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McCausland and another v Duncan Lawrie Ltd and another
COURT OF APPEAL, CIVIL DIVISION
NEILL, MORRITT LJJ AND TUCKER J
1 MAY, 6 JUNE 1996
Sale of land - Contract - Form of contract - Variation - Formalities required - Whether variation of contract for sale of land requiring same formalities applying to formation of contract - Whether alteration of completion date required to be incorporated in one document signed by or on behalf of both parties - Law of Property (Miscellaneous Provisions) Act 1989, s 2.
By a written agreement dated 26 January 1995 the vendors agreed to sell and the purchasers agreed to buy a property for £210,000. Under the terms of the contract the purchasers agreed to pay a holding deposit of £1,000 and the balance of £209,000 on completion, the date of which was stated to be 26 March 1995, which was in fact a Sunday. The contract further provided that if the purchasers did not complete on the completion date the full 10% deposit became payable. When the vendors' solicitor realised that the completion date was a Sunday he wrote to the purchasers' solicitor suggesting that completion be rearranged for Friday, 24 March. The purchasers' solicitor replied that he had been instructed that completion could take place on the new date suggested. However, the purchasers failed to complete on that date and the vendors forthwith issued a completion notice demanding the balance on the full 10% deposit, amounting to £20,000. The purchasers asked for an extension of time in which to complete. The vendors refused, rescinded the contract and issued proceedings to recover the balance of the deposit. The purchasers paid the amount claimed but without prejudice to their right to recover that sum if it was found that the vendors had not been entitled to serve the notice to complete. In proceedings brought by the purchasers claiming specific performance of the original contract and damages, the judge ordered that their statement of claim be struck out on the ground that s 2a of the Law of Property (Miscellaneous Provisions) Act 1989 did not apply to the variation of a contract and therefore the completion date was 24 March. The purchasers appealed.
a Section 2, so far as material, is set out at p 997 h j, post
Held - Where a contract for the sale of land was varied, the formalities prescribed by s 2 of the 1989 Act for the creation of a valid contract for the sale or other disposition of an interest in land applied also to the variation of the contract, and accordingly the contract as varied had to be in writing and incorporated in one document, or each document if contracts were exchanged, and signed by or on behalf of each party to the contract. Since the alteration of the completion date had not been incorporated in one document signed by or on behalf of both parties that variation of the contract did not comply with s 2. The statement of claim had therefore been wrongly struck out. The appeal would therefore be allowed and the statement of claim reinstated (see p 1000 g to j, p 1001 e, p 1002 a c, p 1003 b and p 1006 f to p 1007 a e, post).
Dictum of Shearman J in Williams v Moss' Empires Ltd [1915] 3 KB 242 at 246 applied.
Notes
For requirements for a contract for the sale of land, see 42 Halsbury's Laws (4th edn) paras 27-46.
Cases referred to in judgments:
Appeal
By notice dated 14 November 1995 Piers Conolly McCausland and Elisabeth Maria Rionagh McCausland appealed with leave granted by Millett LJ on 9 November 1995 from the decision of Knox J delivered on 7 July 1995 striking out their statement of claim against the respondents, Duncan Lawrie Ltd and SIS Securities Ltd, for specific performance of the contract of sale dated 26 January 1995 made between the parties for the sale and purchase of the property at No 1 Beechmore Road, London SW11, and damages. The judge also ordered that a caution registered against the property in the Land Registry by the appellants be cancelled. The facts are set out in the judgment of Neill LJ.
David Neuberger QC and William Geldart (instructed by H C L Hanne & Co) for the appellants.
Philip Shepherd (instructed by Swepstone Walsh) for the respondents.
Cur adv vult
6 June 1996. The following judgments were delivered.
NEILL LJ.
This appeal raises a question of some importance as to the meaning and effect of s 2 of the Law of Property (Miscellaneous Provisions) Act 1989.
