Law Report: House vendor liable to purchaser over 'gazumping' deal: Pitt v PHH Asset Management Ltd. Court of Appeal (Sir Thomas Bingham, Master of the Rolls, Lord Justice Mann and Lord Justice Peter Gibson), 29 June 1993

A potential purchaser of property who, in order to protect himself against being 'gazumped', made an agreement by which the vendor gave a negative undertaking he would not deal with any other purchaser for a clear specified period was entitled to enforce the agreement and claim damages for breach of the agreement when the vendor broke it.

The Court of Appeal dismissed an appeal by the defendant, PHH Asset Management Ltd, from Judge Brandt's decision that the plaintiff, Timothy Pitt, was entitled to damages for breach of contract. The plaintiff was one of two contenders interested in purchasing a property put on the market by the defendant. The plaintiff made two offers which were initially accepted by the defendant's selling agent. The acceptances were withdrawn when the other contender made higher offers.

The plaintiff told the agent that he would seek an injunction to prevent the sale to the other contender and that if he told the other contender he was withdrawing any future offer would be lower in the absence of a rival. An agreement was then reached that the defendant would stay with the plaintiff's offer, subject to contract, and would not consider any further offers on the basis that contracts would be exchanged within two weeks of receipt of draft contracts. However before the end of the 14-day period the defendant increased the price and sold the property to the other contender.

The plaintiff sued for breach of the agreement. The judge rejected the defendant's arguments that the contract was unenforceable under section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 because the agreement was for the sale of an interest in land and that the plaintiff gave no consideration for the agreement.

R A Payne (Townsends, Swindon) for the defendant; D Pugh (Steed & Steed, Sudbury) for the plaintiff.

LORD JUSTICE PETER GIBSON said that the crucial question was whether what was agreed was a 'lock out agreement'. One had to look to what was agreed to see whether or not there was something that was capable of subsisting as a binding contract independently of the continuing negotiations for the sale of the land. There was no reason why the agreement, whereby the defendant was locking itself out from negotiating with other prospective purchasers for a limited period, should be considered to be subject to contract as the negotiations for the sale of the land were, there being nothing further to agree. The argument that the agreement was simply part of the continuing negotiations between the plaintiff and defendant was rejected.

The removal of the threat of an injunction and the threat of causing trouble with the other contender provided some consideration. The plaintiff's promise to get on by limiting himself to just two weeks if he was to exchange contracts was of some value to the defendant. Those three items constituted valuable consideration sufficient to support the lock out agreement.

There was no contract for the sale of land or any option for the sale of land. What was agreed was a lock out agreement, the negative element of which was a characteristic as identified in Walford v Miles (1992) AC 128. It was not incumbent on the defendant to proffer a contract but once it did, it was bound by the terms of the lock out agreement for the 14-day period that followed. The agreement was not a contract for the sale of any interest in land and therefore section 2 had no application. The appeal was dismissed.

LORD JUSTICE MANN agreed.

SIR THOMAS BINGHAM MR, agreeing, said that buying and selling a house was frequently a depressing and frustrating experience. A purchaser of property had one means of protection against unprincipled behaviour by a vendor: to make an independent agreement by which the vendor agreed for a clear specified period not to deal with anyone other than that purchaser. The effect was to give that purchaser a clear run for the period in question. The vendor did not agree to sell to that purchaser - that would be covered by section 2 - but gave a negative undertaking that he would not for the given period deal with anyone else.

That was what happened here. The vendor and purchaser made a 'lock out agreement'. That was a contract binding on both. The vendor broke it. He was liable to the prospective purchaser for damages to be assessed.

