240 / 262
Again the agreement was oral but it was intended to
be binding; the defendant assured the plaintiff that he
would not go back on his word. On March 17 the
defendant's solicitors wrote a letter to the plaintiff's
solicitors in which they said : "We understand that an
increase in the consideration has been mutually agreed
and we shall therefore be obliged if you would amend
the Contract in your possession to read a purchase price
of £7,000". Subsequently a date for completion was
agreed and on that date the plaintiff's solicitors for-
warded the purchaser's part of the contract signed by
the plaintiff. The defendant, however, believing that
he could obtain a better price elsewhere, refused to
complete. In an action for specific performance the
defendant claimed that the contract of March 13 was
unenforceable on the ground that the relevant corres-
pondence and the draft contract were incapable of
constituting a "note or memorandum" of the contract
for the purposes of S 40 (1)* of the Law of Property
Act 1925 since they did not look back to a concluded
oral contract, but related exclusively to a different
written contract to be concluded in the future.
Held, by the Court of Appeal (Buckley and Orr
L.JJ,Russell L J disenting) : The contract was enforce-
able for the following reasons—
(i) Where an oral contract for the sale of land had
been proved, it was sufficient, for the purposes of S 40
(1) if the note or memorandum recorded the terms
agreed on; it was not necessary that the note or
memorandum should itself acknowledge the existence of
the contract unless, in the absence of such an acknow-
ledgment, the document would be read as denying the
existence of the contract.
(ii) Where a document contained the words "sub-
ject to contract", it was open to the parties' subse-
quently to waive that stipulation orally, thus creating
a contract. In such a case the document might there-
after serve as a sufficient note or memorandum if the
waiver could be established by oral evidence.
(iii) Even if the insertion of the words "subject to
contract" by the defendant's solicitors prevented the
letter of 17 February and the subsequent correspon-
dence up to March 13 from constituting a note or
memorandum, the letter of March 17 was a written
acknowledgment signed by the defendant's solicitor,
acting within his authority, that the parties had entered
into a new contract on the terms of the draft contract
save for the alteration of the purchase price. That
acknowledgment was not expressed to be "subject to
contract" and any effect which that qualification in
the letter of February 17 had had on the earlier corres-
pondence was nullified by the firm oral agreement
between the parties on March 13. Since the terms of
the oral agreement were to be found incorporated in
the letter of March 17 read with the earlier corres-
pondence, and the draft contract, with which it was
linked, those documents contained a note or memoran-
dum of the oral agreement of March 13 within the
meaning of S 40 (1).
Griffiths v. Young
(1970) 3 All ER 601 applied.
Appeal
By a writ issued on 25 April 1972 the plaintiff,
Joseph Law, brought an action against the defendant,
Stuart Martin Jones, claiming (i) an injunction re-
straining the defendant from selling or otherwise dis-
posing of the defendant's freehold dwelling-house
known as Dingleberry Cottage, Yarningale Common,
Claverdon, Warwickshire ("the cottage") except to the
plaintiff; (ii) specific performance of an agreement by
the defendant to sell the cottage to the plaintiff and
(iii) damages for breach of contract. By his defence the
defendant denied that there existed a binding contract
to sell the cottage to the plaintiff and, in the alternative,
relied on the procisions of S 40 of the Law of Property
Act 1925 and denied that letters, correspondence and
a draft conveyance which had passed between the de-
fendant's and plaintiff's solicitors or any of them con-
stituted a note or memorandum of the alleged con-
tract. The defendant counterclaimed for a declaration
that there was no binding contract between the plain-
tiff and the defendant for the sale of the cottage and
an order that the registration of a class C(iv) land
charge in respect of an estate contract between the
plaintiff and the defendant which the plaintiff had
caused to be registered in the register of land charges
be vacated. On 27 July 1972 Ungoed-Thomas J granted
the plaintiff the decree of specific performance sought
and dismissed the defendant's counterclaim. The de-
fendant appealed.
COURT THROWS OUT OWN RULING
(Tiverton Estates v. Wearwell).
The rule established in Law v. Jones by the Court of
Appeal in April that buyers and sellers of houses can
be legally bound by an oral agreement was overturned
yesterday—by the Court of Appeal.
The April ruling had caused consternation within
the legal provession. It decided that an oral agreement
was binding even if the magic words "subject to con-
tract" were included. These words have for more than
a century been understood to mean that there was no
binding agreement until formal written contracts had
been exchanged.
On this basis, when a buyer and a seller agree orally
subject to contract each has been free to investigate
further. The buyer has the property surveyed and gets
his solicitor to discover whether, for instance, there is
any plan to build a motorway through the back
garden.
Yesterday a differently-constituted Court of Appeal
(Lord Dunning, with Lords Justices Scarman and
Stamp) decided that the April ruling—Law v. Jones—
was wrong. They held that an oral agreement to sell
a leasehold property for £190,000 was not binding
because there was no written contract when the seller
decided not to go ahead.
Normally the Court of Appeal is bound to follow its
own decisions but there is an exception where it has
previously given inconsistent rulings, in which case it
can select from among them. The three judges agreed
that the decision in April was inconsistent with certain
nineteenth century decisions and that the old cases
should be preferred.
It is virtually unheard of for the Court of Appeal
to reverse itself on an important matter within a few
months. But in this particular case the legal profession
will breathe a considerable sigh of relief. It is still, how-
ever, theoretically possible that the April decision will
be restored, because leave to appeal to the House of
Lords was granted.
[The Guardian,
22 /11 /1973)
237