Law Report: Variation of land sale contract was invalid

McCausland and another v Duncan Lawrie Ltd and another; Court of Appeal (Lord Justice Neill, Lord Justice Morritt and Mr Justice Tucker) 6 June 1996

The strict requirements of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, that all the terms of a contract for the sale or other disposition of an interest in land had to be incorporated in a signed document, applied not just to the contract itself, but also to any variation later agreed between the parties.

The Court of Appeal allowed an appeal by the plaintiffs, Piers Conolly McCausland and Elisabeth Maria Rionagh McCausland, against the decision of Mr Justice Knox, on 7 July 1995, striking out their statement of claim against the respondents, Duncan Lawrie Ltd, a bank, and SIS Securities Ltd, a property company. The claim was for specific performance of a contract dated 26 January 1995, whereby SIS agreed to sell the property known as 1 Beechmore Road, London SW11, to the plaintiffs for pounds 210,000, and for damages.

David Neuberger QC and M. Geldart (H.C.L. Hanne & Co) for the appellants; Philip Shepherd (Swepstone Walsh) for the respondents.

Lord Justice Neill said the sale agreement provided for payment of a deposit of pounds 1,000, and payment of the balance by 2.30pm on the completion date, which was stated to be 26 March 1995. It also provided that at any time on or after the completion date a party who was ready, able and willing to complete might give the other notice to complete. By special condition 6, if the buyers did not complete on the completion date, the balance of the full 10 per cent deposit would become payable.

A few days after the contract was signed the respondents' solicitor realised that 26 March was a Sunday. On 3 February he wrote to the plaintiffs' solicitors suggesting completion be rearranged for the preceding Friday 24 March. The plaintiffs' solicitors wrote back confirming this was acceptable.

The plaintiffs were unable to pay the balance of the purchase price on 24 March and the respondents' solicitors sent them a completion notice demanding completion by 7 April or payment of the pounds 20,000 balance of the deposit in accordance with special condition 6. The plaintiffs were unable to complete by then and paid the balance of the deposit while reserving the right to recover that sum if it transpired that the respondents had not been entitled to serve the completion notice on 24 March.

The plaintiffs claimed there had been no valid variation of the contractual completion date of 26 March, and accordingly no valid rescission by the respondents of the contract of sale, because the variation did not comply with section 2 of the 1989 Act. This provided:

1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each.

2) The terms may be incorporated in a document either by being set out in it or by reference to some other document.

The respondents accepted that section 2 contained strict provisions relating to the formation of a contract for the sale or other disposition of an interest in land, but submitted that section 2 had not altered the law on oral variations of a contract. It had always been the law that oral variations of written contracts were capable of proof. The manner of proof was a rule of evidence. There was nothing in section 2 to show that the variation of a contract had to comply with the formalities prescribed in the statute.

His Lordship felt bound to reject those arguments. It seemed clear that Parliament intended to introduce new and strict requirements as to the formalities to be observed for the creation of a valid disposition of an interest in land. Under section 2 all the terms of the contract had to be incorporated in the signed document. The formalities prescribed by section 2 had to be applied to the contract as varied. This was not a case where the agreement between the parties was concluded by an exchange of contracts. The only document signed by both parties was the contract dated 26 January 1995.