Where a contract for the sale of land is silent on a particular point, the “open contract rules” will apply. Cases dealing with the open contract rules are always interesting because the open contract position provides a benchmark for draftsmen and a safety net for parties whose contracts lack important terms.
The obligation to show good title is fundamental to a contract for the sale of land. Consequently, if a contract is silent as to title, the seller will have to deduce good title to the property under the open contract rules.
The decision in Ezekiel v Kohali [2008] EWHC 734 (Ch); [2008] PLSCS 96 concerned a legally binding agreement for the sale of land that came into existence because the parties signed heads of terms, which did not contain any specific provisions dealing with the title to the land.
Unfortunately, the sellers could not deduce title to the full extent of the property that they had contracted to sell. Consequently, the buyers sought a reduction in the price or, alternatively, damages for breach of contract or misrepresentation.
The judge ruled that, in order to show good title, a seller must either be the registered proprietor of the freehold estate with an absolute title or, where the land is unregistered, be seized of the fee simple and be in a position to convey it without disputes or litigation. The seller must also be able to show good title to all of the land over which any easements will be granted.
However, there was one important exception to this rule. Where a right to a good title is implied by law, that legal implication may be rebutted by showing that the buyer knew, before entering into the contract, that the title was defective.
The sellers argued that the buyers had known that title to part of the land was missing. They asserted that the buyers had been fully aware of the position because they had shown the buyers copies of their title plans. Alternatively, the sellers argued that the buyers had had constructive knowledge of the position and should have been aware of the defect in title because they had made their own pre-contract searches through their solicitor.
The judge was not persuaded that constructive knowledge of the title defect would suffice to rebut the open contract requirement to show good title. She also rejected the sellers’ claims that they had disclosed the position to the buyers, who had accepted it. However, she decided that the buyers had been, none the less, well aware of the extent of the sellers’ registered title and had not relied on any representations that the sellers had made about the extent of their ownership. Consequently, she made an order for specific performance of the contract, without abating the price.
It appears, therefore, that the provision of official copies of title plans will not fix a buyer with constructive knowledge of a defect. Actual knowledge of the defect is required to rebut the implied obligation to deduce good title under the open contract rules.
Allyson Colby is a property law consultant
