In Gladman Developments Limited v Sutton  EWHC 1597 (Ch) the High Court considered whether a legally binding oral agreement was made between a developer and landowners for the developer to promote seventy acres of the landowners’ farm land for development.
A straightforward promotion agreement is not a contract for sale or other disposition of an interest in the land. It is therefore not subject to the strict requirements imposed by Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.
The developer contended that a legally binding oral promotion agreement was made at a meeting on 12 March 2012 or in the course of a telephone conversation later that month. The court found that the terms agreed at the 12 March meeting were part of a negotiation of a promotion agreement, not a free standing binding oral agreement.
Prior to the 12 March meeting, the developer had provided the landowners with a pro forma promotion agreement. At the 12 March meeting the seventy acres and its location at the farm, the up-front payment to be made by the developer and the amount of the developer’s commission were agreed. Following the meeting, the correspondence with the landowners made reference to ‘offer’ and ‘proposal’ which was intended to be the basis for ‘a legal agreement’ to subsequently be made. Communications between the parties’ solicitors were ‘subject to contract’. The developer’s solicitor referred to an agreement ‘in principle’.
Analysis of whether there is a binding agreement depends on whether, viewed objectively, the communications between the parties lead to the conclusion that they had intended to create legal relations and had agreed all the terms essential for the formation of a legally binding contract. There was nothing of sufficient substance for finding that the parties had entered into an oral agreement either at the 12 March meeting or the telephone conversation later in March. The evidence fell short of the standard of proof required to make such a finding.
Points to take away:
- There is no requirement that an agreement for the promotion of land for development be made in writing. This applies to a straightforward promotion agreement.
- A promotion agreement containing provisions enabling the developer to acquire an interest in the landowner’s land, such as an option to purchase, would need to comply with the requirements of Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 in order to be valid - made in writing, incorporate all the terms that have been expressly agreed and be signed by or on behalf of the parties.
- Even in circumstances where contracts do not need to satisfy Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 in order to be valid, there are evidential difficulties in proving a legally binding oral agreement.