Contracts for the sale of an interest in land have for centuries been attended by certain legal formalities. For about 250 years the proof of such contracts was governed by s 4 of the Statute of Frauds (1677), though from an early date the effects of the statutory rule were mitigated by the equitable doctrine of part performance. In 1925 s 4 of the 1677 Act was replaced by s 40 of the Law of Property Act 1925, which provided:
'(1) No action may be brought upon any contract for the sale or other disposition of land or any interest in land, unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some other person thereunto by him lawfully authorised.
(2) This section applies to contracts whether made before or after the commencement of this Act and does not affect the law relating to part performance, or sales by the court.'
It may be noted that the sidenote to the section stated 'Contracts for sale, etc, of land to be in writing'. But in fact a contract not complying with the section was not illegal or void. It was merely unenforceable.
In practice, both s 4 of the 1677 Act and s 40 of the 1925 Act gave rise to difficulties. In particular the doctrine of part performance led to uncertainty in its application to the facts of individual cases. There were calls for reform and in 1985 the Law Commission produced a working paper (No 92). The working paper was followed in 1987 by a Law Commission report, Transfer of Land: Formalities for Contracts for Sale etc of Land (Law Com No 164), which recommended that, with certain specified exceptions, all contracts for the sale or other dispositions of interests in land should have to be in writing signed by all parties in order to be valid. A draft Bill incorporating the commission's recommendations was attached to the report.
The 1989 Act gave legislative effect to a number of the reforms relating to land law which had been proposed by the Law Commission in the previous few years. Section 2 introduced the recommendations in report No 164, though there were some differences between s 2 and the corresponding clause in the draft Bill attached to the report.
So far as is material, s 2 was in these terms:
'(1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each.
(2) The terms may be incorporated in a document either by being set out in it or by reference to some other document.
(3) The document incorporating the terms or, where contracts are exchanged, one of the documents incorporating them (but not necessarily the same one) must be signed by or on behalf of each party to the contract ...'
By s 2(6) 'interest in land' was defined as 'any estate, interest or charge in or over land or in or over the proceeds of sale of land'. By s 2(8) it was provided that s 40 of the 1925 Act should cease to have effect but by s 2(7) it was further provided that nothing in the section should apply in relation to contracts made before the section came into force.
I propose to turn next to the facts.
THE FACTS
I can state the relevant facts quite shortly. Duncan Lawrie Ltd, the first respondent, is a bank. SIS Securities Ltd (SIS), the second respondent, is a property company. The two companies have a common parent.
In 1991 Mr and Mrs McCausland, the appellants, brought proceedings against Duncan Lawrie seeking specific performance of an alleged agreement for the sale to them of the property known as 1 Beechmore Road, London SW11 (the property). At about the time when these proceedings were issued the appellants registered a caution in the Land Registry against the property. It is unnecessary for the purposes of this judgment to investigate the circumstances which gave rise to these earlier proceedings. The 1991 proceedings were settled on 26 January 1995. It was a term of the settlement that the property would be sold to the appellants for £210,000. The 1991 proceedings were formally compromised by a Tomlin order dated 7 February 1995.
By a written agreement dated 26 January 1995 SIS, as seller, agreed to sell the property to the appellants for the sum of £210,000. The written agreement incorporated the Standard Conditions of Sale (2nd edn) and also contained a number of special conditions. The agreement provided for the payment of a deposit of £1,000 and for a balance of £209,000. The completion date was stated to be 26 March 1995.
By the combined effect of standard condition 6.1.2 and special condition 5(b) the balance of the purchase price of £209,000 was due to be paid by 2.30 pm on the completion date. By standard condition 6.8.1 it was provided that at any time on or after the completion date a party who was ready able and willing to complete might give the other a notice to complete. By special condition 6 it was provided that if the buyers did not complete on the completion date the balance of the full 10% deposit would become payable.
A few days after the contract was signed the solicitor acting for Duncan Lawrie and SIS realised that 26 March 1995 was a Sunday. I shall call the two companies 'the bank'. He therefore wrote the following letter to the appellants' solicitors dated 3 February 1995:
'... I note that the completion date in the Contract is 26th March which is a Sunday, and I therefore suggest that completion be re-arranged for Friday the 24th March. I await your confirmation.'
