Key points
- An agreement signed by one of two buyers bound the signatory because he had accepted joint and several liability under the contract.
- A seller may be able to resist a claim for restitution of a deposit if a contract is void but the buyer has received the benefit for which the payment was made.
If you are hoping to escape a contract to buy land, or to rescue a deposit, Marlbray Ltd v Laditi [2016] EWCA Civ 476; [2016] PLSCS 152 serves as a warning that it is often easier to make contractual commitments than to break them.
The litigation concerned a contract signed at a sales fair held to whip up interest in units in an “aparthotel” in London and to enable investors to sign legally binding contracts on the spot. The sale and purchase agreements required buyers to pay an initial sum of £1,000, to make further substantial payments at agreed intervals while the hotel was being built, and to pay the balance due and accept a 999-year lease of their chosen units when the hotel was finished.
Some of the buyers had second thoughts, or were unable to complete their purchases. But, in the litigation that followed, the High Court rejected claims that the contracts were not binding due to non-compliance with the formalities: Rabiu v Marlbray Ltd [2013] EWHC 3272 (Ch); [2013] PLSCS 261.
Off the hook
However, one of the contracts had been signed by only one of two joint purchasers. The signature appeared immediately above the words “Signed for and on Behalf of the Purchaser”. Was the agreement invalid because the individual who did sign lacked authority to sign on behalf of his co-purchaser?
The parties named as “the Purchaser” were husband and wife. Mr Laditi went into the sales fair, but Mrs Laditi had remained outside with their children. She was not impressed by her husband’s announcement that he had paid a reservation fee of £1,000 and was not aware that he had actually signed a contract, let alone that he had purported to do so on behalf of them both. It followed that Mrs Laditi was not bound by the agreement because she had neither signed it, nor authorised her husband to sign on her behalf.
Several liability
Drawing on a concept more usually applied in relation to guarantees, where recalcitrant guarantors sometimes try to avoid liability on the ground that a guarantee has not been signed by every named guarantor, the Court of Appeal ruled that the validity of the contract between the seller and Mr Laditi depended on whether his agreement to sign the document, and his execution of it, was expressly or impliedly conditional on his wife signing as well.
The agreement imposed joint and several obligations on the buyers. The court explained that joint and several liability gives rise to one joint obligation and to as many several obligations as there are joint and several promisors. So, had the contract been signed by all parties, the seller could, if it chose, pursue both parties in one action under their joint contract, or launch separate actions against either of the parties named as “the Purchaser” under their several contracts. Therefore, the parties could not have intended the husband’s liability under the contract to be conditional on his wife signing the document as well.
Section 2
Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 requires contracts to buy and sell land to be made in writing, to incorporate all the agreed terms, and to be signed by or on behalf of the parties. Did the fact that the agreement had not been signed by all the parties mean that it did not comply with the requirements of section 2?
Gloster LJ observed that it would make a mockery of section 2 if Mr Laditi could rely on technical arguments to escape his obligations under his several contract when the failure to obtain his wife’s authority to sign the contract was entirely his. Her Ladyship explained that Mr Laditi was entitled to call for the grant of a lease to himself and his wife under the terms of his several contract with the seller and that it was not necessary for Mrs Laditi, as the proposed co-tenant, to be a party to that several contract for the purposes of section 2. Therefore, Mr Laditi was bound by his agreement, even though his wife was not.
Deposit
If this were wrong, would the seller be entitled to keep Mr Laditi’s deposit because he was unable to complete his purchase? In its report, Transfer of Land (1987), which preceded the enactment of section 2, the Law Commission explained that contracts that did not satisfy the statutory requirements would be void. In such circumstances, buyers would generally be entitled to recover their deposits because they would not have received anything in return for their money. However, Sharma v Simposh Ltd [2011] EWCA Civ 1383; [2012] 1 EGLR 113 confirmed that a seller may be able to resist a claim for restitution of a deposit, even though there is no contract between the parties, if the buyer has received the benefit for which the payment was made.
That was the case here. The unit that Mr Laditi had chosen had been taken off the market and secured for his purchase at a specific price. The seller had completed the development and was still willing to sell to Mr Laditi. Therefore – subject to as yet undecided claims for rescission on the ground that the bargain was unconscionable, that the 25% deposit paid by Mr Laditi was a penalty, and for the return of his deposit under section 49(2) of the Law of Property Act 1925 – the seller would have been entitled to retain Mr Laditi’s deposit, even if the contract had been void.
Allyson Colby is a property law consultant
