Time is not usually of the essence of a contract for the sale and purchase of land. Consequently, all is not lost if a buyer is unable to complete its purchase on the contractual completion date. The seller must serve a notice to complete, requiring the buyer to complete the transaction before a specified date, making time of the essence of completion for that date.
The decision in Chinnock v Hocaoglu [2007] EWHC 2933 (Ch); [2008] PLSCS 142 serves as a warning against tendering an incorrect amount to complete a purchase, especially if time is of the essence of completion. In this case, the buyer failed to complete the transaction on the contractual completion date, but remitted the balance of the purchase price to the seller on the last day for compliance with a notice to complete. Unfortunately, the remittance did not include an additional payment required by the contract.
The contract for sale provided that the latest time for completion was 1pm, but the seller’s solicitor did not receive the funds until 2.45pm. The seller took the view that the buyer was out of time; it therefore forfeited the buyer’s deposit and returned the sum tendered by the buyer to complete the purchase.
The High Court ruled that the standard conditions of
Nothing contained in the contract displaced the standard conditions. Consequently, the buyer had tendered the balance of the purchase price in time. However, the buyer had failed to tender the full amount due because it had failed to make the additional payment required under the contract. Consequently, the seller was entitled to rescind the contract and forfeit the buyer’s deposit.
We can learn two lessons from this case. First, it is essential to get the sums right. In order to complete a purchase, a buyer must tender the purchase price, less any deposit paid, adjusted to take account of apportionments, any other sums due under the contract and any compensation payable for late completion. Importantly, if time is of the essence of completion and the money tendered falls short of the amount required to complete the transaction, the seller will be entitled to rescind the contract when the notice to complete expires and forfeit the deposit paid on exchange of contracts.
Second, sale contracts should specify the latest time by which completion must take place if time is of the essence of a transaction. This will avoid arguments as to whether a seller would be entitled to rescind if, for example, a buyer were to tender the balance due at 9.30pm on the last day of the period allowed for compliance with a notice to complete.
Allyson Colby is a property law consultant