A few days later the appellants' solicitors replied:
'Thank you for your letter dated 13 February 1995 [I understand that this letter was a reminder of the letter of 3 February] and I have now received instructions that completion can take place on 24 March 1995.'
On Friday, 24 March 1995 the bank's solicitors sent a fax to Mr Grimes, a partner with the appellants' solicitors, asking him to confirm that the completion moneys had been transmitted to the bank's account that morning. The balance of the purchase price was not so transmitted, however, and accordingly later that day the bank's solicitors sent a completion notice to the appellants and to their solicitors. The accompanying letter was in these terms:
'As completion did not take place today, and in accordance with the Agreement dated 26th January 1995 made between SIS Securities Limited (1) and Piers Conolly McCausland and Elizabeth Maria Rionagh McCausland (2), I enclose a Completion Notice pursuant to the above Agreement and look forward to receiving £20,000 in accordance with Special Condition 6 of the Agreement. If the above sum is not payable forthwith my clients will be applying for summary judgement and your clients should also be aware that interest is payable at the Contract rate from exchange of the Agreement until actual payment is received by my clients. I look forward to hearing from you by return.'
I should also refer to the first part of the notice to complete which was addressed to the appellants and headed by the name of the property. The notice continued:
'We the undersigned as Solicitors for and on behalf of SIS Securities Limited ... ("the Seller"): 1. Refer to the contract dated the 26th January 1995 ("the Contract") by which you agreed to buy from the Seller the Property known as 1 Beechmore Road, Battersea, London SW11; 2. State that the sale of the Property has not been completed on the date fixed in the Contract for completion and that the Seller is ready, able and willing to complete; 3. Give you notice under condition 6.8 of the Standard Conditions of Sale (2nd Edition) ... to complete the transaction in accordance with that condition ...'
On 3 April 1995 the appellants' solicitors wrote to the bank's solicitors:
'We write further to our telephone conversation with your Mr Eliades this afternoon concerning the request for additional time in which to complete this transaction. We appreciate that the notice to complete expires this Friday. The request is for an additional four working days to expire on Thursday 13 April before Good Friday, to enable our client to raise the finance to complete.'
The bank, however, was unwilling to grant an extension and on 5 April the bank's solicitors wrote to say that completion had to take place on or before 7 April in accordance with the notice to complete.
Mr Grimes made a further attempt on Friday, 7 April to obtain an extension to Monday, 10 April but this attempt failed. On 7 April the bank's solicitors sent a notice to rescind the contract of sale.
On 18 April 1995 the bank issued proceedings claiming the balance of the deposit together with interest. Those proceedings were later compromised by the payment by the appellants of the balance of the deposit. But this payment was made without prejudice to the appellants' right to recover this sum if it were found that the bank had not been entitled to serve the notice to complete on 24 March.
On 14 June 1995 the appellants brought the present proceedings against both Duncan Lawrie Ltd and SIS Securities Ltd. I propose, however, to continue to refer to these two companies collectively as the bank.
The claim by the appellants as set out in the statement of claim was to the effect that there had been no valid variation of the contractual completion date and that accordingly there had been no valid rescission of the contract of sale. The appellants claimed specific performance of the contract of sale dated 26 January 1995 and damages. On 21 June the first appellant registered a caution against the property in the Land Registry.
On 30 June 1995 the bank issued a notice of motion seeking an order for the cancellation of the caution and for the striking out of the statement of claim. The motion was heard by Knox J on 7 July 1995.
