In the property world, many deals are concluded on the basis of a handshake. The problem is that some people seem to think they can walk away from an oral agreement at any time. What remedies are available if this happens?

The Courts are now attempting to stop people backing out of oral agreements and are ordering those who do to compensate the injured party. The doctrine of proprietary estoppel allows the Courts to intervene in circumstances where the application of strict legal rights is considered to be harsh and unfair. A proprietary estoppel may arise where a landowner induces, encourages or allows an expectation to be created that the claimant has a right over the landowner’s land and the claimant relies on this belief to his detriment, perhaps by spending money, and the landowner knows this.

One recent case that brought this doctrine to the forefront of the legal press is the perhaps surprising decision in Cobbe v Yeomans Row Management Limited [2006] 1 WLR 2964. A developer, Mr Cobbe, had an oral agreement with the owner of a block of flats to develop it and share the total sale value. He spent a considerable amount of money, around £200,000, in obtaining planning permission but, after the permission was granted, the owner backed out of the agreement. Strictly speaking, all contracts for the sale or other disposition of an interest in land must be made in writing. Mr Cobbe was unable, therefore, to make a claim for breach of contract. However, Mr Cobbe was awarded rights over the property worth half the difference between its value with and without planning permission, despite nothing being in writing. One point to note, however, is that perhaps proprietary estoppel would not have arisen had the negotiations been conducted on a “subject to contract” basis.

Going through the Courts at a similar time was the case of Clark v Clark [2006] ALL ER (D) 357. Two brothers, Douglas and Keith, were joint shareholders in a family haulage contracting business. The brothers fell out and Douglas sought to wind up the company with a view to redeveloping part of the land from which the company operated. Douglas was 63 years old and in poor health, but Keith felt that the business was still viable, and wished to continue. Douglas was the legal owner of the land the company had occupied and he served a notice on the company requiring it to leave the land. Keith opposed the notice on the basis that the company had spent £38,000 redeveloping access to the land. He also opposed it as the company had moved to its present location in the mid-1980s after proceedings by the local authority had compelled it to leave the premises it had previously occupied. The move was not, therefore, designed to be a temporary one.

The Court decided that the facts of the case gave rise to a proprietary estoppel. Douglas had made his land available to the company without objection and without anything being said to indicate that the use of the land would merely be temporary. Douglas may have been the legal owner of the land but it would have been unconscionable for him to rely on the absence of any written agreement to evict the company from his land especially when the company had spent so much developing it. The Court made it clear that Keith could continuing using the land for the business, for as long as it continued to provide him with an income.

In the situations as outlined in these two cases, the Courts may find favourably for a claimant notwithstanding that there is no legally binding contract in place.