Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 imposes strict requirements that affect contracts for the sale or disposition of an interest land. Any such contracts must be made in writing, must incorporate all the terms that have been expressly agreed, and must be signed by or on behalf of the parties. It pays to observe these formalities; contracts that do not comply with the requirements are void.
These requirements do not apply to a straightforward agreement for the promotion of land for development. A promotion agreement is an agreement that a developer will use its expertise to maximise the development potential of land and then market the property for sale on receipt of planning permission for development. In return, the developer will receive a fee, or a proportion of the net sale proceeds. The question that arose in Gladman Developments v Sutton [2016] EWHC 1597 (Ch) was whether the parties had reached a legally binding oral promotion agreement in respect of 70 acres of farm land, either at a meeting or during a telephone conversation shortly afterwards.
Analysis of whether or not there is a binding agreement depends not on the subjective states of mind of the parties but on whether, viewed objectively, the communications between them lead to the conclusion that they had intended to create legal relations and had agreed all the terms essential for the formation of a legally binding contract: RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH & Co KG [2010] UKSC 14.
Furthermore, even though parties may have agreed essential points, their agreement may be “in principle” only because there are further terms to be agreed. Cheverny Consulting Ltd v Whitehead Mann Ltd [2006] EWCA Civ 1303 is also authority for the proposition, in the context of commercial contracts, that the courts will approach a dispute about the formation, or existence, of a contract on the basis that the more complex the subject matter and terms the more likely the parties are to want refrain from committing themselves until they have a written document, prepared or reviewed by lawyers, which they have considered and executed.
The developer had provided a pro forma promotion agreement to the landowners before the parties’ meeting. It obliged them to make their land available for promotion on receipt of an up-front payment. However, the documents did not support the developer’s case that the parties had reached a binding oral agreement at their meeting. In fact, they pointed consistently and overwhelmingly to the contrary.
The evidence suggested that the landowners were uncertain about how much land to commit to the scheme. In addition, subsequent correspondence between the parties’ lawyers had been labelled “subject to contract” and letters from the landowners’ lawyers had included a request for an undertaking to cover their legal fees, whether the transaction completed or not. Communications in these terms served to emphasise that the parties had not reached a legally binding agreement – and there was nothing else of sufficient substance to justify a finding that the parties had done so.
Allyson Colby is a property law consultant