THE JUDGE'S JUDGMENT
In the course of his judgment the judge set out the material parts of s 2 of the 1989 Act. Later he continued:
'It does seem to me that the limitation that is in terms created is one on the making of a contract for the sale or other disposition of an interest in land, and I do not discern within the four corners of the section a requirement that variations of an existing and, ex hypothesi, enforceable provision for the sale or disposition of an interest in land have themselves to be made in one document or where contracts are exchanged in each ... The conclusion that I have come to is that where there is initially a duly signed contract which complies with s 2(1) of the 1989 Act in incorporating all its terms, the requirement is satisfied and it is open to the parties, if they so agree of course, to vary one or more of those terms and that so far as that variation is concerned what matters is that it should be proved in the ordinary way. The alternative produces a result which seems to me to go beyond what Parliament can reasonably be expected to have intended, and this is a very good example because nothing could be much more simple and straightforward than the actual agreement for the alteration of the completion date from the Sunday for perfectly sensible commercial reasons to the preceding Friday.'
In these circumstances the judge made an order that the caution be cancelled and that the statement of claim be struck out. The action was thereupon dismissed.
The judge refused leave to appeal but leave was subsequently granted by Millett LJ on 9 November 1995.
THE APPEAL
It was argued on behalf of the appellants that if the contract dated 26 January 1995 had been varied by the exchange of correspondence the contract which the bank was relying on was the contract as varied by the correspondence. It was not a case of two collateral contracts. Furthermore, even if it were possible to treat this case as one where there had been an exchange of contracts for the purposes of s 2(1), it was necessary, by virtue of s 2(2), for the terms to be incorporated 'in a document either by being set out in it or by reference to some other document'.
It was accepted on behalf of the bank that s 2 of the 1989 Act contains strict provisions relating to the formation of a contract for the sale or other disposition of an interest in land. But it was submitted that s 2 has not altered the law on oral variations of a contract. It has always been the law that oral variations of written contracts are capable of proof. The manner of proof is a rule of evidence. There was nothing in s 2 to show that the variation of a contract had to comply with the formalities prescribed in the statute.
Our attention was drawn to s 82 of the Consumer Credit Act 1974, which contains provisions relating to the variation of 'regulated agreements' as defined in s 189(1) of the Act. In the case of consumer credit Parliament had provided that the regulated agreement, as modified by any variation, should comply with the prescribed formalities. There was no similar provision in the 1989 Act.
Furthermore, it was submitted, it was a general principle of the law that in construing a statute the courts will not attribute to Parliament an intention to bring about a fundamental change in the law 'by a sidewind'. Counsel referred us to passages in the speeches of Lord Hodson and Lord Guest in Beswick v Beswick [1967] 2 All ER 1197 at 1206, 1210, [1968] AC 58 at 79, 85.
It was further argued on behalf of the bank that the appellants were estopped from recovering damages or being granted specific performance. By the letter of 14 February 1995 it was represented on behalf of the appellants that the completion date would be 24 March 1995. By their subsequent conduct the appellants and their solicitors had accepted that completion was due to take place and should have taken place on Friday 24 March. It was not until the issue of these proceedings that any objection was raised to the variation of the completion date. Had the bank had notice that the variation of the completion date was being challenged another notice to complete could have been sent. We were referred to para 11 of the affidavit of Ms Rhory Robertson sworn on 3 July 1995 from which it appeared that the appellants would not have been able to complete before 21 April 1995.
I propose to deal with these arguments under two headings: (1) the variation and (2) estoppel.
The variation
I feel bound to reject the arguments on this issue advanced on behalf of the bank. The principle of construction that Parliament is not to be intended to have amended the law 'by a sidewind' is of importance when one is construing a consolidation Act. But, as Peter Gibson LJ explained in Firstpost Homes Ltd v Johnson [1995] 4 All ER 355 at 358, [1995] 1 WLR 1567 at 1571, s 2 of the 1989 Act was intended to effect a major change in the law:
'Section 2 brought about a markedly different regime from that which obtained hitherto. Whereas under s 40 of the 1925 Act contracts which did not comply with its requirements were not void but were merely unenforceable by action, contracts which do not comply with s 2 of the 1989 Act are ineffective: a contract for the sale of an interest in land can only be made in writing and in conformity with the other provisions of s 2. Whereas an oral contract was allowed and enforceable provided that it was evidenced in writing and the memorandum or note thereof was signed by or on behalf of the party against whom it was sought to be enforced, oral contracts are now of no effect and all contracts must be signed by or on behalf of all the parties. Whereas the contract or the memorandum or note evidencing the contract previously could be contained in more than one document, only one document is now allowed (save where contracts are exchanged) although reference to another document may be permitted in the circumstances laid down in s 2(2) and (3). Whereas the memorandum or note needed for s 40 of the 1925 Act did not have to contain every term of the contract, all the terms must now be contained in the document in question. Whereas the doctrine of part performance allowed certain contracts otherwise unenforceable to be enforced, that doctrine now has no application.'
