Notices to complete are double-edged weapons that require careful handling
A notice to complete is a powerful weapon because it makes time of the essence of the contract. Clarke Investments Ltd v Pacific Technologies [2013] EWCA Civ 750; [2013] PLSCS 142 reminds us that notices to complete make time of the essence for both parties, and not just for the party on whom the notice to complete is served.
The property at the centre of the dispute was sold by private treaty following an auction. The auction particulars stated that the price was inclusive of VAT, but the seller maintained that it was entitled – and, indeed, legally obliged – to charge VAT in addition to the price. The buyer served a notice requiring the seller to complete within ten working days and followed this up with a letter threatening the seller with legal proceedings.
The letter before action served its purpose. The seller abandoned its arguments about VAT on the last day for completion in accordance with the notice complete, but sent the buyer a completion statement that made no allowance for compensation for the loss and damage caused by its failure to complete on time. The buyer tried to agree the sum payable on completion with the seller and instructed its bank to place its solicitors in funds, which they received the following day.
The seller took advantage of the buyer’ failure to complete before the notice to complete had expired. It rescinded the contract and forfeited the buyer’s deposit on the ground that the buyer had not been ready, able or willing to complete on the due date. The court refused the buyer’s application for an order for specific performance of the contract and upheld the seller’s claims.
The judge reminded the buyer that the party serving a notice to complete must be ready to complete by the date fixed in the notice, because, if time is of the essence, failure to complete on time is a repudiatory breach of contract. The buyer had focused on trying to compel the seller to complete, and on its claim for compensation, and had lost sight of its own obligation to complete on time. Consequently, when the seller finally caved in, the buyer was not ready or able to complete, which enabled the seller to claim that the buyer was in breach of an essential condition of the contract, and rescind it.
The decision also reminds us that the provision of an inaccurate completion statement will not discharge a party from its obligation to complete on time. Indeed, sellers are not under any legal obligation to provide a completion statement at all: Carne v Debono [1988] 3 All ER 485; [1988] EGCS 102.
This means that buyers must calculate the sum due on completion and tender the correct amount. If a buyer believes that the amount demanded is incorrect, and offers an alternative sum, it takes the risk that it may be wrong. In cases where time is short, and is also of the essence, and the amount tendered is less than the amount due on completion, the seller will be entitled to refuse to complete and, when time runs out, to rescind the contract and forfeit the buyer’s deposit.
Allyson Colby is a property law consultant
