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Issue 6: Whether the Defendants validly terminated Option C on 21 October 2021 for the reasons set out in their solicitors’ letter of the same date
Issue 6: Whether the Defendants validly terminated Option C on 21 October 2021 for the reasons set out in their solicitors’ letter of the same date.
Mr Eagle’s letter of termination relies on Orchard House’s failure to accept Mr Wilson’s determination and to attend to completion, either as a fundamental breach of the Option Agreement under Clause 21 or, alternatively, as a repudiatory breach at common law.
Mr Aslett suggests that, even if Orchard House were to succeed in the Part 8 Claim, it would be of no benefit to it because the 5-year Option Period has now expired, such that Orchard House cannot validly exercise it.
I do not agree with Mr Aslett on that point.
Given that I have already concluded that the deposit was not payable when Orchard House exercised Option C on 6 January 2021, and in the absence of any other conditions precedent applicable to the exercise of the option, it follows that it was validly exercised on that date. At that point, a contract was formed between the parties pursuant to which Orchard House had 4 weeks to complete from the date of Mr Wilson’s valuation.
The question to be decided is whether, given the failure of Orchard House to complete, or indeed to take any further steps after the expert determination was made available to the parties, the Defendants were entitled to terminate the contract.
At the outset, I shall consider the contractual position in relation to, firstly, the steps to be taken in the event that one of the parties considered that the expert had made a manifest error or had acted fraudulently and, secondly, the payment of the deposit once the determination was to hand.
There are no express contractual provisions covering these points and so I must decide whether any suitable terms should be implied into the contract to deal with them.
In Reigate v Union Manufacturing Co (Ramsbottom) [1918] 1 KB 592 Scrutton LJ put it this way:-
“ A term can only be implied if it is necessary in the business sense to give efficacy to the contract; that is, if it is such a term that it can confidently be said that if at the time the contract was being negotiated someone had said to the parties, ‘What will happen in such a case,’ they would both have replied, ‘Of course, so and so will happen; we did not trouble to say that; it is too clear.’ Unless the Court comes to some conclusion such as that, it ought not to imply a term which the parties themselves have not expressed”.
“for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that it “goes without saying”; (4) it must be capable of clear expression; and (5) it must not contradict any express terms of the contract”.
“I would hold that, in the ordinary case, the requirement to pay a deposit, including the time of payment, is a condition of the contract or, to use the phrase used in courts of equity, that time is of the essence of the date the payment.”
“Since the payment of a deposit at the executory stage of the contract is an earnest or guarantee of further performance, it is no surprise that a failure to pay the deposit on time is taken to demonstrate that the buyer is unwilling to perform the contract as a whole. In addition, without actual receipt of the deposit, the seller does not know where he stands. Is the buyer serious about the contract or not? A right to call off the contract for failure to pay the deposit on time restores to the seller his freedom to market the property. In the case of late completion, the seller at least has the deposit in his hands as part compensation for any loss. If the deposit itself is not paid, he has nothing except a fetter on his freedom to deal with his property.”
- Heading
- The Parties
- The Background Facts
- The Master Agreement
- By Clause 2.5, the Defendants agreed to grant Mr Lomax an option to purchase plot F ( Option F )
- Option Agreement C
- the “Option Period” is defined as “five years from [19 January 2017]”
- by Clause 8.2, “the Deposit must be paid by direct credit”
- the Deposit is defined as “10% of the Purchase Price (exclusive of VAT)”
- Option Agreement F
- by Clause 1.1 (definitions)
- Subsequent events in relation to Plots C and F
- informed the Defendants that he had been unaware that a main water pipeline ( the Severn Trent Pipeline ) ran directly across the land which the Claimants had acquired and proposed to buy and suggeste
- proposed a Purchase Price of £250,000 for the remainder of Plot C proposed that the Defendants agreed to remove the restrictive covenant on Plot F prohibiting the construction of additional buildings on that land, other than the redevelopment of the
- “What was the total amount on the table H” “£250K for the land [Plot C] £325K for the house [Plot F]…The deal is take it or leave it…”
- The date of the Defendants’ move to the New Farmhouse
- a holiday request form, indicating that she was to be away from work on 28 and 29 June 2018 a removal van invoice/receipt dated 28 June 2018 referring to a “part move, total cost £80. Paid cash”
- a Certificate of Practical Completion dated 25 June 2018
- The issues to be determined in relation to Plot C
- whether Orchard House was ready and able to tender any deposit on 6 January 2021
- what loss, if any, has been suffered by Orchard House by reason of any breach by the Defendants The Parties’ broad positions on Plot C
- Issues to be determined in relation to Plot F
- the date on which the Defendants moved into their new property
- whether the Defendants are in breach of Option Agreement F by failing to transfer Plot F to Mr Lomax
- The Parties’ broad positions on Plot F
- Procedure
- The Part 8 Claim
- he valued the incorrect size of the development authorised by the Planning Permission
- he failed to allow for other build costs; and
- Mr Wilson’s calculation of Gross Development Value and build costs is, therefore, overstated
- Approach to the witnesses’ evidence
- the demeanour of the witness; and the inherent probability of the witness’s account being true
- The witnesses
- The minutes of the meetings taken by Mrs Davies
- Discussion and Analysis
- The key factual issues to be determined
- Was there a certain and binding oral agreement between Orchard House and the Defendants reached between September 2018 and March 2019 as to the Purchase Price for Plot C (less Plot G)?
- Was there a further binding oral agreement (or a certain binding variation to any prior agreement) reached between Orchard House and the Defendants in or around July 2020 as to the Purchase price for
- What was the date on which the Defendants moved into the New Farmhouse?
- Plot C – Issues for determination
- Issue 2: Was there a further certain and binding oral agreement (or a certain and binding variation to any prior agreement) between Orchard House and the Defendants in or around July 2020 as to the Pu
- Issue 3: Whether waiver by estoppel arose up to July 2020 upon which reliance was placed by Orchard House, so that the Defendants are estopped from denying that a Purchase Price of £250,000 was agreed
- Issue 4: Whether the purported exercise of the Option C on 6 January 2021 was required to be conditional upon the payment of a deposit; and, if it was so, whether the Defendants waived compliance with
- The Law
- commercial common sense; but disregarding subjective evidence of any party’s intentions
- Issue 5: Whether Orchard House was ready and able to tender any deposit on 6 January 2021
- Issue 6: Whether the Defendants validly terminated Option C on 21 October 2021 for the reasons set out in their solicitors’ letter of the same date
- Issue 7: Whether the second purported exercise of the option for Plot C on 17 January 2022 was valid
- Issue 8: Whether the Defendants are in breach of Option C by failing to transfer Plot C to Orchard House
- Issue 9: what loss, if any, has been suffered by Orchard House by reason of any breach by the Defendants
- The Part 8 Claim
- Option F – Issues for determination
- The parties’ respective positions
- Analysis and decision
- Issue 2: the date on which the Defendants moved into the New Farmhouse
- Conclusions