It seems to me to be clear that Parliament intended to introduce new and strict requirements as to the formalities to be observed for the creation of a valid disposition of an interest in land. As Stuart-Smith LJ noted in Commission for the New Towns v Cooper (GB) Ltd [1995] 2 All ER 929 at 952, [1995] Ch 259 at 287, the section enacted by Parliament was materially different from that drafted by the Law Commission. Under s 2 all the terms of the contract have to be incorporated in the signed document.
What then is the contract on which the bank seeks to rely? It was said by counsel for the bank that the bank relied on the contract dated 26 January which was created in a form which complied with s 2 and that this contract was later varied in a manner which would have been recognised by the common law and by the courts of equity.
In my judgment, however, counsel for the appellants was correct when he submitted that the formalities prescribed by s 2 have to be applied to the contract as varied. This was not a case where the agreement between the parties was concluded by an exchange of contracts. The only document signed by both parties was the contract dated 26 January 1995.
The law in this regard is made plain in the speech of Lord Parmoor in Morris v Baron & Co [1918] AC 1 at 39, where he referred with approval to the following passage in the judgment of Shearman J in Williams v Moss' Empires Ltd [1915] 3 KB 242 at 246:
'The principle ... is where there is alleged to have been a variation of a written contract by a new parol contract, which incorporates some of the terms of the old contract, the new contract must be looked at in its entirety, and if the terms of the new contract when thus considered are such that by reason of the Statute of Frauds it cannot be given in evidence unless in writing, then being an unenforceable contract it cannot operate to effect a variation of the original contract ... whenever the parties vary a material term of an existing contract they are in effect entering into a new contract, the terms of which must be looked at in their entirety, and if the new contract is one which is required to be in writing but is not in writing, then it must be wholly disregarded and the parties are relegated to their rights under the original contract.'
In Morris v Baron the House of Lords was concerned with a contract for the sale of goods which was required by s 4 of the Sale of Goods Act 1893 to be evidenced in writing. It seems to me, however, that the principle approved by Lord Parmoor is directly applicable in this case. Furthermore, there are other passages in the speeches in Morris v Baron which show that if a contract is required to be in writing, variations which are not in writing cannot be relied upon (see [1918] AC 1 at 12, 16 per Lord Finlay LC and Viscount Haldane). Lord Atkinson explained the matter as follows (at 31):
'The foundation, I think, on which that rule rests is that after the agreed variation the contract of the parties is not the original contract which had been reduced into writing, but that contract as varied, that of this latter in its entirety there is no written evidence, and it therefore cannot in its entirety be enforced.'
We have had the advantage of a fuller argument than the judge had. With the benefit of that fuller argument I am satisfied that on this issue the judge reached the wrong conclusion and that the appeal must be allowed.
Estoppel
I have indicated earlier in this judgment the nature of the estoppel on which the bank would seek to rely. I am satisfied, however, that this issue cannot be resolved without evidence. I propose to say nothing further about it save that I consider that the point is plainly arguable.
CONCLUSION
In these circumstances I would allow the appeal and reinstate the statement of claim. The matter should proceed to trial if the parties cannot reach some agreement. If the action does proceed the bank will be able to raise the defence of estoppel if so advised.
MORRITT LJ.
