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Notice to complete
Options
Overage
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Reasonable endeavours
Rent charges
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Vendor's lien
Writing - s2 of 1989 Act

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Contract

This page includes information on various matters relating to property contracts including the following:
  • Agreements by e-mail.
  • Assignment of benefit of consultant's report on sale of land.
  • Correcting mistakes by construction of documents.
  • Contract signed by agent for non-existent company
  • Oral variation not precluded by term precluding oral variations
  • Rights of third parties.
  • Construction of property contracts in commercial context using common sense.
  • Interest on purchase price.
  • Mistake.
  • Stakeholders
See also the page on s2 of the 1989 Act.


Agreement by e-mail - guarantees

Metha v J Pereira Fernandes SA
[2006] EWHC 813 (Ch)

Section 4 of the Statute of Frauds provides that
    "no action shall be brought ... whereby to charge the defendant upon any special promise to answer for the debt default or miscarriage of another person ... unless the agreement upon which such action shall be brought or some memorandum or note thereof shall be in writing and signed by the party to be charged therewith or some other person thereunto by him lawfully authorised".
The effect of a non compliance with Section 4 is that the contract is unenforceable.

In this case the defendant Mr Mehta sent an e-mail to the claimant offering a guarantee. The e-mail was not signed by the defendant but was described in the header as having come from "Nelmehta@aol.com". The judge held that the e-mail could have been capable of constituting a sufficient memorandum of the agreement but that the automatic statement in the header of the source of the e-mail was not a sufficient signature. HH Jg Pelling QC at para 27:
    "Thus, as I have already said, if a party or a party's agent sending an e-mail types his or her or his or her principal's name to the extent required or permitted by existing case law in the body of an e mail, then in my view that would be a sufficient signature for the purposes of Section 4. However that is not this case."

Assignment of benefit of consultant's report on sale of land

Technotrade Ltd v Larkstore Ltd
[2006] EWCA Civ 1079

Summary

Where a landowner assigns the benefit of a consultant's report to a buyer of the land, can the assignee recover damages from the consultant, despite the fact that the assignor has suffered no loss in relation to the report? Answer: yes, provided that the assignor could have recovered damages if it had in fact suffered the loss.

Facts

In this case, a consultant provided a site investigation report to the owner of a development site. The site was subsequently sold to a third party, and the benefit of the report (as well as the right to sue the consultant) was also assigned to the new owner. Although the report had stated that the site was satisfactory, in fact a landslip occurred after the site had been sold to the new owner. An adjoining owner whose properties had been damaged by the landslip sued the site owner, and the site owner joined the consultant to the proceedings on the basis that he had the benefit of the report.

Decision

The Court of Appeal held that the new site owner could recover substantial damages from the consultant in relation to the loss that it had suffered. The fact that the original site owner had suffered no loss in relation to the report (having sold the site to the new owner at full value) was irrelevant - if the original site owner had not sold the site, it could have recovered substantial damages from the consultant, and the new site owner could therefore do the same.

Article: "An end to the disappearing trick" by Laurie Heller, Berwin Leighton Paisner - A consideration of the case law and principles behind the liability of a contract breaker following the transfer of a property and assignment of the relevant contract following the decision in this case (Property Law Journal, 19 February 2007, p 21)


Construction of documents

In addition to the cases in this section see the important decision of the House of Lords in Chartbrook Limited v Persimmon Homes Limited
[2009] UKHL 38 and Arnold v Britton which are dealt with on the Overage page.

Conflict between plan and words of contract - plan prevailed

Smith v Royce Properties Ltd
[2001] EWCA Civ 949

Summary

This case is an example of the application of the modern principles of construction, explained by the House of Lords in Investors Compensation Scheme Ltd v West Bromwich BS (1998), in the context of a property dispute.

Facts

In the case there was a conflict between a plan and the relevant clause of an option agreement. The case concerned two parcels of land: OS 0062 (which was very large) and OS 0052 (which was very thin). The large plot was stuck behind the thin plot. On the ground it was impossible to distinguish between the two. Unless the option included the thin plot there would be no access to the large plot and the option agreement would be useless. However, the option agreement itself only referred to OS 0062.

