First Shanghai Enterprises Limited v Dahlia Properties Pte Limited (High Court Action 13426/97, May 3 2001) is another cautionary tale for lawyers acting for vendors to note that the vendor's obligation to prove title should be performed well before the date fixed for completion.

In this case the sale and purchase agreement provided that any requisitions or objections in respect of title should be delivered to the vendor's solicitors within seven working days of receipt of title deeds. Failing this, the purchaser would be deemed to have accepted the vendor's title. Time was stated in the agreement to be of the essence.

Unfortunately for the vendor, its lawyers were too busy with other transactions and title deeds were only delivered to the purchaser's solicitors shortly before completion and less than seven working days before the completion date.

The 96 title deeds sent to the purchaser's solicitors were far from complete and the purchaser's solicitors noted 13 missing documents. The purchaser claimed that the vendor had breached the agreement in failing to provide the title deeds as early as possible, leaving it with insufficient time to consider the vendor's title and to raise requisitions. The vendor was said to have repudiated the agreement and the purchaser claimed for the return of the deposit paid.

Justice Yuen gave judgment in favour of the purchaser. The court ruled (referring to Re Priestley's Contract [1947]) that it is well-established law that even though the obligation of a vendor to prove title is an obligation which it must perform at completion, it is an obligation which in practice ought properly to be performed by the vendor well before the completion date. The vendor was in breach in failing to deliver the title deeds to the purchaser less than seven working dates before the completion date.

The lesson to be learnt is that the purchaser should be given reasonable time to consider the title of the vendor and its own position. Extra care should be given to the wording of the sale and purchase agreement to ensure that the time limit imposed on the purchaser to raise requisition is workable, bearing in mind the facts in question.

For further information on this topic please contact May Chang at Baker & McKenzie by telephone (+852 2846 2478) or by fax (+852 2845 0476) or by e-mail ([email protected]).

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