What should an innocent party do when the other party to a contract, for the sale of heritage, refuses to implement their end of the bargain? The recent decision of the Inner House in AMA (New Town) Limited v Ron Law (and two associated cases) raises, again, this well-known conundrum.
AMA (New Town) Limited v Ron Law
AMA entered into a contract with Mr Law for the sale of a property in Edinburgh. Missives were concluded. The essential aspects of the relevant contract were that the purchase price of £212,000 would be payable (with the exception of the deposit) on the date of entry. However, when the date of entry arrived Mr Law refused to pay the purchase price and demands for payment went unanswered. AMA raised an action seeking payment of the purchase price. Mr Law resisted the claim on the basis that AMA was not entitled to insist on performance of the contract because there were outstanding obligations on the part of both parties at the date of entry. Mr Law needed to pay the purchase price and, in exchange, AMA would deliver a good and marketable title. These obligations were due to be performed at the same time on the date of entry. AMA had not yet delivered a good and marketable title, so AMA was not entitled to insist on payment of the price by Mr Law. Mr Law argued that the only remedy available to AMA, as a result of his breach of contract, was a claim for damages; implementation of the contract could not be forced upon him in the circumstances.
The Court rejected Mr Law's arguments, stating that in the event of a material breach of contract, an innocent party has a choice of remedy: either to accept the breach, terminate the contract and seek damages or refuse to accept it, in which case the contract remains in full force and must be implemented.
The Court recognised that there were certain outstanding obligations to be performed as at the date of entry, but indicated that in the present case, where AMA had confirmed their willingness and readiness to grant title, they could not be thwarted from doing so because of a refusal by Mr Law to keep his end of the bargain.
Whilst in many cases it may be undesirable to seek implementation of the contract - for example where there are issues about a buyer's financial position – refusal by one party to keep their end of the bargain cannot restrict the remedies open to the innocent party.
It was recognised by the court that there may be exceptions to the general rule. However, in the present case, there was no reason to depart from the usual rule and AMA was entitled to enforce performance of the contract.
The decision upholds a well-established rule of Scots law, but it is worth emphasising, particularly in the context of contracts for the sale of heritage. On the conclusion of missives, a binding contract is entered into and a breach by one party will entitle the innocent party either to terminate the contract and claim damages or seek to enforce the contract.