Where a contract includes conditions that are exclusively for the benefit of one party, it can waive compliance with the conditions and enforce the contract. However, disputes often arise if it is unclear whether a provision benefits one or both of the parties.
Irwin v
The parties were unable to agree: (i) whether the condition had been inserted exclusively for the buyer’s benefit and whether the fact that either party was entitled to terminate for non-performance prevented the buyer from waiving the benefit of the condition; (ii) whether the buyer could waive the condition after the seller had served notice to terminate; and (iii) if so, what the completion date was.
The court ruled that the term had been included for the buyer’s benefit. If the condition were met – and the transaction completed – the seller would have no further interest in the property and the defect in title would cease to concern him. The position might have been different if the seller had had an interest in the adjoining property and would have been affected should the error not be corrected, but this was not the case here.
The fact that the seller could terminate the contract for non-performance of the condition was irrelevant. It was important to distinguish between the benefit of the condition and the benefit of the right to terminate if that condition was not fulfilled (which allowed the seller a modicum of certainty). The judge also refused to allow the fact that completion was tied to performance of the condition to prejudice the buyer. He ruled that the elimination of the condition from the contract would not of itself eliminate the obligation to complete and that the court could fix a completion date if the parties could not agree one.
So far so good, but the buyer lost out because the seller terminated the agreement before the buyer had waived the benefit of the condition. The seller’s notice was irreversible and took effect when it was given: Akzo Nobel UK Ltd v Arista Tubes Ltd [2010] EWCA Civ 28; [2010] 05 EG 112 (CS) applied.
The decision underlines the care required when drafting conditional contracts. The parties would be well advised to specify: (i) whether the conditions can be waived; (ii) if so, by whom; (iii) whether the contract will lapse automatically or must be terminated by notice; (iv) when; (v) who must give any such notice; (vi) whether the party with the benefit of the conditions must first be asked if it wants to waive them; and (vii) whether a notice terminating the contract crystallises when it expires or is given.
Allyson Colby is a property law consultant
