Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 provides that contracts for the sale of land must: (i) be made in writing; (ii) incorporate in one document all the terms that the parties have expressly agreed or, where contracts are exchanged, in each; and (iii) be signed by or on behalf of each party.
The provisions were enacted to prevent parties from inadvertently creating contractual commitments. However, they also created new problems for the courts to solve because, if an agreed term has been omitted from a contract, the agreement will be void. The courts have addressed this in different ways.
Tootal Clothing Ltd v Guinea Properties Management Ltd [1992] 41 EG 117 suggested that section 2 applies to uncompleted contracts for the sale of land. Therefore, once a land contract has been performed, either party will be entitled to enforce any separate or supplemental agreement without reference to section 2. Grossman v Hooper [2001] EWCA Civ 615 cast doubt on that particular aspect of the decision. However, the court felt able to uphold the supplemental agreement in that case because the land agreement and the supplemental agreement were completely independent of each other and the supplemental agreement was not a contract for the disposal of an interest in land.
The Court of Appeal took a similar approach in North Eastern Properties Ltd v Coleman [2010] EWCA Civ 277. It ruled that parties can enter into contracts that are truly independent of each other. However, this does not enable parties to a composite transaction to separate out expressly agreed terms where performance of the land contract is conditional on the performance of the separately documented terms.
Keay v Morris Homes (West Midlands) Ltd [2012] EWCA Civ 900 adds fuel to the fire. The claimants sought damages for breach of an oral agreement for the speedy construction of a medical centre. The Court of Appeal ruled that it did not have sufficient evidence to decide whether the contract for the sale of the land and the oral agreement were, in fact, interdependent, or truly separate from each other, but made the following comments to assist the judge with responsibility for the trial.
The court rejected the suggestion that Tootal was authority for the principle that completion of a land contract that fails to comply with section 2 breathes life into any void, non-land terms. A void contract cannot mutate into a contract that is valid.
The legislation does not prevent the parties from completing a contract that fails to comply with section 2, if they choose to do so; the issue of whether the previous agreement was “section 2 compliant” will then be irrelevant. However, neither party will be able to sue the other for specific performance – or for breach of – an uncompleted agreement because their contract is void.
The decision underlines the merciless effect of section 2. Agreements for the sale of land must record all the agreed terms, failing which the entire agreement will be void. Similar rules apply to agreements to vary land contracts. The omission of an agreed term will nullify the variation agreement. Consequently, the original contractual provisions will stand.
Allyson Colby
Property Law Consultant
