A contract for the sale of land which has not been signed or exchanged may be enforced if a deposit has been paid over. A condition drafted for the benefit of one party may be waived by that party.

Sometimes the conduct of the parties will lead a court to disregard the exact words of a written contract in order to give effect to the intentions of parties. as happened in McKenny v. Martin [2010] IEHC 293, Martin agreed to sell a small plot of land in Louth to McKenny for approximately €38,000. McKenny hoped to build a house on the property. The agreement had three noteworthy features:

First as is commonplace in Irish property transactions, the contract for sale expressly provided that there would be no enforceable agreement until the contract was signed and exchanged.

Secondly, a deposit of €31,743 (or 83% of the total purchase price) was to be paid to the Vendor on signing.

Thirdly, the sale was made subject to the Purchaser obtaining planning permission to build a house on the site. The contract could be rescinded if planning permission was not obtained.

The Purchaser signed the contract and sent it to the Vendor’s solicitors. The Vendor never signed the contract but the Purchaser paid the deposit. Over the next few years the Purchaser made numerous unsuccessful attempts to obtain planning permission. In 2008, the Vendor wrote to the Purchaser stating that he would not complete the sale of the property unless an additional payment was made. The Purchaser sued for specific performance.

The Vendor based his defence on the wording of the contract. He pointed out that the contract had never been signed or exchanged. As a result, he argued, no agreement had come into existence. Laffoy J rejected this reasoning. Taking a ‘realistic and proper approach’ she found that the conduct of the parties, particularly payment of the substantial deposit, caused an enforceable agreement to come into being.

The Vendor then argued that the contract was not enforceable as no planning permission had been granted. The judge dismissed this argument by looking to the purpose of the term. She decided that it had been inserted exclusively for the benefit of the purchaser, and therefore the Purchaser could waive compliance with this condition. She interpreted the bringing of the proceedings as such a waiver.

Arguably the planning condition could be for the benefit of both parties. The Vendor would not want his property to be tied to a conditional contract indefinitely and it is unclear whether this point was made in the case. Explicit drafting would reduce any uncertainty.

Judge Laffoy is one of Ireland’s leading property experts, so her judgments are worthy of careful study. In this case she adopts a purposive approach in construing the terms of a contract for sale and considers all the factors to give effect to what the parties had shown by their conduct to be their intentions.