Time is not usually of the essence of a contract to sell land. Consequently, the seller must serve a notice to complete on a buyer who fails to complete on time, making time of the essence for completion on or before a specified date.
The litigation in Chinnock v Hocaoglu [2007] EWHC 2933 (Ch); [2008] 29 EG 92 concerned a buyer who tendered less than the seller was expecting to receive on the last day for compliance with the seller’s notice to complete. The contract provided that completion was to take place “by 1.00pm on the day fixed for completion”. The seller’s solicitor did not receive the funds until 2.44pm. The parties asked the court to decide whether, in those circumstances, the seller was entitled to rescind the contract and forfeit the buyer’s deposit.
The High Court ruled that the contract did not displace the standard conditions of sale (4th ed) (SCS), which do not fix a precise point in time by which completion must occur. Consequently, the buyer had tendered the balance of the purchase price in time, but had failed to tender the full amount due. The seller was therefore entitled to rescind.
However, the Court of Appeal has overturned that decision: [2008] EWCA Civ 1175; [2008] PLSCS 291. Their lordships noted that the contract provided for a number of additional payments, most of which sums were payable “upon completion”. There was a noticeable difference between the language used in these provisions and that used in the clause requiring payment of the disputed sum. The clause in question failed to specify that the amount outstanding was payable “upon completion”. Thus, the buyer did not have to tender that sum to require completion of the transaction.
Was it too late for the buyer to complete? The Court of Appeal decided that the buyer had tendered the requisite sum in time. The clause in the contract requiring completion to take place before 1pm did fix a time for completion, but on the contractual completion date only – and time was not of the essence of that date. The clause did not apply subsequently, while the notice to complete was running, and the SCS do not fix a precise point in time by which completion must occur, although they do provide for interest to be payable if completion does not take place by 2pm. The sum tendered arrived at 2.44pm and included interest payable under the contract. Consequently, the buyer had tendered sufficient sums to complete in time.
Draftsmen can learn much from this case. If payments are required as a condition of completion, the contract should make this clear, failing which the seller will have to resort to the usual contractual remedies to recover any outstanding sums. Careful drafting is also required if a seller requires completion to take place by a particular time on the contractual completion date where time is of the essence of that date, or on the final day of the period for compliance with a notice to complete.
Allyson Colby is a property law consultant
