Exchange of contracts — Exchange by telephone and Formula B — Undertaking as to payment of deposit — Deposit not paid for 48 hours — Vendor rescinds — Whether payment of deposit a fundamental term — Whether payment of the deposit time of the essence — Claim by purchaser succeeds
On the evening of May 10 1988, the solicitors for the respective parties exchanged contracts for the sale by the defendant of a number of properties to the plaintiff. The exchange was by telephone in accordance with the guidance in the Law Society Telephone/Telex Exchange — Formula B (1986) direction. By that formula the plaintiff’s solicitors undertook “to send his signed part of the contract to the other together with … a banker’s draft or a solicitor’s client account cheque for the deposit …”. That has to be effected on the day of exchange by the use of first class post, document exchange or hand delivery. It was a term of the contract that the defendant vendor was obliged to deposit the title deeds to the purchaser’s order and then to have the deposit released to her.
The purchaser’s deposit was not received by the defendant until the evening of May 12 1988, some 48 hours after the telephonic exchange. The defendant had contracted to sell the properties to a third party during the afternoon of May 12 and therefore purported to rescind the contract with the plaintiff. The plaintiff claimed breach of contract and damages. The defendant contended that this was a commercial transaction, and in such transactions time is of the essence. There was also the obligation of the vendor to provide the title deeds and her right to have the deposit released to her; she would have been in difficulty over this if the deposit were not paid immediately.
Held The claim was allowed.
Under the Formula B basis of exchange of contracts, the solicitors undertake to pay the deposit as soon as possible. Although the contractual obligation to pay the deposit was a fundamental term, time was not of the essence for its payment. The late payment of the deposit may involve a breach of the solicitors’ undertaking in Formula B, but the contract for sale remained valid. The obligation of the defendant to hand over the deeds on receipt of the deposit made no difference to the situation.
Bunge Corporation v Tradax Export SA
[1981] 1 WLR 711 considered.
John Boggis (instructed by Jaques & Lewis) appeared for the plaintiff; and Ian Mill (instructed by D M Landsman & Co) appeared for the defendant.
