The appellants challenged specific performance orders obliging them to complete the purchase of apartments, saying that the contracts had not complied with the 1989 Act, and that their repudiation of the contracts had been accepted. The contracts had omitted an agreement for the payment of a 2% finders fee on exchange. The appellants intended to sell on the flats to buyers as they found them, by the assignment of the contracts, and the terms had been omitted at the appellants’ request to avoid its benefit being assigned to the sub-purchasers.
Held: The buyers’ appeals failed. It had not been the intention of the 1989 Act to make it easier for purchasers to escape from contractual liability, though ‘because of the rigorous discipline which it imposes upon parties to land contracts, it does indeed enable persons who have genuinely contracted to do just that.’ It was legitimate to interpret the 1989 Act so as to avoid the creation of an injustice, and ‘there is nothing contrary to common sense in construing such a clause as having the alternative meaning that the parties have agreed that the terms of some other part of the composite transaction are not to be conditions for the performance of the land contract.’
In this case the notices to complete gave an unreasonably short time period for completion of the construction works, and the purchaser could not rely on them.
Briggs J set out the principles: ‘A party seeking to avoid a land contract under section 2 must identify a term which the parties have expressly agreed, which is not to be found in the single, or exchanged, signed document. It is not sufficient merely to show that the land contract formed part of a larger transaction which was subject to other expressly agreed terms which are absent from the land contract. The expressly agreed term must, if it is required by section 2 to be included in the single document, be a term of the sale of the land, rather than a term of some simultaneous contract (whether for the sale of a chattel or the provision of a service) which happens to take place at the same time as the land contract, and to form part of one commercial transaction. Section 2(1) does not prohibit parties from structuring a transaction, for example, for the sale of the whole of a company’s assets, in such a way that the land sale is dealt with in a different document from the sale of stock, work in progress or goodwill, unless the sale of the land is conditional upon the sale of the other assets. For an illustration of this point, see Grossman v. Hooper [2001] 2 EGLR 82, paras 19-22, per Chadwick LJ.
. . In my judgment, the apparent disharmony constituted by the dicta on this point may be reconciled as follows: (i) Nothing in section 2 of the 1989 Act is designed to prevent parties to a composite transaction which includes a land contract from structuring their bargain so that the land contract is genuinely separated from the rest of the transaction in the sense that its performance is not made conditional upon the performance of some other expressly agreed part of the bargain. Thus, in Chadwick LJ’s example in Grossman v. Hooper [2001] 2 EGLR 82, parties may agree to the sale and purchase both of a house and of its curtains and carpets in a single composite transaction. None the less it is open to them to agree either (a) that completion of the purchase of the house is dependent upon the sale of the carpets and curtains, or (b) that it is not. They are free to separate the terms of a transaction of type (b) into two separate documents (one for the house and the other for the carpets and curtains) without falling foul of section 2. They may also agree to structure a transaction which includes the sale of two or more parcels of land by way of separate contracts for each, so that none of the land contracts is conditional upon the performance of any of the others. (ii) By contrast, the parties to a composite transaction are not free to separate into a separate document expressly agreed terms, for example as to the sale of chattels or the provision of services, if upon the true construction of the whole of the agreement, performance of the land sale is conditional upon the chattel sale or service provision. That would, albeit for reasons which seem to me to frustrate rather than serve the purposes for which the 1989 Act was passed, fall foul of section 2(1), however purposively construed. So would a series of separate contracts for the sale of separate parcels of land, if each was conditional upon the performance of the other. (iii) Since the splitting into separate contracts of parts of a composite transaction is inherently likely to give rise to uncertainties as to whether performance of the one is conditional upon performance of the other, the parties are free, and in my opinion should be positively encouraged, to make plain by express terms whether or not that conditionality exists. To do so serves rather than evades or frustrates the purposes of section 2, an important part of which is to encourage clarity rather than uncertainty in land transactions.’
