This association ended some time ago, but in EMI Group Limited`s recent High Court case against Prudential Assurance Company Limited, EMI was confronted with a different type of GAGA (Guaranteed Guarantee Contract (AGM)). The law provides that a tenant (here HMV) will be released from his obligations upon the transfer of his tenancy agreement and that a deposit (here EMI) will be released to the same extent as the outgoing tenant (sections 5(2) and 24 (2) of the law). Section 25 of the Act states that any agreement on a lease agreement is invalid to the extent that it would alter or eliminate the application of the law. The judgment states that where an GAGA contravenes what LtA authorized in 1995, it is important that the court have the freedom to interpret the agreement in its particular context. It prevents the removal of invalid words from emptying the rest of the clause. An option available to a tenant under a commercial lease is the ability to transfer (or transfer) the lease to a third party. This usually requires the owner`s consent. One of the conditions of a landlord who agrees will inevitably be that the outgoing tenant agrees to guarantee the liability of the incoming tenant for the tenancy agreement in an „approved guarantee contract“ (AGM). This ensures that the landlord does not lose a completely good tenant, only to replace it with a tenant with a much weaker alliance force (solvency).
However, from the landlord`s point of view, the AGM is of little use to them if the outgoing tenant company is to be dissolved or if the original tenant`s strength has been formed by the support of an essential guarantor. The landlord may therefore decide that he would prefer the entrance of the tenant`s guarantor. In this case, the applicability of a „GAGA“ which is a guarantee for an authorized guarantee agreement (AGM) was examined. An AGM is, in turn, a guarantee that an outgoing tenant gives to a lessor when the lease is transferred with respect to the obligations of the incoming tenant; AAAs are statutes that flow from Section 16 of the Landlord and Tenant (Covenants) Act 1995. EMI, as guarantor, attempted to argue that the gaga it had given was unenforceable, primarily because of the development of the lease and subsequent transfer licence. However, the Court of Justice found that GAGA was indeed legal and usefully summarized the approach it will take in interpreting such a guarantee. The fundamental principle of Tindall Cobham is that the court must „adopt a balanced approach to annulment which, while neutralizing the injurible parts of the treaty, does not dispossess it and does not leave it dispossessed and unenforceable.“ The court has the power to „examine the structure of the agreement in an objective and reasonable manner.“ The 1995 law abolished the contractual practice in leases, but allows landlords to require as a condition of transfer that the outgoing tenant guarantee the obligations of the assignee in the form of an approved warranty contract (AGM).