In 1987 the Law Commission recommended that contracts for the sale or other disposition of an interest in land should only be capable of being made in writing (see Transfer of Land: Formalities for Contracts for Sale etc of Land (Law Com No 164)). This was to be contrasted with the requirement, which had prevailed for several centuries and was then contained in s 40 of the Law of Property Act 1925, that such a contract might be made orally but would only be enforceable if there was a written note or memorandum thereof signed by the party against whom it was sought to enforce the contract or his agent or if it had been partly performed by the person seeking to enforce the contract. The reasons for the recommendation were to avoid the uncertainties arising from the doctrine of part performance, to ensure mutuality between both parties to the contract and to avoid the continuing uncertainty surrounding the operation of s 40 of the 1925 Act notwithstanding its long history (see paras 1.7 and 1.8).
This recommendation was accepted and in 1989 Parliament enacted the Law of Property (Miscellaneous Provisions) Act 1989, which provides, so far as material to this appeal:
'... 2.--(1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each.
(2) The terms may be incorporated in a document either by being set out in it or by reference to some other document.
(3) The document incorporating the terms or, where contracts are exchanged, one of the documents incorporating them (but not necessarily the same one) must be signed by or on behalf of each party to the contract ... and nothing in this section affects the creation or operation of resulting, implied or constructive trusts ...
(6) In this section--"disposition" has the same meaning as in the Law of Property Act 1925; "interest in land" means any estate, interest or charge in or over land or in or over the proceeds of sale of land ...
(8) Section 40 of the Law of Property Act 1925 (which is superseded by this section) shall cease to have effect ...'
As Stuart-Smith LJ pointed out in Commission for the New Towns v Cooper (GB) Ltd [1995] 2 All ER 929 at 952, [1995] Ch 259 at 287, that section is not in the same terms as the draft Bill submitted by the Law Commission with their report so that it should not be assumed that the Act implements the recommendations of the Law Commission in all respects. It is material to this appeal to note one respect in which the form proposed by the Law Commission differs from that which Parliament enacted. In the draft Bill sub-cl (1) provided:
'No contract for the sale or other disposition of an interest in land shall come into being unless the contract is in writing and--(a) all the express terms of the contract are incorporated (whether expressly or by reference) in one document or each of two or more documents; and (b) that document or, as the case may be, one of those documents (though not necessarily the same one) is signed by or on behalf of each party to the contract.'
The former, but not the latter, requires all the terms of the contract to be contained in one document or in each document involved in an exchange of contracts. The latter would have permitted a contract contained in one or each of two or more documents, whether or not exchanged as a contract. This suggests that Parliament intended to require greater formality in the creation of a contract for the sale of land than that suggested by the Law Commission.
The question on this appeal, namely whether the formalities required for the creation of a contract for the sale or other disposition of an interest in land are also required for its variation, was not considered by the Law Commission in its report. Accordingly, the answer to it must be ascertained by a consideration of the words used in the Act and the objects which the Act was intended to achieve without any preconceptions stemming from the provisions of s 40 of the 1925 Act.
As the judge observed, the section, read literally, applies to the making of the contract only. From this he deduced that where, as in this case, the contract was undoubtedly made as required by the section and therefore valid there was no requirement that the subsequent variation should likewise comply so long as the agreement to vary it was proved in the ordinary way. If it were relevant to consider whether there was an agreement to vary a contract to which the section applies without also considering whether the original contract had been varied it might well be that the section would not apply to the contract to vary; by itself it might not be a contract for the sale or other disposition of an interest in land.
But that is not the question which arises in this case. The question here is whether the contract for the sale of the land was varied so as to justify the notice to complete served by the vendor. Thus the vendor has to establish that the contract with the purchaser provided that the sale of the property was to be completed on Friday, 24 March. For that purpose he has to demonstrate that there is a document or two documents which were exchanged containing all the terms of that contract and signed by both parties. Obviously he cannot do that for the completion date he relies on is different from that specified in the contract and there is no other document which is signed by both parties.