Longmore, Smith LJJ, Briggs J
[2010] EWCA Civ 277, [2010] 2 EGLR 161, [2010] 12 EG 97 (CS), [2010] BLR 579, [2010] 3 All ER 528, [2010] NPC 39, [2010] TCLR 4, [2010] 1 WLR 2715, [2010] 2 All ER (Comm) 494
Bailii
Law of Property (Miscellaneous Provisions) Act 1989 2
England and Wales
Citing:
Cited – Tiverton Estates Ltd v Wearwell Ltd CA 1975
“Subject to Contract” not to be diluted
‘subject to contract’ proposals remain in negotiation until a formal contract is executed. Lord Denning MR said: ‘for over a hundred years, the courts have held that the effect of the words ‘subject to contract’ is that the matter remains in . .
Cited – Commission for the New Towns v Cooper (Great Britain) Ltd, (Formerly Coopind UK Ltd) CA 4-Mar-1995
The trial judge had dismissed a claim for rectification on the basis that the defendant hoped and suspected, but did not know, of the relevant mistake by the plaintiff.
Held: Rectification was ordered because the defendant had sought to . .
Cited – Tootal Clothing Ltd v Guinea Properties Ltd CA 1992
By a single commercial transaction the parties agreed to the grant of a lease, on terms that Tootal (the intending lessee), would carry out shop-fitting works, have the benefit of a three months rent-free period during the which the works were to be . .
Cited – Grossman v Hooper CA 11-Apr-2001
The parties had lived together in the house, each contributing but held in the name of one only. The parties disputed the effect under the 1989 Act of a letter signed by each of them setting out their agreement as to the basis on which it was held. . .
Cited – Stickney v Keeble HL 1917
The purchaser had made repeated complaints about the seller’s delay in completing construction.
Held: The repeated complaints formed a principal ground for justification of the short specified notice period.
Lord Parker of Waddington set . .
Cited – British Commonwealth Holdings plc v Quadrex Holdings Inc 1989
In considering the reasonableness of a time set in a notice to complete for construction works, the time it would actually take to complete the work is not the only consideration. . .
Cited – Oun v Ahmad ChD 19-Mar-2008
The parties agreed in writing for the sale of leasehold property to the claimant. One document had been signed, but later one said that it had not included an aportionment. Another document then set out the apportionment. When the defendant refused . .
Cited – Business Environment Bow Lane Ltd v Deanwater Estates Ltd CA 27-Jun-2007
Enforcement of repairing obligations in lease after assignments, and the use of collateral contracts. Sir Andrew Morritt C said: ‘The law relating to collateral contracts is well-established but in connection with sales or leases of land needs to be . .
Cited – Godden v Merthyr Tydfil Housing Association CA 15-Jan-1997
The Plaintiff was a building contractor; the Defendant a housing association engaged in developing suitable sites for residential accommodation for letting to tenants. Before the contract the parties had successfully completed what was been called . .
Cited – Inntrepreneur Pub Co v East Crown Ltd 2000
The ‘entire agreement’ clause contained in a lease not only had the effect of rendering evidence of an alleged collateral warranty inadmissible, but also deprived the warranty of all legal effect. It did not collapse the lease in on itself. Lightman . .
Appeal from – North Eastern Properties Ltd v Coleman and Another ChD 20-Aug-2009
The parties agreed for the developer to build and the defendants to purchase several apartments. The properties were not completed after a notice to complete and the purchasers purported to rescind the contract. The claimant completed the flats and . .
Cited by:
Cited – Keay and Another v Morris Homes (West Midlands) Ltd CA 11-Jul-2012
The claimants sought damages alleging breach of contract. The defendants argued that the contract related to land, and since it was an oral agreement it was unenforceable under the 1989 Act.
Held: It was not possible for a contract which was . .
Cited – Rock Advertising Ltd v MWB Business Exchange Centres Ltd SC 16-May-2018
The parties disputed whether a contract (licence to occupy an office) had been varied by an oral agreement, where the terms prohibited such.
Held: The ‘no oral variation’ clause applied. Such clauses were in common commercial use and served a . .
Lists of cited by and citing cases may be incomplete.
Land, Contract
Updated: 11 November 2021; Ref: scu.403471
