Sale by tender already effectively in contract form, with no terms remaining to be negotiated–Words ‘subject to contract’ mistakenly typed by a secretary on vendor’s acceptance of tender–Parties behaved as though a contract existed until purchaser was informed of prospective compulsory acquisition of property–Typed words held meaningless in their context–Goff J disclaims any intention of causing ‘alarm bells’ to ring in solicitors’ offices–Contract held to have come into existence and purchasers’ deposit forfeited
This was a
claim by Michael Richards Properties Ltd against the Corporation of Wardens of
St Saviour’s Parish, Southwark, for the return of a deposit paid on an
agreement made in October 1972 for the purchase of property owned by the
defendants in Sydenham, London SE26. The defendants counterclaimed a
declaration that the deposit was forfeit.
Mr A J
Balcombe QC and Mr B Levy (instructed by Nabarro, Nathanson & Co) appeared
for the plaintiffs, and Mr H E Francis QC and Mr T R F Jennings (instructed by
Simpson, Palmer & Winder and W R Millar & Sons) represented the
defendants.
Giving
judgment, GOFF J said that in October 1972 the defendants advertised certain
property at Sydenham for sale by tender. The tender documents contained full
particulars and special conditions of sale, and the special conditions
incorporated the National Conditions of Sale 18th ed with amendments including
the deletion from condition 22 (3) of the words ‘(unless the court otherwise
directs).’ Special conditions 5 and 7
read:
5. Every
person desiring to purchase the property described in the foregoing particulars
shall fill in and sign with his name and address the form of tender printed at
the foot of these conditions, and shall send a copy of the foregoing particulars
and these conditions with the said form of tender so filled in and signed still
attached thereto to reach the Clerk, the Corporation of Wardens of St Saviour .
. . in an envelope marked ‘tender’ not later than 12 noon on the 27th day of
October 1972 when the tenders will be opened. No tender may be withdrawn before
the date specified in paragraph 7 hereof.
7. The person
whose tender is accepted on the 27th day of October 1972 shall be the
purchaser, subject to the approval of the Charity Commissioners, and shall be
informed of the acceptance of his tender by letter sent by registered post or
recorded delivery post addressed to the address given in his tender and any
letter of acceptance so sent shall be deemed to have been received in the due
course of post.
On October 26
1972 the plaintiffs sent in a completed form of tender offering £110,000 for
the property in question, and on October 27 the defendants’ agents, Richard
Ellis & Son, sent a letter of acceptance of that tender. The letter, which
required payment of a 10 per cent deposit, was signed with the firm’s name,
immediately underneath which appeared, typed in capitals, the words ‘SUBJECT TO
CONTRACT.’ The evidence was that an
assistant surveyor, Mr Ryder, had either dictated that letter to his secretary
or given her general instructions what to say, and that he did not intend the
words ‘subject to contract’ to be used: she however had added the words because
of a general (and understandable) practice in the office by which all offers
and acceptances in private treaty cases were to be so safeguarded. On or about
October 31 the plaintiffs paid the deposit of £11,000 to the defendants’
solicitors. Mr Ryder did not realise what had happened, and he (his Lordship)
was satisfied that the words ‘subject to contract’ were used by mistake. The
matter proceeded in the normal way. The vendors did not submit a draft
contract, nor did the purchasers ask for one, and it was difficult to see what
a contract could have contained.
That same
October 27 1972 the local authority sent the vendors a letter saying that its
officers had it in mind to recommend the compulsory purchase of the property,
and suggesting that the vendors might think it ethically right to inform the
successful tenderer. In fact this information was not passed on to the
plaintiffs till November 29, but they made no complaint of that, accepting that
it was merely the result of the wardens not having met in the meantime. Both
parties meanwhile proceeded on the basis that there was a contract. On November
1 the defendants’ solicitors sent the plaintiffs’ solicitors various formal
documents. On November 8 the plaintiffs’ solicitors acknowledged these, and on
November 21 they submitted requisitions. That letter crossed with one sending a
draft of the order the Charity Commissioners proposed to make. On November 29
the plaintiffs’ solicitors approved the draft order, and subject to replies to
requisitions enclosed a draft conveyance. However, that letter, too, crossed
with one from the defendants referring to the letter from the local authority,
and this caused consternation and a prompt reply to the effect that the local
authority’s letter must have been received by the vendors on October 30 or 31,
and if the contents had been made known to the plaintiffs on either of those
days, the plaintiffs would still have had time to consider the matter further
before ‘lodging with you the ten per cent deposit and concluding the
contract.’ That last statement was not
accurate on any showing, but was entirely inconsistent with the matter having
remained in negotiation. On December 4 the vendors approved the draft
conveyance, and on December 20 they enclosed replies to requisitions and asked
for the conveyance for execution. On January 1 1973 they advised that the Charity
Commissioners’ sealed consent was available. On January 15 they served notice
to complete, but on the same date the plaintiffs’ solicitors delivered by hand
a letter requesting return of the deposit, pointing out that the vendors’
agents’ letter of acceptance was stated to be ‘subject to contract,’ and that,
as no unconditional offer and acceptance had taken place, no contract existed.