A similar problem arose in relation to the provision which was formerly contained in s 4 of the Sale of Goods Act 1893 requiring a contract for the sale of goods of more than £10 in value to be evidenced in writing. The question arose in Morris v Baron & Co [1918] AC 1, where such a contract duly made was subsequently varied without the same formality. Lord Atkinson stated the relevant principle to be applied in these terms (at 31):
'There is nothing in all this inconsistent with the well established rule that a contract which the law requires to be evidenced by writing cannot be varied by parol: Goss v. Lord Nugent ((1833) 5 B & Ad 58, [1824-34] All ER Rep 305); Stead v. Dawber ((1839) 10 Ad & El 57, 113 ER 22); Noble v. Ward ((1867)
LR 2 Ex 135); Sanderson v. Graves ((1875) LR 10 Ex 234). The foundation, I think, on which that rule rests is that after the agreed variation the contract of the parties is not the original contract which had been reduced into writing, but that contract as varied, that of this latter in its entirety there is no written evidence, and it therefore cannot in its entirety be enforced. There is a clear distinction, however, between cases such as these and cases like Ogle v. Earl Vane ((1868) LR 3 QB 272) where one party at the request of and for the convenience of the other forebears to perform the contract in some particular respect strictly according to its letter. As, for instance, where one party, bound to deliver goods sold upon a certain day, at the request of and for the convenience of the other postpones delivery to a later day. In such a case the contract is not varied at all, but the mode and manner of its performance is, for the reasons mentioned, altered. Moreover, rescission of a contract, whether written or parol, need not be express. It may be implied, and it will be implied legitimately, where the parties have entered into a new contract entirely or to an extent going to the very root of the first inconsistent with it: Hunt v. South Eastern Ry. Co. ((1875) 45 LJQB 87); Thornhill v. Neats ((1860) 8 CBNS 831, 141 ER 1392).'
To similar effect is the passage from the speech of Lord Parmoor, where he said (at 39):
'There is no reason to dissent from the opinion expressed by Shearman J. in Williams v. Moss' Empires, Ld. ([1915] 3 KB 242) and approved by Swinfen Eady L.J., although for the reasons given above, it is not, in my opinion, applicable to the present case. "The principle as laid down by Willes J., who delivered the judgment of the Court, in Noble v. Ward ((1867) LR 2 Ex 135) is where there is alleged to have been a variation of a written contract by a new parol contract, which incorporates some of the terms of the old contract, the new contract must be looked at in its entirety, and if the terms of the new contract when thus considered are such that by reason of the Statute of Frauds it cannot be given in evidence unless in writing, then being an unenforceable contract it cannot operate to effect a variation of the original contract. That principle is to be found in a number of cases, which I need not to refer to in detail." After referring to the cases of Goss v. Lord Nugent ((1833) 5 B & Ad 58, [1824-34] All ER Rep 305), Stead v. Dawber ((1839) 10 Ad & El 57, 113 ER 22), Giraud v. Richmond ((1846) 2 CB 835, 135 ER 1172), Marshall v. Lynn ((1840) 6 M & W 109, 151 ER 342) and Stowell v. Robinson ((1837) 3 Bing NC 928, 132 ER 668) the learned judge continues: "Those cases show that whenever the parties vary a material term of an existing contract they are in effect entering into a new contract, the terms of which must be looked at in their entirety, and if the new contract is one which is required to be in writing but is not in writing, then it must be wholly disregarded and the parties are relegated to their rights under the original contract." Unless the principle is maintained that it is not admissible to vary the terms of a contract in writing by a subsequent parol contract, which in itself would be required to be in writing to be enforceable, the safeguards provided either by the Statute of Frauds or the Sale of Goods Act, 1893, might be practically evaded and rendered of little value as a protection against fraud or to ensure certainty.'
In this case there is no suggestion of voluntary forbearance of the type referred to by Lord Atkinson nor of rescission of the contract altogether which may well be capable of being done otherwise than in writing. Nor in my view can there be any doubt but that the contractual date for completion is a material term if only because it specifies the time from which one or other party is entitled to serve a notice to complete and make time of the essence.
