The Gazette 1981

GAZETTE

JULY-AUGUST 1981

Earlier

Contract?

An extract from the 1981

Frances E. Moran Memorial

Lecture on "Irish Law in the

Next Century"

by John Wylie, LL.M., LL.D.

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'

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

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