Standard conditions of sale – Leasehold property – Seller purporting to exercise contractual right to rescind on ground that landlord’s consent not obtained by specified date – Buyer contending for implied term suspending right to rescind while other party performing its contractual duty to use reasonable efforts to obtain such consent – Buyer’s contention rejected
The defendant held a leasehold flat in Hyde Park Gardens, London W2, in his capacity as the executor of JS, who died in 1987. At all material times the flat, which was heavily mortgaged to a bank, was occupied by the claimant and her children, who were relatives of JS. In April 1996 certain proceedings relating to the estate of JS were compromised on terms that the defendant would, inter alia, sell the flat to the claimant for £220,000, which would be used to discharge the mortgage and meet various other liabilities of the estate. A corresponding contract of sale was entered into by the parties on 17 May 1996. The completion date was stated to be 18 August 1996 or such earlier date as was 10 working days after the landlord’s consent was obtained. A special condition modified clause 8.3.2 of the standard conditions of sale (which were otherwise applicable) so as to place upon the claimant, as buyer, the duty to use all reasonable efforts to obtain the landlord’s consent as soon as practicable.
With the approach of the completion date, it became clear that the landlord was unwilling to consent. On 4 December 1996 the defendant agreed to allow the use of his name in proceedings against the landlord for a declaration that consent had been unreasonably withheld. However, at about the same time, the bank ascertained that the value of the flat had risen to around £325,000, and, with the prospects of recovering all the money owed by the estate, urged the defendant to exercise the right conferred by clause 8.3.4 to send a notice rescinding the contract on the ground that the requisite consent had not been given three working days before the completion date. On 11 May 1998 the landlord ceased to oppose the application for a licence. On 20 May 1998 the defendant, acting at the instigation of the bank, sent a notice purporting to rescind the contract. By a letter of the same date, the defendant proposed the making of a new contract at the price of £325,000. The claimant disputed the validity of the notice and brought proceedings for specific performance, contending, inter alia, that the contract was unworkable unless a term was implied suspending the right to give a notice under clause 8.3.4, at a time when the other party was still using the reasonable efforts required by clause 8.3.2.
Held: The action was dismissed.
1. There was nothing in the contract to limit the operation of clause 8.3.4 (intended to meet the case where completion was thwarted by the act of a third party) to cases where the other side was in breach. Far from giving business efficacy to the contract, the suggested implied term would introduce uncertainty, in so far as either side could find itself locked into the contract for an indefinite period with no prospect of completion.
2. Since no variation, by estoppel or otherwise, had been pleaded, it was unnecessary to determine the possible effect of section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989.
Araba Taylor (instructed by Farnfield & Nicholls, of Warminster) appeared for the claimant; Mark Blackett-Ord (instructed by Iliffes Booth Bennett, of Chesham) appeared for the defendant.
Alan Cooklin, barrister
