| VENDOR AND PURCHASER — Leasehold property — Contract for assignment — Landlord’s consent necessary — Purchaser giving notice of rescission of sale agreement — Conduct of purchaser —Whether right to rescind exercisable only within reasonable time of right arising — Whether notice valid — Standard Conditions of Sale (4th ed), cond 8.3
Alchemy Estates Ltd v Astor and another [2008] EWHC 2675 (Ch); [2008] WLR (D) 343
Ch D: Sales J: 5 November 2008
The contractual right of rescission under condition 8.3.3 of the Standard Conditions of Sale had to be exercised promptly, which meant by the contractual completion date, or possibly, within a day or two thereafter.
Sales J, sitting in the Chancery Division, so held when dismissing the claim by the claimant, Alchemy Estates Ltd, for return of the deposit paid on exchange of contracts, and giving summary judgment for the defendants, Judith Astor and Polly Astor, on their claim for specific performance of the sale agreement.
By a contract dated 15 January 2008 the claimant had agreed to purchase a leasehold property from the defendants with a completion date of 13 March 2008. The contract incorporated the Standard Conditions of Sale (4th ed), condition 8.3.1 of which provided that if a consent to assign was required to complete the contract then, by condition 8.3.2, the seller was to apply for it at his own expense and use all reasonable efforts to obtain it and the buyer was to provide all information and references reasonably required. By condition 8.3.3 either party might, unless it was in breach of its obligation under condition 8.3.2, rescind the contract by notice to the other if three working days before completion date consent had not been given or consent had been given subject to a condition to which the buyer reasonably objected. By notice given on 19 May 2008 the claimant rescinded the contract.
SALES J said that there were two reasons why the claimant had no right to rescind the contract in reliance on standard condition 8.3.3 as at 19 May, in the light of the way it had conducted itself over the period from 10 March (the date on which the right to rescind arose). First, since the claimant did not, in the three-day period up to the contractual completion date or within a reasonable time thereafter, purport to exercise such right of rescission as it enjoyed, but allowed the sale agreement to remain on foot and encouraged the defendants to continue working towards its completion, the claimant lost the right to rescind. The condition had a very specific object, which was to allow the parties to a sale agreement to assess their respective positions where landlord’s consent had not been obtained at a specific point in time a short period before the contractual completion date in order to decide whether they wished to go on with the agreement in circumstances where it had become clear that there might be a difficulty in obtaining such consent. It was a provision which allowed an area of uncertainty as to how a stranger to the contract (the landlord) might act which remained unresolved in the immediate lead up to the contractual completion date to be brought to a head by either party opting to treat the contract as rescinded on that basis. The provision allowed the parties to anticipate the possible non-fulfilment by the contractual completion date of a condition upon which they contemplated their agreement depended. It enabled them to achieve certainty at a particular defined juncture in the life of the contract, given by reference to the third working day before the contractual completion date: see Aubergine Enterprises Ltd v Lakewood International Ltd [2002] 1 WLR 2149. It was clear that neither the drafters of the conditions nor the parties intended that the effect of a right to rescind arising under standard condition 8.3.3 shortly before the contractual completion date should continue indefinitely thereafter, so as to afford each party the potential ability to bring the agreement to an end without any warning at all (no matter how much time, effort and expense the other might have put into working for the proper completion of the agreement after the contractual completion date had passed, and no matter how close they might be to being able to achieve completion). If the right of rescission was not exercised promptly, namely by the contractual completion date, or perhaps a matter of a day or two thereafter, both parties must be taken to have decided that they wished to proceed with the original allocation of risk set out in their agreement. Second, the claimant by its actions had given a clear and unequivocal indication after the contractual completion date that it regarded the contract as on foot, was itself seeking to rely upon it and thereby affirmed it.
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