A binding contract?
YOU have exchanged contracts on the sale of Lake View, your little pad overlooking the sewage works. Everything will now simply wind its gentle way to completion. Of course it will. Then you will bank your massive profit and depart for Spain. Unless the buyer, Owen Munny, backs out of the deal.
On the day, it turns out his mortgage offer was withdrawn so he can not go ahead. That leaves a removal van half full of gear on your drive and the deposit in your solicitor’s bank. Plus you still have the house. Your happy retirement in the sun is put on hold until he pays or you resell.
The first thing you do is ensure that you can get your hands on the 10% deposit. Then you remember that, in order to secure this excellent sale as the estate agent said, you agreed to a reduced deposit. Or was it your husband who agreed? Probably your husband, not listening to your advice again. So it is only 1% of the price. “Dear me!” you mutter.
At this stage Mr Munny must still carry out his obligations under the contract. You tell your solicitor to make him complete the deal. So he serves a notice to complete which tells the buyer that he has a limited time to do the deal or lose it. Mr Munny does nothing. So you tell your solicitor to ask the court to make him buy the house. And you ask for damages. You should be put into the same position as if the contract had been performed. You should recover; losses arising naturally, according to the normal course of things, from the breach of contract itself; or such loss as may reasonably be supposed to have been in the contemplation of the parties at the time they made the contract, as a probable result of the breach.
Mr Munny turns around and says that you agreed that you would use your best endeavours to ensure that the sewage works were moved. You are quite sure that this was not in the contract that you signed. However, if he can show that it was then you, like Houston, have a problem.
The law says that a party to a contract who has not fulfilled his obligations cannot demand performance of the other party’s obligations or payment from the other party. So if you are shown to be in the wrong because you have not done your bit, then you will get no court order for specific performance and damages.
You manage to show that he is (again) in the wrong. He is lying (or, as lawyers say, mistaken). You press on. Now it appears that he has no money, as he can not sell his own fully-mortgaged house or get another mortgage. It can be difficult when you are an undischarged bankrupt. He has a bit of a gambling problem. Or so he says.
You discover that Mr Munny is lying about all this and has himself refused to accept the offer for his house or the mortgage. This is, you think, because his wife did not want to sell the place in any case. She wants to carry on living next door to her mother.
So you press on with your action. Your solicitor is by now becoming like an old friend who came to stay for a day and is still with you a month later. And you are paying for the privilege.
Then Mr Munny tries a new tack, (he knows about sailing close to the wind). He says that he made a mistake. He thought he was buying another house. Which, he says, has a much nicer kitchen, and a bigger garden. So what does the law think of this mistake?
A mistake can be a mistake of fact or a mistake of law. The courts are very reluctant to allow a party to avoid a contract by simply proving it was mistaken. However. the law says there are three kinds:
l Common mistake (where the mistake is fundamental, shared by both parties and directly affects the basis of the contract). The mistake will make the contract void if it makes the contract meaningless.
lMutual mistake (where the parties are at cross-purposes with one another). If, from the parties’ words and conduct, only one possible interpretation of what was agreed can be deduced, the contract will still be valid. Otherwise it will be void.
lUnilateral mistake (where one party is mistaken and the other knows or should have known of the mistake). If the mistake is fundamental to the nature of the contract, then it may be set aside as void.
So there you are; expensive litigation, a devious opponent and only a 1% deposit to fall back on. How you wish you had not listened to the Estate Agent. “Aha”, you think, “Let’s sue him!”. Unfortunately he went out of business last week. And so it goes!
lIf you have any legal questions or queries in respect of commercial property contact Endeavour Partnership on (01642) 610300.
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