The Gazette 1981

JULY-AUGUST 1981

GAZETTE

Earlier Contract?

preliminary oral agreement of any binding quality and facilitates the moral abomination of gazumping. Thus the Statute, as it is often said, encourages the perpetration of more frauds than it discourages. And, if I may hark back to a subject I was discussing earlier, is this not a fine example of a statute failing to achieve its purpose? Repeal of the Statute so as to remove the need for written evidence has been mooted from time to time and has a superficial attraction for other reasons. One is that it must be a very strong favourite for the prize going to the most litigated statutory provision; every year brings yet more cases involving section 2 of the Irish Statute. However, I must confess that I have my doubts about whether its repeal will affect the solution desired. If written evidence of the agreement were no longer required, the matter would be thrown back for determination according to the intention of the parties and it will always be argued in conveyancing situations that one or other of the parties cannot reasonably be taken to have intended to commit himself at such an early stage because of the dangers of this from his own point of view. Another approach, which has become increasingly popular in the North, is to use what are called 'conditional' contracts, but I have doubts as to whether these are entirely satisfactory. One reason is that there are doubts as to their precise legal effect. Most of the authorities, which are English and Commonwealth cases, are far from clear or consistent with each other. The other is that such contracts, even if their effect is clear, will work only if both parties are prepared to enter into one. The trouble is that one or other of the parties may feel that it is not in his own, albeit selfish, interests to commit himself to an arrangement whereby the other party may withdraw if things do not turn out to his liking. And, of course, the pressure which the other party can bring upon him to persuade him to enter into such a contract may vary again according to the state of the market. So I c ome back to the proposition that what is needed is a change in procedures. In particular, what we must try to do is to tackle the root of much of the trouble, namely that under the present system it is not in the interests of the purchaser to commit himself to a binding contract at an early stage. To understand the solution you must analyse why this is so. There are, of course, many reasons, but three in particular stand out. The first is that basic principle drum- med into all conveyancing students — 'caveat emptor' — which in substance means that the purchaser must take precautions against Che risk of physical defects in the property he is contemplating buying. The really only effective protection is to have it surveyed by a competent person, but the galling thing at the moment is that this may result, to use an apt metaphor, in him throwing money down the drain. The survey, for which, of course, the prospective purchaser has to pay, may reveal serious defects and force him to call the deal off and to look elsewhere. And he may be unlucky enough to have to repeat the exercise several times before he feels able to commit himself to a purchase of a particular property. What a daft system! Little wonder so many purchasers are prepared to run the risk or rely instead on the survey carried out by their lending institutions, for which, of course, they also pay, though this too may prove to be abortive. Surely the time has c ome to question the whole

An extract from the 1981 Frances E. Moran Memorial Lecture on "Irish Law in the Next Century" by John Wylie, LL.M., LL.D. I F one were to conduct a survey amongst those who have recently completed a major conveyancing trans- action, such as the sale of one's home and the purchase of a new one, and were to ask them, and indeed, their conveyancers, which aspect of the transaction disturbed them most, I suspect that one item in particular would be specified by most people. This is that period of time stretching between the preliminary negotiations and the signing of the contract for sale or purchase, when neither party is really sure whether the transaction is 'on' or ' o f . In other words, in most conveyancing transactions there is a wretched period when both parties are in a state of 'limbo.' It is sometimes said that which of them is the more uncomfortable depends on the state of the market. If there is a property b o om, it is more likely to be the pur- chaser, because he is then subject to the risk of 'gazumping' by the vendor who may be tempted to accept subsequent, but more attractive offers for his property. In times of a slump, or even a static market, it is more likely to be the vendor, for he is then subject to the risk that, having apparently made a bargain with one purchaser and thereafter turned away later offers, the original will withdraw and the ones who made later offers will have gone elsewhere. In truth, however, both parties are often equally uncomfortable because in many situations they each have a dual capacity, that is, they are each a vendor and a purchaser, selling one property, and therefore sub- ject to one risk, and buying another property, and therefore subject to the other risk. And as most conveyancers will testify, all too often it is the law of the jungle which prevails in this situation. If only we could remove, or at least reduce drastically, this period of 'Umbo.' Of course, several different approaches to resolution of this problem have been suggested from time to time. One is to tackle what may be described as the strictly legal source of the trouble, which is of course, the provision in the Statute of Frauds whereby the contract for sale does not become enforceable until written evidence of its exist- ence is created. It is this which deprives the parties'

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