Law, page 28

News
More than 90 years of car history are coming to an end with the abolition of the paper car-tax disc
newsThis and other facts you never knew about the paper circle - completely obsolete tomorrow
News
Kim Jong Un gives field guidance during his inspection of the Korean People's Army (KPA) Naval Unit 167
newsSouth Korean reports suggest rumours of a coup were unfounded
Arts and Entertainment
You could be in the Glastonbury crowd next summer if you follow our tips for bagging tickets this week
music
Life and Style
It is believed that historically rising rates of alcohol consumption have contributed to the increase
food + drink
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
News
people
News
i100
News
Piers Morgan tells Scots they might not have to suffer living on the same island as him if they vote ‘No’ to Scottish Independence
peopleBroadcaster has a new role bringing 'the big stories that matter' to US
Life and Style
fashion
Arts and Entertainment
Kylie performs during her Kiss Me Once tour
musicReview: 26 years on from her first single, the pop princess tries just a bit too hard at London's O2
News
people'I’d rather have Fred and Rose West quote my characters on childcare'
Life and Style
Moves to regulate e-cigarettes and similar products as medicines come amid increasing evidence of their effectiveness
healthHuge anti-smoking campaign kicks off on Wednesday
Voices
The erotic novel Fifty Shades of Grey has already been blamed for a rise in the number of callouts to the fire brigade for people trapped in handcuffs
voicesJustine Elyot: Since Fifty Shades there's no need to be secretive about it — everyone's at it
Arts and Entertainment
A new Banksy entitled 'Art Buff' has appeared in Folkestone, Kent
art
Arts and Entertainment
Shia LaBeouf is one of Brad Pitt's favourite actors in the world ever, apparently
filmsAn 'eccentric' choice, certainly
Sport
footballBut the Newcastle United midfielder's news has 'left his mistress furious'
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Senior Marketing Manager - Central London - £50,000

£40000 - £50000 per annum: Ashdown Group: Marketing Manager (Campaigns, Offlin...

Head of Marketing - Acquisition & Direct Reponse Marketing

£90000 - £135000 per annum: Ashdown Group: Head of Marketing (B2C, Acquisition...

1st Line Service Desk Analyst

£27000 - £30000 Per Annum: Clearwater People Solutions Ltd: Our client who are...

Trainee Recruitment Consultant - Birmingham - Huxley Associates

£18000 - £23000 per annum + Commission: SThree: Huxley Associates are currentl...

Day In a Page

Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

Isis an hour away from Baghdad -

and with no sign of Iraq army being able to make a successful counter-attack
Turner Prize 2014 is frustratingly timid

Turner Prize 2014 is frustratingly timid

The exhibition nods to rich and potentially brilliant ideas, but steps back
Last chance to see: Half the world’s animals have disappeared over the last 40 years

Last chance to see...

The Earth’s animal wildlife population has halved in 40 years
So here's why teenagers are always grumpy - and it's not what you think

Truth behind teens' grumpiness

Early school hours mess with their biological clocks
Why can no one stop hackers putting celebrities' private photos online?

Hacked photos: the third wave

Why can no one stop hackers putting celebrities' private photos online?
Royal Ballet star dubbed 'Charlize Theron in pointe shoes' takes on Manon

Homegrown ballerina is on the rise

Royal Ballet star Melissa Hamilton is about to tackle the role of Manon
Education, eduction, education? Our growing fascination with what really goes on in school

Education, education, education

TV documentaries filmed in classrooms are now a genre in their own right
It’s reasonable to negotiate with the likes of Isis, so why don’t we do it and save lives?

It’s perfectly reasonable to negotiate with villains like Isis

So why don’t we do it and save some lives?
This man just ran a marathon in under 2 hours 3 minutes. Is a 2-hour race in sight?

Is a sub-2-hour race now within sight?

Dennis Kimetto breaks marathon record
We shall not be moved, say Stratford's single parents fighting eviction

Inside the E15 'occupation'

We shall not be moved, say Stratford single parents
Air strikes alone will fail to stop Isis

Air strikes alone will fail to stop Isis

Talks between all touched by the crisis in Syria and Iraq can achieve as much as the Tornadoes, says Patrick Cockburn
Nadhim Zahawi: From a refugee on welfare to the heart of No 10

Nadhim Zahawi: From a refugee on welfare to the heart of No 10

The Tory MP speaks for the first time about the devastating effect of his father's bankruptcy
Witches: A history of misogyny

Witches: A history of misogyny

The sexist abuse that haunts modern life is nothing new: women have been 'trolled' in art for 500 years
Shona Rhimes interview: Meet the most powerful woman in US television

Meet the most powerful woman in US television

Writer and producer of shows like Grey's Anatomy, Shonda Rhimes now has her own evening of primetime TV – but she’s taking it in her stride
'Before They Pass Away': Endangered communities photographed 'like Kate Moss'

Endangered communities photographed 'like Kate Moss'

Jimmy Nelson travelled the world to photograph 35 threatened tribes in an unashamedly glamorous style