Sale of land – Condition – Rescission – Standard conditions of sale – Defendants paying deposit to purchase claimants’ property – Defendants failing to complete – Claimants rescinding contract and claiming damages for breach of obligation under condition 6.3.3 to pay further deposit – Whether rescission precluding entitlement to balance of deposit – Claim allowed
By a contract in writing dated April 2011, the defendants agreed to purchase a substantial country residence near Lewes from the claimants for £3.6m. The defendants paid a deposit of £150,000. The completion date, as extended by agreement of the parties, fell at the end of April 2012, but, in the event, completion did not take place on that date. The claimants served a notice to complete on the defendants and subsequently rescinded the contract, by a letter dated May 2012, for non-compliance after the defendants failed to comply with that notice.
The contract for sale incorporated the standard conditions of sale (4th ed). Condition 6.8.3 provided: “On receipt of a notice to complete: (b) if the buyer paid a deposit of less than 10% (no less than £500), he is forthwith to pay a further deposit equal to the balance of that 10% deposit.” Condition 7.5.1 and 7.5.2 provided: “If the buyer fails to complete in accordance with a notice to complete… The seller may rescind the contract, and if he does so… he may… claim damages”.
Pursuant to those provisions, the claimants brought a claim for damages against the defendants. An issue arose as to whether, in the light of earlier authorities, the contractual rescission of a contract for the sale of land precluded the vendor from recovering the unpaid balance of the deposit and from enforcing the provisions of the rescinded contract.
Held: The claim was allowed.
(1) There was no authority for the proposition that the rescission of a contract for the sale of land, pursuant to the seller’s contractual right to rescind, precluded recovery of the unpaid balance of the deposit or resulted in the contract being terminated ab initio so that unperformed obligations, which were intended to remain enforceable after the contract had been brought to an end, were somehow dissolved or discharged.
The rights unconditionally acquired by the vendor of land, prior to the exercise of his contractual right to rescind, survived the rescission of the contract unless the contract for the sale of land contained clear express words divesting or discharging the vendor of any such rights. The failure to pay the deposit under a contract for the sale of land gave the vendor the right to sue for the deposit as an agreed sum, which could be recovered in debt, or an accrued right to sue for damages for breach of an obligation to pay the deposit, the measure of which was the amount of the deposit. The vendor was entitled to be placed in the same position as if the contractual obligation had been performed: Damon Cia Naviera SA v Hapag-Lloyd International SA (The Blankenstein) [1985] 1 WLR 435 (a shipping case) and Dewar v Mintoft [1912] 2 KB 373 applied; Buckland v Farmer and Moody (a firm) [1979] 1 WLR 221, Johnson v Agnew [1980] AC 367, Samarenko v Dawn Hill House Ltd [2013] Ch 36 and Griffon Shipping LLC v Firodi Shipping Ltd [2014] 1 CLC 1 considered; Lowe v Hope [1970] Ch 94 not followed.
(2) Accordingly, in the present case, the claimants’ unconditional right to payment of the further deposit survived the exercise by them of their right to rescind the contract. They were entitled to claim those damages under standard condition 7.5.2(a)(iii) because, if the vendor rescinded the contract, he could claim damages under that provision in the contract. The vendor was also entitled to pursue any claim for damages in respect of accrued rights under that standard condition. That provision was not limited to any loss suffered by the vendor on re-sale of the property. If the standard condition had been limited in that regard, one would have expected to see express words saying so and there were no such words. Furthermore, the claimants were entitled to damages of £210,000 in respect of the defendants’ breach of standard condition 6.8.3(b) of the contract.
Jonathan Seitler QC (instructed by Cripps, of Tunbridge Wells) appeared for the claimants; Stephen Brown (instructed by Goodlaw Solicitors, of Hove) appeared for the defendants.
Eileen O’Grady, barrister
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