The plaintiffs did not comply with the notice to complete.
He (his
Lordship) would dispose of one point at once. In his opinion a contract
expressed, as here, as conditional on the consent of the Charity Commissioners
being forthcoming was effective upon that consent issuing. It was therefore not
made without consent, and did not offend against section 29 (1) of the Charities
Act 1960. On the main point, if the words ‘subject to contract’ stood and had
to be regarded, the plaintiffs were clearly right. It was not possible to say
that the words referred only to the special condition relating to the Charity
Commissioners’ consent. A further argument, that the effect of the words was
capable of being waived, and was waived, he (Goff J) thought could be advanced
only in the House of Lords, having regard to Tiverton Estates Ltd v Wearwell
Ltd [1975] Ch 146. It was true that the question there was whether the
qualification ‘subject to contract’ could be disregarded so as to enable a
writing so limited to be treated as a note or memorandum of a contract, but the
question whether it could be waived so as to make a contract appeared to be a
fortiori. The point on which the case finally turned, therefore, was
whether the words ‘subject to contract’ in the letter of acceptance ought to be
rejected. He (his Lordship) could not infer, as he had been invited to do by
counsel for the defendants, that the plaintiffs knew the words had been
inserted by mistake. After all, the surveyor concerned signed the letter, and
did not himself notice it. Even if he (Goff J) did make this inference, he
could not see how it would avail the defendants. He could not make a contract
for the parties if by mistake they had failed to make one for themselves. The
approach on this basis must be a claim for rectification, but then where was
the prior agreement to which by mutual mistake the letter of acceptance failed
to give effect?
Counsel for
the defendants further contended, however, that the words ‘subject to contract’
should be rejected as meaningless in the context, relying on Nicolene v Simmonds
[1953] 1 QB 543, and in particular on words of Denning LJ at p 552 and Hodson
LJ at p 553. That case was different on its facts, but he (his Lordship)
thought the principle applied. He hoped that this judgment would not ring
warning bells in solicitors’ offices, as Lord Denning had put it in Tiverton
Estates v Wearwell Ltd (supra) when referring to Law v Jones
[1974] Ch 112. He (Goff J) was not casting any doubt on the meaning, effect and
protection of the words ‘subject to contract’ in the cases in which they were
used in normal conveyancing practice and everyday life, viz when estate agents
were negotiating a sale, solicitors negotiating a contract or otherwise acting
for a vendor or purchaser on a proposed sale by private treaty, and individuals
meeting, making a written or oral offer to buy or sell, or an agreement subject
to contract. He would not wish to do so, even if he could, and in any case it
was clear on the authorities in the Court of Appeal that it would be quite
wrong. His decision was on the particular facts of this case. Here was a sale
by tender: nothing remained to be negotiated, there was no need or scope for a
further formal contract, and it was difficult to see how one could be drawn.
Nobody ever thought there was. The vendors did not submit a draft contract, nor
were they asked to do so, and the matter proceeded with the necessary steps,
not to negotiate or finalise a contract, or even to put it into further form or
shape, but with the steps required for completion. In the context of a tender
document setting out all the terms of the contract, and requiring to be annexed
to the tender offer, it seemed to him (his Lordship) that the words ‘subject to
contract’ in the acceptance were meaningless, and could be rejected in
accordance with the decision in Nicolene v Simmonds (supra).
As to whether
he ought to exercise his discretion to order a return of the deposit under
section 49 of the Law of Property Act 1925, the plaintiffs advanced two reasons
for his doing so: that the defendants would otherwise have made a profit, and
that the warning concerning the local authority’s views could have been
communicated before the deposit was paid. The first was inherent in cases of
forfeiture, the second was not really significant because the contract was
concluded before then by the letter of acceptance. The parties had, by deleting
the words ‘unless the court otherwise directs’ from condition 22 (3) of the
conditions of sale, agreed between themselves to the forfeiture, and the court
should not lightly go behind their agreement, though it was common ground that
there was jurisdiction so to do. Moreover, the plaintiffs had deliberately
refused to perform their contract. Some sympathy might be felt for them,
because they had discovered a matter which might seriously affect the value of
the property, and if they had known it before they might not have tendered at
all, or might have tendered
repudiated their contract, thinking they had an escape route which, on the view
he (his Lordship) had reached, they had not. The action therefore failed, and
on the counterclaim, the defendants would take a declaration that the deposit
was forfeited.
