Eccles v Bryant
| Jurisdiction | England & Wales |
| Date | 1947 |
| Year | 1947 |
| Court | Court of Appeal |
Vendor and purchaser - Sale “subject to contract” - Draft contract signed by both parties - Withdrawal of vendor before completion of exchange - Effect.
Where parties enter into an agreement for the sale of real property “subject to contract,” the contract, in the absence of express agreement to the contrary, is not complete until the parties have exchanged their copies in accordance with ordinary conveyancing practice, and until such exchange is effected either party can withdraw.
Where such exchange is intended to be carried out through the post, the moment of completion is at any rate not earlier than the putting of the later copy in the post.
Quaere whether the effective time is that of posting or of receipt by the other party.
APPEAL from Vaisey J.F1.
In April, 1946, the defendants agreed to sell and the plaintiff to buy “subject to contract” a house known as “Barns Branford,” Brick Lane, Newchapel. The respective solicitors prepared and agreed the draft contract, and on June 11, 1946, the vendor's solicitors wrote to the purchaser's solicitors: “Our clients have now signed their part of the contract herein and we are ready to exchange and shall be glad to hear from you.” The purchaser's solicitors raised certain further questions, but on June 18, 1946, they wrote: “We enclose herewith the contract signed by our client, and shall be glad to receive in exchange the part signed by your clients.” On the same date (and therefore before receiving the purchaser's part of the contract) the vendors' solicitors wrote: “We are instructed to inform you that our clients have decided not to proceed with the sale to your client owing to the delay which has occurred on your client's part in dealing with the matter. They have accordingly disposed of the property elsewhere.”
The purchaser brought an action and Vaisey J. made the usual order for specific performance in a purchaser's action. The vendors appealed.
Neville Gray K.C. and Hubert Rose for the defendants. Where the terms of a sale of land have been come to “subject to contract,” the essence of a binding contract is the exchange of two parts signed by vendor and purchaser respectively. Signature without exchange is not enough. If, however, there is only one document and both parties sign it, no exchange of documents is necessary. The need for that is waived by both parties signing the single document. An agreement to exchange parts by post is often made by the solicitors to the parties, and then the contract of sale is not completed till each party receives the part signed by the other party. Alternatively, on the offer being made by post by sending a signed part, the acceptance is made, at the earliest, as soon as the other signed part has been put in the post. Vaisey J. held that the letter of the vendors' solicitors, dated June 11, was an offer but there are three answers to this: (1.) the letter contained no offer; (2.) the solicitors had no authority to make an offer for the vendors; (3.) that letter was not treated as an offer by the other side. The letter of June 11 merely stated that the vendors had signed their part and went on to invite the purchaser's solicitors to exchange parts. That is not an offer and the contract could not be completed till the solicitors had received the purchaser's signed part and posted back the vendors' signed part.
[LORD GREENE M.R. When the expression “subject to contract” is used I have never known a case where it has been suggested, much less held, that this did not import that there is nothing binding till the exchange of parts of the formal contract has been made.]
That is the defendant's first proposition which was disputed in the court below. In support of it we would refer to passages in certain authorities. The first is Chillingworth v. EscheF2. Other material authorities are Lockett v. Norman WrightF3 and Keppel v. WheelerF4. Trollope & Sons v. Martyn BrothersF5 was disapproved in the House of Lords in Luxor (Eastbourne), Ld. v. CooperF6 but not as regards the point for which it is cited that until contracts are signed and exchanged, there is no binding contract where the purchase is made subject to contract: see also Spottiswoode Ballantyne & Co. v. Doreen Appliances, Ld.F7. [They were stopped.]
Fox-Andrews K.C. and R. E. Hopkins for the plaintiff. The merits of the case are clearly with the plaintiff on the correspondence. The court, however, has to determine the true meaning and effect of the phrase “subject to contract.”
It is contended that all that is required is that the parties should be ad idem in all respects and record it in appropriate form whether by one or two documents with an intention that the document or documents should be acted on. Here both documents were signed with that intention. To state the law more fully the effect of the words “subject to contract” is this, and no more than this, namely, that before the bargain becomes binding, the following requirements should be observed and performed: (1.) the parties must have reached agreement on all points; (2.) each of the parties must have recorded his agreement in a document signed by himself or his authorized agent or otherwise acknowledged by him as his document, and in both cases that signature must be placed on the particular document with the intention of being bound; (3.) the fact that each document has been so brought into existence shall be communicated to the other party.
It is accepted that the exchange of the parts of the contract is in practice very frequent but it is not legally necessary. That is merely a convenient way of carrying out the third essential. This precise point has never before been considered by the court. In both the first and the latest editions of Williams on Vendor and Purchaser (p. 4 in both) it is said that “contracts for the sale of land are generally concluded, on a sale by private treaty, by the signature by both parties or their agents of a formal written contract.” In neither edition is there any reference to exchange after completion or the necessity for any such exchange. Admittedly the fact of signature must be communicated to the other party, but exchange is merely one method of communication, which in this case was made by the vendors' solicitors in their letter of June 11.
It does not follow because a practice is usually followed at a certain stage, that it is an essential part of the contract. Who could really doubt on the facts of this case that these two gentlemen had made a contract? Something more required to be done before conveyance, but nothing remained to establish the contractual relation. On proof of these facts, there would be an obligation to execute the conveyance.
[COHEN L.J. Does it not come back to this: What did the vendors intend when they signed that document? They did not intend to be bound immediately, for they did not know whether the other party would sign. Is not the question whether they gave it to their solicitor to be completed by exchange or to be completed by communication?]
The word “exchange” has only begun to be used in this connexion since 1919. In none of the reported cases. has the question whether documents have been exchanged come in issue. Phillips v. EdwardsF8 was a case of a deed: and as to the necessity of delivery there is no doubt. The strongest authority against us is the dictum of Bankes L.J. in Keppel v. WheelerF9. Chillingworth v. EscheF10; Lockett v. Norman-WrightF11; Wilson v. BalfourF12; and Trollope & Sons v. Martyn Bros.F13 are consistent with the purchaser's argument, though the reference to Winn v. BullF14 in the last named is not clear, since it has no reference to exchange. They referred also to Rossdale v. DennyF15.
The second point is whether the judge was right (as it is submitted that he was) in finding that the vendors were bound because they made an offer by their letter of June 11, which was accepted.
Where parties to a bargain “subject to contract” have intimated by their conduct that the post shall be substituted for personal exchange across a table in the solicitor's office, the contract is completed when the first party puts his signed part in the post.
LORD GREENE M.R. This case is one of that long series of cases which no doubt will go on as long as contracts take place, in which one party to a transaction, which was intended to produce a contract and was carried on on the usual condition that it was to be subject to contract, is attempting to say that a contract came into existence at a date on which the other party says that negotiations had not yet been completed and that no binding contract had come into existence at all. That type of case is extremely familiar in these courts. Each case, of course, differs on its own facts, but the attempt similar to that which is made here is the common form of attempt that is made.
The parties were minded to enter into a contract for the sale and purchase of a house. The matter was put into the hands of their respective solicitors in the ordinary way. The basis on which the negotiations were being conducted was that the terms set out in the preliminary correspondence were stated to be subject to contract and survey. We are not troubled with the survey. The important words are “subject to contract.” This is one of those cases where quite clearly and admittedly no contract came into existence in the earlier correspondence. It is common ground that the parties contemplated a definitive binding contract which was to come into existence in the future. One thing is quite clear on the facts of this case to my mind, that both firms of solicitors, one of whom — that is the vendors' solicitors — practised in East Grinstead and the...
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