Introduction to Property Law
This particular case involves the transfer of the right to land. Clarke, S. & Greer, S. (2008, 72) state that although the owner of the freehold is generally free to transfer his or her land, English property law requires an element of formality. Much like a property auction, Whiteknights Properties Ltd (WP Ltd) would be most interested in taking the highest offer. However, the dispute between Mr Yellow, Mr Patel and WP Ltd is to whether this offer had be formally accepted, hence forming a binding contract. The premise of the question is to understand whether WP Ltd should deal only with Mr Yellow, or whether they have to freedom to later decline his offer and accept a larger offer from Mr. Patel. Further more, the case should investigate whether Mr Yellow has any claims against WP Ltd.
The transfer of title is usually a four stage conveyance process; negotiation and agreement, formation and exchange of contract, transfer or conveyance of the legal estate and registration. Each of these stages is legally distinct and an important process which must be closely linked to the rules of the Law of Property (Miscellaneous Provisions) Act 1989, section 2. This act states that the contracts for the sale or disposition of law must be in writing and contained or referring to one master document. The case between Mr. Yellow and WP Ltd. clearly does not show any binding paper contract, but only a hand shake. On the other hand, Keenan, D. & Riches, S. (2005, 250) explains that an acceptance may take any form, either orally or in writing, with the only non valid exception being silence.
However, we could argue that Mr. Yellow was only paying for the privilege and not actually placing a deposit on the property in the agreement to transfer the freehold of a property. In essence, Mr. Yellow was only commencing in the first stage where Clarke & Greer (2008, 73) describes that if the buyer decides, in principle, to buy the property that it would result in an agreement to buy the land ‘subject to contract’, where the agreement would not be legally binding. Therefore, either party would be able to withdraw.
The 2003 Pitt vs. PHH Asset management Ltd. case is a good comparison to this case where Mr. Pitt (the original bidder) and Miss Buckle (the competing bidder) placed competing bids. However, much like the case between Mr. Yellow and Mr. Patel, Miss Buckle increased her bid, making PHH Asset Management Ltd withdraw its acceptance with of Mr. Pitt. He threaten to sue for an injunction, to compel transfer of the property to him which resulted in PHH agreeing to sell him the property, not considering any further offers which is know as a ‘lock down agreement’. However, PHH did decide to sell to the competitor which resulted in Mr. Pitt suing.
Clarke & Greer (2008, 74) explains a process know as gazumping being where a higher offer on a property on which a sale price has already been agreed, but for which agreement no binding contract is yet in place. The key word in this definition is ‘binding’, and therefore to identify whether WP Ltd. should have dealt solely with Mr. Yellow, will depend on whether the £250 privilege was a contract which is binding. In this case there was a ‘lock out agreement’ where no other offers should have been considered, and furthermore Mr. Yellow had shown his willingness by paying for this lock-out agreement.
On balance, it is seen that WP Ltd. should have dealt solely with Mr. Yellow as there was a monetary transaction, which in itself binds a contract showing that both sides were serious. Therefore, WP Ltd. should have not made this agreement, if they were expecting to later receive a higher bid.
Therefore, we must identify that after WP Ltd. did to sell the Mr Patel, whether Mr. Yellow would have the right to claim against WP Ltd. In the case between Pitt vs. PHH Asset management Ltd, Mr. Pitt did sue PHH, and in both cases Mr. Yellow and Mr. Pitt did show that they were serious with going ahead with the transaction. Mr. Yellow, who is self employed was willing to spend money on accountancy fee in order to buy this property, which emphasises his confidence in going ahead with his purchase and should claim because of the risk of damage being made.
MacMillan, C (1993, 392) states that in the similar case between Mr. Pitt and PHH, the court had rejected all arguments that PHH made, including it being section 2 of the Law or Property (Miscellaneous Provisions) Act 1989. In the successful case for Mr. Pitt, Mr. Yellow should also have a similar and viable case as he had actually paid for the privilege, which is an binding in itself, according to the basics of contract law as describe earlier by Keenan, D. & Riches, S. (2005, 250). This oral contract, which therefore should be viable to override the Law of Property Act 1989 which states that it should be in writing and signed by both parties. If it was not a binding agreement for lock out then the privilege agreement should not have gone ahead and this should have been understood by both party’s.
On balance this case has been made clear, with the supporting comparison case of Pitt vs. PHH Ltd. that the court should reject any arguments by Whiteknights Ltd. should Mr. Yellow take this to court. WP Ltd. should have declined the agreement for the privilege should they have be willing to accept higher offers, and as a result, could case damages to Mr. Yellow.