent without formally granting a lease, a legal periodic tenancy arises by implication of law, the terms of which are dictated by the way in which the rent is in fact paid. So, if as in Walsh v. Lonsdale itself the rent was actually paid annually in arrears, the tenancy implied will be a yearly tenancy at a rent paid annually in arrears. We see this rule in operation in Prudential Assurance Co. Ltd v. London Residuary Body [1992] 2 AC 386, discussed in Chapter 17. The question the court had to decide in Walsh v. Lonsdale was therefore whether the tenant was in possession under this rule (in which case the rent was payable in arrears) or whether he was in possession under the terms of the lease he had agreed to take but never in fact had taken (where the rent was payable in advance). The court said it was the latter, because in equity the tenant acquired the lease he contracted to take as soon as he performed his part of the contract by taking possession and paying rent. In other words, he had an equitable lease on the agreed terms as soon as he moved in, so there was no question of a legal yearly tenancy arising by implication of law.

12.3.2. Application to property other than land

Neither the estate contract rule nor the rule in Walsh v. Lonsdale appears to apply to interests in goods. This has never been established as a matter of decision by the courts, but it was strongly stated by Atkin J in Re Wait [1927] 1 Ch 606, and endorsed (but again not as a matter of decision) by Lord Brandon in the House of Lords in The Aliakmon [1986] 2 WLR 902 at 910–11 (see Extract 12.5 below). The reason given for the exception is important and perhaps surprising. Since the estate contract rule and the rule in Walsh v. Lonsdale depend on the availability of specific