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Some contract and land law issues

The first key material legal issue is whether the contract for sale is valid. In order to be valid, a contract for sale, or 'estate contract, entered into on or after 27 September 1989, must be made in writing, contain all the terms agreed by the parties and be signed by both parties (Law of Property (Miscellaneous Provisions) Act 1989, s. 2.

The first requirement is satisfied as the facts reveal that 'two copies of their contract for sale were produced' and that it was typed. The requirement for a signature can be fulfilled by either both parties signing the same document, or by each party signing a copy and exchanging them (Mackenzie 2012). This requirement has been satisfied as the facts reveal that two copies of the contract were produced to be signed. However, it is noteworthy that the facts do not explicitly state that both copies were, in fact, signed - we must assume this has been completed.
The crux of the issue in this scenario is the second requirement - that the contract must contain all terms agreed by the parties. Specifically, what happens when a term of the contract i.e. that the refrigerator was included in the sale, has been omitted from the contract. Prima facie the contract is void in such circumstances (Smith 2009). However, the Law Commission envisaged that the omission of a term might be remedied by rectification of the signed contract (Law Com No 164). This is evidenced in the case of Wright v Robert Leonard Developments Ltd (1994). D agreed to sell the leasehold to a flat to C. The original agreement included an oral agreement that all of the fixtures and fitting should be included. D proceeded to remove the fixtures and fitting after the sale which C contested. The court held that the oral agreement was left out of the main agreement by mistake, and therefore the original agreement was rectified to include the oral agreement.

In order for rectification to succeed, the omission must represent a mistake in the drafting of the contract (Peel and Treitel 2012). A deliberate omission will not trigger rectification (Oun v Ahmad [2008]).
As the facts reveal that the omission on the contract 'was due to a typing error' it is apparent that the omission was not deliberate, and therefore rectification is possible. The contract for sale is valid. Now that the contract for sale is deemed valid, the next legal issue is whether Edward is bound to buy the house now that the porch has been destroyed.

The entering into of a binding contract for sale of land does not transfer legal title to the purchaser. However, it is a fundamental principle of property law that where a contract for the sale of land is made, but the sale has not yet completed, the beneficial or equitable ownership will pass to the purchaser, with the seller retaining a right to the purchase money. The seller becomes a constructive trustee for the purchaser from the date of exchange until the date of completion (Lysaght v Edwards (1876)).

This fundamental principle is premised on the equitable maxim that 'equity treats as done that which ought to be done'. The net effect is the troubling position for the purchaser that 'When a person contracts to buy real property he is not usually allowed into possession and so has no control over it' yet the purchaser will 'bear the risk of damage from natural causes or from accidents' (Wilkinson 1989).

However, certain duties are placed upon the seller - for example, a fiduciary duty is placed upon the seller not to damage or prejudice the land himself (Englewood Properties Limited v Patel [2005]). However, that duty does not extend to insuring against damage which may occur after the exchange of contracts. As the equitable owner of the property, it is a prudent purchaser that should arrange insurance cover with effect from the time of exchange (Gray and Gray 2011). No purchaser wishes to be 'contractually obligated to receive a transfer of an uninsured charred ruin'. Furthermore, it is not safe for the purchaser to rely on the seller's insurance policy, as any money paid to the seller under their policy is not held on trust for the purchaser (Rayner v Preston (1881)).

Turning to the instant case, it is clear that the damage to the porch occurs 'the day after contracts has been exchanged'. Therefore, the day before the accident, Edward became the beneficial or equitable owner of the house. Edward, as a prudent purchaser, should have arranged insurance from this date to cover the 20,000 damage but has not done so. Applying the general rule, Jayshri can compel Edward to buy the house in its damaged state and is not obliged to reduce the price by 20,000.

However, it should be noted, that the Standard Conditions of Sale (Law Society 2011) published by the Law Society and used in the sale of land, allow for the seller to retain the risk until the date of completion. However, the purchaser has no obligation to assume the risk. As the facts or silent on whether such an agreement was made, the likely outcome is that Jayshri can compel Edward to purchase her home. If he does not, Edward is in breach of contract.

Breach of contract is a common law remedy and the usual measure of damages is the loss which the claimant has sustained as a result of non-performance. However, damages are usually considered inadequate in cases involving the sale of land as land is deemed unique (Watt 2012). Where damages are an inadequate remedy, contracts for the sale of land are specifically enforceable in Equity (Davies and Virgo 2012). Specific performance is an order which compels an individual to perform specific contractual obligations (Hudson 2009). The award of specific performance is discretionary, although it is not exercised capriciously and follows rules established by case law (Hector 2011). It is likely that Jayshri will be awarded specific performance against Edward to complete the sale of the house, even in its damaged state.

In conclusion, the contract for sale is valid as the contract has been rectified to include the omitted term pertaining to the refrigerator. Jayshri can claim specific performance against Edward to ensure the sale of the house in the damaged state.

Englewood Properties Limited v Patel [2005] 1 WLR 1961
Lysaght v Edwards (1876) 2 Ch D 499
Oun v Ahmad [2008] EWHC 545 (Ch)
Rayner v Preston (1881) 18 Ch D
Wright v Robert Leonard Developments Ltd [1994] EGCS 69

Law of Property (Miscellaneous Provisions Act 1989, s. 2

Davies P and Virgo G, Equity and Trusts: Text, Cases and Materials (OUP, 2013)
Gray K and Gray S, Land Law (7th edn, OUP 2011)
Hector E et al, Cheshire and Burn's Modern Law of Real Property (18th edn, OUP 2011)
Hudson A, Equity and Trusts (16th edn, Routledge-Cavendish 2009)
MacKenzie J, Textbook on Land Law (13th edn, OUP 2012)
Peel E and Treitel G, The Law of Contract (13th edn, Sweet and Maxwell 2012)
Smith R, Property Law (6th edn, LexisNexis 2009)
Watt G, Equity and Trusts ( 3rd edn, OUP 2012)

Journal Articles
Wilkinson, 'What's Mine is Your Loss - Transfer of Land, Passing of Risk' (1989) 31 Conveyance and Property Lawyer 1

Official Published Sources
Law Commission, Transfer of Land (Law Com No 164)
Law Society, Standard Conditions of Sale (5th edn, 2011)

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Article published 25/05/2017

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