Decision

The CA nonetheless had regard to the land registry plan which referred to both plots to contradict the clear words of the option clause. (The original plan was missing). To do otherwise would not make commercial sense. Indeed it was "inconceivable that [the parties] intended that the option should only apply to 0062". Tuckey LJ:
    "I do not think the judge's finding about the plan can stand. He should have given greater weight to the filed plan. As the only plan in existence, he should have started with the presumption that it did accurately reflect what was show on the plan attached to the conveyance, not only because it was prepared by the Land Registry, but also because that is what one would have expected it to show.

    Having therefore concluded that there was an ambiguity between the wording of the option and the plan, how should the judge have resolved it? He does not appear to have taken account of the commercial context to which I have referred. Common sense compelled the conclusion that the parties intended the option to cover the whole field. If the judge did feel compelled to decide that the wording prevailed over the plan because of the nineteenth century cases which were cited to him, I think he was mistaken. Where there is a conflict of this kind I think the modern approach is well summarised in Lewison: Interpretation of Contracts (2nd ed., 1997) at paragraph 10.07 which says:
      "Whether a plan controls a verbal description or a verbal description controls a plan is a question of construction of the particular conveyance. There is no presumption either way."
Obvious mistake - corrected by construction

(See also Mistake below).


Contracts (Rights of Third Parties) Act 1999

Avraamides v Colwill
[2006] EWCA Civ 1533

This is a Court of Appeal case, the first one to be decided under the Contracts (Rights of Third Parties) Act 1999. The respondents entered into a contract for the refurbishment of two bathrooms with a company. The work was not carried out properly, and the respondents sought to hold the appellants liable for the faulty work, as the company itself had no assets. The appellants had purchased the assets of the company, and agreed, in a contract made between the shareholders of the company and the appellants, to complete outstanding customer orders and to pay accrued liabilities of the company. The respondents sought to rely on the provisions of that contract under the 1999 Act, on the basis that they were customers of the company to whom accrued liabilities were owed.

Section 1(3) of the 1999 Act makes it clear that, in order to rely on the Act, a party must be "expressly identified in the contract by name, as a member of a class or as answering a particular description". There was no express identification of the respondents in the contract between the shareholders of the company and the appellants, and accordingly the respondents could not rely on the 1999 Act. (See in particular paras 18 and 19 of the judgment).


Contract signed by agent for (non-existent) company

Braymist Ltd v Wise Finance Co. Ltd
[2002] EWCA Civ 127.

Solicitors acting as agent for a company that had not yet been formed signed a contract to sell a parcel of land. When the purchaser failed to complete they served a notice to complete, subsequently rescinded, forfeited the deposit and claimed damages. The purchaser defended the claim and sought recovery of the deposit on the ground that no valid contract had been made.

By virtue of s36C(1) of the Companies Act 1985 the contract, having been made on behalf of an unincorporated company, took effect as a contract with the agent. The CA held that there was no common law bar to the solicitors enforcing the contract and, for the purposes of s2 of the Law of Property (Miscellaneous) Act 1989, they could be properly treated as having signed the agreement on their own behalf even though they had signed as agents on behalf of the unincorporated entity.


Interest on purchase price

P&O Overseas Holdings Ltd v Rhys Braintree Ltd
[2002] EWCA Civ 296.

Interest on the balance of the purchase price accrued in the vendors favour from the contractual date for completion even though it had not yet been registered as proprietor of the land. This was because it was capable of transferring the title pursuant to s37 of the Land Registration Act 1925.


Mistake

Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd
[2002] EWCA Civ 1407

In this case the CA abolished the equitable doctrine of common mistake. Solle v Butcher [1950] 1 KB 671, one of Lord Dennings great forays into justice, was overturned as being inconsistent with Bell v Lever Brothers Ltd [1932] AC 161. Where a contract is valid and enforceable on ordinary principles of contract law there is no jurisdiction to rescind the contract on the ground of common mistake.


Oral variation

Not precluded by contract term that precluded oral variations

MWB Business Exchange Centres Ltd v. Rock Advertising Ltd
[2016] EWCA Civ 553

Summary

A clause of a contract that precluded oral variations had not in fact rendered invalid an oral variation that had been agreed between the parties.

Facts

MWB operated managed office space. For some years, Rock occupied as licensee premises managed by MWB. Subsequently, the parties entered into an agreement in writing for larger premises at an increased fee for a term of 12 months. Rock was un-able to meet this financial commitment and it eventually incurred arrears of licence fees and other charges of over £12,000. MWB then exercised its right under the li-cence agreement to lock Rock out of the premises and shortly afterwards it gave notice purporting to terminate the agreement.