For the vendors it was submitted that to require the variation of the contract to comply with the same formalities as required for its original formation would be unnecessary, liable to give rise to serious inconvenience and therefore not what Parliament intended. It was suggested that such formality was unnecessary as the parol evidence rule excluding oral evidence tending to add to, subtract from, or vary or qualify a written contract would apply. In that event the variation would have to be in writing anyway, though not necessarily in the form required by s 2.
As counsel for the purchasers pointed out, the parol evidence rule only applies to the ascertainment of the original intention of the parties when the contract was made. That rule does not apply to the subsequent variation of the written contract; cf Berry v Berry [1929] 2 KB 316, [1929] All ER Rep 281 and Chitty on Contracts (27th edn, 1994) para 20-29. Accordingly, a subsequent variation of a contract for the sale of land would not have to be in writing independently of s 2 of the 1989 Act. It is not to be presumed that Parliament intended that although the original contract could only be formed in compliance with the formalities required by that section it might be varied orally given the substantial effect that such variations may have.
It was suggested by counsel for the purchasers that the formality required for a variation was not very great. He submitted that it would be sufficient for the solicitors for vendor and purchaser to sign the same memorandum expressly incorporating the terms of the original contract and setting out the agreed variation. He suggested that this was hardly more onerous than agreeing a variation in correspondence in so far as that had been the previous practice.
The choice lies between permitting a variation, however fundamental, to be made without any formality at all and requiring it to satisfy s 2. In my view it is evident that Parliament intended the latter. There would be little point in requiring that the original contract comply with s 2 if it might be varied wholly informally. Further, the respect in which the Act differs from the Bill proposed by the Law Commission indicates that Parliament intended more, rather than less, formality than that recommended by the Law Commission.
In his speech in Morris v Baron [1918] AC 1 at 39 Lord Parmoor recognised, in approving the judgment of Willes J, that equivalent formality is only required for the variation of 'a material term'. Thus the formalities prescribed by s 2 must be observed in order to effect a variation of a term material to the contract for the sale or other disposition of an interest in land but are not required for a variation which is immaterial in that respect. There is no doubt that in this case the term was material in that respect as it advanced the contractual date for completion and therefore the time when either party might make time of the essence by the service of a notice to complete. But it does not follow that s 2 must be observed in order to secure the variation of a term which is immaterial.
Thus, whilst understanding the reasons which the judge considered justified his conclusion and having had more time than he did to consider the point, I do not agree with him. In my judgment, the variation of a term material to a contract for the sale or other disposition of an interest in land must comply with the formalities prescribed by s 2 of the 1989 Act if either party is to be able to enforce such contract as varied. Accordingly, I think that the judge was wrong to have struck out the statement of claim on the footing that s 2 did not apply in this case.
The vendors sought to support the order striking out the statement of claim and dismissing the action on the alternative ground that the agreement to vary the original contract gave rise to an estoppel precluding the purchasers from denying that the completion date was 24 March rather than 26 March. For the purchasers it was submitted that this ground might be sufficient to justify leave to defend if an application were made for summary judgment but was not so clearly right as to warrant the order made. It was submitted for the purchasers that one of the points the judge at trial would have to consider would be whether the court should give effect to an estoppel so as thereby to produce indirectly a result which Parliament had deliberately prevented being achieved directly by contract.
In my judgment, the claim for an estoppel is not so plain as to warrant striking out the action at this stage. Rather it is a defence available to the vendor if the action proceeds to trial. Section 2 does not give rise to any illegality if its terms are not observed and the need for an estoppel arises in just those circumstances where there is no enforceable contract. For my part I would not place weight on the contention that an estoppel such as the vendor would advance is impossible as a matter of law but it still has to be made out as a matter of fact.
For these reasons and the reasons given by Neill LJ I would allow this appeal.
TUCKER J.
I agree with both judgments and have nothing to add.
Appeal allowed.
Paul Magrath Esq Barrister
Tagged with: duncan lawrie mccausland, mccausland v duncan lawrie, estoppel
