Contract for sale of land – Certain terms omitted from written document – Parties expressly agreeing not to record those terms – Whether omission of expressly agreed terms rendering written document void for non-compliance with section 2 of Law of Property (Miscellaneous Provisions) Act 1989 – Whether rectification available to incorporate omitted terms into written document – Appeal dismissed
The defendant owned a long lease of premises consisting of an off-licence with residential accommodation above. By a document dated December 2004, he contracted to sell the property, its fixtures and fittings and the goodwill of the business to the claimant for £75,000. The parties signed the document in the presence of witnesses. A second, handwritten document indicated how the purchase price was to be apportioned between the building, the fixtures and fittings and the goodwill.
The parties subsequently fell into disagreement regarding the completion of the sale. The claimant registered a unilateral notice of the sale contract against the defendant’s title. The defendant applied to have the notice cancelled, contending that the contract was void since all its express terms were not contained in a single document, contrary to section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. The claimant sought rectification of the contract to incorporate an express term recording the apportionment of the price. The defendant argued that there was no scope for rectification since the parties had expressly agreed that the terms of the apportionment should not be recorded in the written document.
The matter was referred to an adjudicator, who found that: (i) the contract as originally drafted did not contain all the terms that the parties had expressly agreed; (ii) there was disagreement over the apportionment of the price; and (iii) the parties had agreed not to include apportionment details in the contract. He regarded the second document as merely a written note of arrangements that had no contractual force. He concluded that the contract did not comply with section 2 and could not be cured by rectification, such that the claimant did not have the benefit of a binding contract for sale and his notice should be cancelled.
On appeal by the claimant, an issue arose as to whether the court could rectify the first document to include any terms expressly agreed as to apportionment on the basis that the parties had intended that document to create a legally enforceable contract of sale and had made a mistake of law as to the effect of that document.
Held: The appeal was dismissed.
If, on a contract for the sale of land, the written document did not incorporate all the terms that the parties had expressly agreed, there would prima facie be no binding contract unless the omitted terms could properly be regarded as being the subject of a separate and independent contract or the written document could be rectified to include those terms. Although rectification would sometimes be possible in cases where the written document did not incorporate all the expressly agreed terms, the purpose of the legislation would be undermined if it were open to the court in every such case to investigate the details of the orally agreed terms and to write them into the written document. Rectification was available where the omission of expressly agreed terms resulted from a mistake in the recording of the agreement. It was not available where the parties had agreed that certain terms should remain unrecorded in writing, and their mistake was only in thinking that they had made a binding contract and that it was unnecessary for them to record the additional terms. It was beyond the ambit of rectification to write into the written agreement a term that the parties had expressly agreed should not be so recorded. In such cases, the parties had executed the document that they had intended to execute, the way in which the transaction had been expressed was not erroneous, and their only mistake was as to the legal consequences: Allnutt v Wilding [2007] EWCA Civ 412; [2007] WTLR 941 applied; Swainland Builders Ltd v Freehold Properties Ltd [2002] EWCA Civ 560; [2002] 2 EGLR 71; [2002] 23 EG 123 and Wills v Gibbs [2007] STI 1970 distinguished.
On the evidence, the claimant and the defendant had expressly agreed upon an apportionment of the price of £75,000 and that such apportionment should not be recorded in the written document. Accordingly, the first document did not incorporate all the terms expressly agreed between the parties and did not comply with section 2. It could not be rectified since the parties had expressly agreed not to record the terms in question.
Colin Green (instructed by J Esner & Co, of Bolton) appeared for the claimant; Richard Carter (instructed by Fieldings Porter, of Bolton) appeared for the defendant.
Sally Dobson, barrister