MWB claimed the arrears and damages to compensate it for the other losses it claimed it had suffered. Rock disputed the claim and counterclaimed for loss and damage resulting from what it asserted to be its wrongful exclusion from the premises. Rock contended that an oral agreement had been made between the parties to re-schedule the licence fee payments due under the agree-ment in such a way that for the first few months Rock would pay less than the amount originally agreed but thereafter it would pay more with the result that, by the end of the year, the arrears would have been cleared. Moreover, on that same day it had paid £3,500 to MWB, this being the first instalment due in accordance with the revised pay-ment schedule.

In the alternative, Rock argued that by reason of its payment and MWB's acceptance of the £3,500, MWB was estopped from disavowing the variation to which it had orally agreed.

MWB denied that an agreement had been reached. It also argued that the oral varia-tion agreement was not enforceable because it lacked consideration. MWB also ar-gued that the licence could not be varied by an oral agreement, based on the following clause:
    ”This licence sets out all of the terms as agreed between MWB and the li-censee. No other representations or terms shall apply or form part of this licence. All variations to this licence must be agreed, set out in writing and signed on behalf of both parties before they take effect." (Clause 7.6).


First instance

The trial judge was not persuaded by either of MWB’s initial arguments. However, the judge held that Clause 7.6 was a clear clause which precluded an oral re-negotiation of a core term of the agreement. In relation to the estoppel argument, the judge consid-ered that the payment of the £3,500 by Rock could not be described as a relevant det-riment when it was merely a sum which Rock was already obliged to pay. The argument therefore failed, and the judge found for MWB. Rock appealed to the Court of Appeal.

Issues

(1) Whether clause 7.6 precluded any variation of the agreement other than one in writing in accordance with its terms;
(2) Whether Rock provided any good consideration for the oral variation; and
(3) Whether the judge ought to have held that MWB was estopped from enforcing its rights under the original agreement.

Decision on appeal

The Court of Appeal allowed the appeal. In relation to the above issues the Court found as follows.

(1) An agreement that contains an anti-oral variation clause such as Clause 7.6 can be varied otherwise than in accordance with the terms of that clause (see Globe Motors Inc and ors. v TRW Lucas Varity Electric Steering Ltd and anor [2016] EWCA Civ 396). Kitchen LJ said:
    “To my mind the most powerful consideration is that of party autonomy, as Moore-Bick LJ explained it. Indeed that explanation seems to me to echo the words of Cardozo J …in Alfred C Beatty v Guggenheim Exploration Company (1919) 225 NY 380. "Those who make a contract, may unmake it. The clause which forbids a change, may be changed like any other. The prohibition of oral waiver, may itself be waived … What is excluded by one act, is restored by another. You may put it out by the door, it is back through the window. Whenever two men contract, no limitation self-imposed can destroy their power to contract again…”


(2) The Court found for Rock, relying on the judge’s findings that the oral variation agreement would have a number of beneficial consequences for MWB (namely they would recover some of the arrears immediately and have some hope of re-covering them all in due course, and also Rock would remain a licensee and so the property would not be standing empty). There was no suggestion that MWB were operating under any kind of duress.

(3) It was unnecessary to consider the third issue, but LJ Kitchen went on to find that, if the agreement had not been enforceable, MWB would not have been estopped from enforcing their rights under the original agreement. Proprietary estoppel was also discounted.


Stakeholders

Gribbon v Lutton
[2001] EWCA Civ 1956

A decision in in which the vendor threatened to break off negotiations unless the purchaser paid a deposit of £21,600. The basic position was explained by Laddie at para 12:
    "Since the tripartite contract does not define entitlement between vendor and purchaser but responds to an entitlement determined elsewhere, what happens in a case where the deposit is paid by the purchaser to the stakeholder in advance of there being any enforceable contract between him and the vendor? Prima facie, since it is the purchaser's money and the vendor has no legal entitlement to it, the purchaser can demand its return to him at any time in advance of an enforceable vendor/purchaser contract being put in place. Thus if there is an unenforceable promise by the purchaser to pay a sum of money to the vendor, the vendor acquires no legal entitlement to it and the fact that the sum may have been paid to a stakeholder does not create an entitlement to it. The stakeholder can and must respond to a demand for repayment by the purchaser. The tripartite agreement does not alter who is and who is not entitled to the deposit."
See also para 14 of the judgment.

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