King v David Allen [1916] 2 AC 54

Facts

• David Allen entered into an agreement with King, the owner of a cinema, granting Allen permission to affix advertisements to the cinema’s walls.
• Subsequently, King leased the cinema to a third party, who refused to honor Allen’s advertising agreement.
• Allen sought enforcement of his contractual licence against the new lessee.
• The dispute centered on whether the licence bound the subsequent lessee and if the agreement created a proprietary interest or a personal right.

Issues

1. Whether the contractual licence granted to Allen created a proprietary interest in the property or was merely a personal right.
2. Whether the contractual licence could be enforced against third parties, namely the new lessee.
3. Under what conditions, if any, a contractual licence could bind third parties.

Decision

• The House of Lords held that the licence granted to Allen was a personal right and did not amount to a proprietary interest in the cinema’s walls.
• The court determined that, in the absence of registration or constructive notice, the contractual licence was not binding on third parties such as the new lessee.
• The advertising agreement was not enforceable against the new lessee as it was purely contractual and not a proprietary interest.

Legal Principles

• A contractual licence is a personal right between the original parties and does not create an interest in land.
• Contractual licences do not generally bind third parties unless accompanied by a proprietary interest or registered under the relevant land registration system.
• The enforceability of a licence against third parties depends on clear evidence of the parties’ intention to create a proprietary interest or on registration or notice to subsequent purchasers or lessees.
• Courts maintain a strict distinction between contractual rights and proprietary interests to ensure certainty in property transactions.

Conclusion

King v David Allen [1916] 2 AC 54 confirmed that contractual licences are personal rights that do not bind third parties unless specific conditions such as notice or registration are met. This decision maintains a clear division between contractual and proprietary rights, reinforcing predictability in land law.