Do your property contracts protect you?
Two cases of interest have recently passed through the Court of Appeal.
The first case allowed a developer to keep a deposit under a contract for sale where the buyer decided not to proceed with the purchase.
The second case was where a seller had failed to comply with his contractual obligations to lay services within six months of completion and the Court held that rescission was not an appropriate remedy, but the buyer was entitled to accept the repudiatory breach of contract and treat it at an end.
In respect of the first case regarding the deposit, even though the agreement itself fell afoul of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, which requires contracts for the sale of land to be in writing and containing all the salient terms, this did not prevent ownership of the deposit passing to the developer.
The Court of Appeal felt that the key was the intention of the parties regarding ownership, and in this case, the intention was for it to pass unconditionally.
The court rejected the buyer’s claim for restitution on the basis that the buyer had obtained some benefit for which it had paid the deposit and the court ordered it was just that the developer kept the deposit (Sharma and another v Simposh Limited).
The second case considered the important distinction between rescission of contract and discharge for a breach of contract.
On the facts in Howard-Jones v Tate the Court held that the buyer was entitled to recover damages for losses as a result of the breaches but not to be put back into the position he would have been had the contract never been entered into.
These two judgments show that the courts are adopting strict interpretations of contracts of sale and it is vital that proper drafting and due consideration of all possibilities and eventualities are made.
Contact John Gillette today for more information.
Note: This article is not legal advice; it provides information of general interest about current legal issues.