309 / 364
exchanged contracts for the sale of these securites.
Completion should
take place within
LI
short
period and we undertake to hold the leases to
your sole order and to account to you for the
proceeds, £13,000." Mr. Lincoln himself was
said
to have written a personal confirmation
of that to the bank manager. The bank said
that on
the
faith of
these
letters
they
ad
vanced £15,000, part of which had been
lost
and that there was a duty on Mr. Lincoln and
his clerk to take reasonable care in writing these
letters, having regard particularly to the recent
decision of the House of Lords in Hedley Byrne
& Go. Ltd. v Heller (1964. AC. 465). Mr. Lincoln
in his affidavit alleged that the bank were money
lenders, not registered as such, and he denied the
misrepresentations alleged and the interpretation
put on these letters by the bank. The Court of
Appeal held that the question of damages and
liability were so interconnected that they could
not be dealt with separately and accordingly
granted leave to defend unconditionally.
(National Union Bank Ltd. v Lincoln,
Times
newspaper, 10/11/66).
Vendor and Purchaser :
Clause Excluding
Objections to Title
By an underlease dated 28th December, 1963,
S. who had an assignment of a lease of three
floors of a London house, sublet the second floor
flat to P ("the vendor") for a term ending in
July, 1972. Despite his right at law to call for
the lease out of which his underlease was granted,
P did not do so, but his solicitors accepted in
stead an assurance from the husband of S that no
consent was required for the underlease. In fact
the lease required consent in writing to any under
letting. By an agreement made on 26th October,
1964,
the vendor agreed
to sell and B
("the
purchaser") agreed
to buy the residue of his
underlease, completion
to
take place on 23rd
December, 1964. Clause 3 provided that "The
vendor's title which has been accepted by
the
purchaser shall commence with an underlease
dated 28th December, 1963 and the purchaser
shall raise no requisition or objection thereon.1'
The purchaser went into possession on 26th Octo
ber. Two days later, on 28th October, the pur
chaser's solicitors were informed by the reversioner's
solicitors that the rent under the lease was over
due and that there were outstanding breaches of
covenant. After further correspondence and in
quiries the purchaser, on 8th January, 1965, in
formed the vendor that the contract must be
treated
as discharged; and proceedings were
started for rescission of the agreement and return
of the purchase money on the ground,
inter alia,
that as no consent
to
the vendor's underlease
had been obtained,
the
title accepted by
the
purchaser was bad as
liable to forfeiture. The
vendor by his defence claimed,
inter alia,
that
even if there were defects in his title, cl. 3 of
the
agreement precluded objections;
and
he
counter-claimed
for
specific
performance. The
County Court Judge (Sir Alun Pugh) dismissed
the claim for rescission and ordered specific per
formance and consequential relief. The purchaser
appealed.
Danckwerts, L.J., giving the reserved judgment
of the Court, said that the vendor's failure to
inspect the lease out of which his own underlease
was granted was a terrible mistake. As a result of
that, he was affected by constructive notice of the
requirement of consent to the underletting to him
and the consequent liability to foretiture. Though
no steps to enforce forfeiture had been
taken,
the superior landlords were alive to the point; and
if an interest in leasehold was subject to deter
mination for breaches of covenant which had
already been committed, the title was not good.
The important question was whether the pur
chaser was precluded from taking objections by
reason of cl. 3. Assuming that that clause pre
cluded objection to the vendor's title, the pur
chaser having discovered by other means a vital
defect in that title which meant that the pur
chaser was being asked to accept something which
might be made worthless, could the clause pre
vail? There was no doubt
that by a clearly
drawn special conditions in a contract put in
by a vendor who acted in good faith, and dis
closing a possible defect in the title, the purchaser
might be compelled to accept the title offered by
the vendor. But the vendor must have disclosed
the defects of which he knew. In this case the
vendor did not know the breaches which would
give
rise
to forfeiture. But he ought
to have
known that such breaches might exist.
His solicitors ought to have insisted on seeing
the underlease assigned to S out of which his own
underlease was to be created, as they were en
titled to by law.
The vendor's solicitors accepted
instead an untrue statement by the husband of
S, who was not a lawyer anyway. The position
was covered by the decision in Re Haedicke &
Lipski's Contract (1901) 2 Ch. 666, that a pur
chaser had a right to assume, when a condition of
this kind was inserted, that the vendor had dis
closed what it was his duty to disclose. The vendor
could not rely on this clause in this case, and
the purchaser was entitled
to rescind. Appeal
allowed.
(Becker v Partridge I.L.T.R. &
S.].—Journal,
Vol. C., page 373).