The purchasers agreed in writing to purchase land ‘subject to a proper contract to be prepared by the vendors’ solicitors’ accepting andpound;240 ‘as deposit and in part payment of the said purchase money’. A contract was prepared by the vendor’s solicitors, approved by the purchasers’ solicitor, executed by the vendor and tendered to the purchasers for execution. At that point the purchasers declined to proceed with the transaction and claimed the return of the deposit.
Held: The signed document was conditional, and the purchasers could have return of their deposit. (per Sterndale) ‘To my mind the words ‘subject to contract’ or ‘subject to formal contract’ have by this time acquired a definite ascertained legal meaning-not quite so definite a meaning perhaps as such expressions as fob or cif in mercantile transactions, but approaching that degree of definiteness. The phrase is a perfectly familiar one in the mouths of estate agents and other persons accustomed to deal with land; and I can quite understand a solicitor saying to a client about to negotiate for the sale of his land: ‘Be sure that to protect yourself you introduce into any preliminary contract you may think of making the words ‘subject to contract’.’ I do not say that the phrase makes the contract containing it necessarily and whatever the context a conditional contract. But they are words appropriate for introducing a condition, and it would require a very strong and exceptional case for the clear prima facie meaning to be displaced.’
Pollock MR said: ‘This case . . does not involve a decision of what a deposit may be in all cases, but simply what it is in this particular case.
In Howe v Smith where the nature of a deposit was considered and the right of a purchaser to the return of it, Bowen LJ said: ‘The question as to the right of the purchaser to the return of the deposit money must, in each case, be a question of the conditions of the contract. In principle it ought to be so, because of course persons may make exactly what bargain they please as to what is to be done with the money deposited. We have to look to the documents to see what bargain was made.’ And Cotton and Fry LJJ say substantially the same thing. Therefore we have to consider what in fact was the effect of the document of July 10, 1922, not forgetting the contemporaneous documents, and to ask ourselves whether this deposit was by those documents intended to pass irrevocably to the vendor if the purchasers did not carry out the transaction. In all the circumstances of this case, I think the deposit is recoverable by the purchasers. There was no provision made in the documents which would justify the vendor in declining to return it; though if he had, by appropriate words, made provision for that in the document, such a provision could have been upheld.’
Warrington LJ, Sir Ernest Pollock MR
[1924] 1 Ch 97, [1923] All ER Rep 97, 93 LJ Ch 129, 129 LT 808, 40 TLR 23, 68 Sol Jo 80
England and Wales
Citing:
Cited – Howe v Smith CA 1884
A contract for the sale of land required the purchaser to pay andpound;500 ‘as a deposit and in part payment of the purchase money’, and that if the purchaser failed to complete on time the vendor should be free to resell and recover any deficiency . .
Cited by:
Cited – Confetti Records (A Firm), Fundamental Records, Andrew Alcee v Warner Music UK Ltd (Trading As East West Records) ChD 23-May-2003
An agreement was made for the assignment of the copyright in a music track, but it remained ‘subject to contract’. The assignor later sought to resile from the assignment.
Held: It is standard practice in the music licensing business for a . .
Explained – Gribbon v Lutton and Another CA 19-Dec-2001
The defendant solicitors acted in obtaining and holding a deposit on the sale of land. They issued interpleader proceedings which decided that the deposit was payable to the purchaser. The vendor then sued the solicitors in negligence. The . .
Cited – Sharma and Another v Simposh Ltd CA 23-Nov-2011
The parties created an oral (and therefore void) contract for a development, the claimants paid a deposit, expressed to be non-refundable, and the defendant builders completed the building work. The buyers backed out. The developer now appealed . .
Lists of cited by and citing cases may be incomplete.
Contract, Land
Updated: 21 December 2021; Ref: scu.183730