In the last eBulletin, we looked at how oral agreements and promises can be enforced in property transactions despite the general requirement that all contracts for the sale, or other disposition of land, must be made in writing.

The issue was recently examined again by the Court of Appeal in the case of Oates v Stimson [2006] EWCA Civ 548. Mr Oates and Mr Stimson bought a house together in 1995. They both made equal mortgage payments until 1997, when Mr Oates ran into financial problems. He moved out and never returned. Mr Stimson claimed that he had orally agreed to buy Mr Oates’ interest for £2,500, when he could afford to do so, and that he would take over full responsibility for the mortgage payments. In 2000, Mr Stimson tried to pay Mr Oates the £2,500 and Mr Oates denied the existence of the oral agreement and claimed that his share in the house was worth £50,000.

The judge accepted Mr Stimson’s evidence that an oral agreement had been reached and that, by relying on this agreement, he had acted to his own detriment by taking over the mortgage and paying for repairs to the property. The judge found that this gave rise to a constructive trust in Mr Stimson’s favour and so, on payment of the agreed sum of £2,500 to Mr Oates, Mr Stimson was entitled to the full value of the property.

Perhaps this case has done little more than just open the door to further litigation between property owners but it is a positive step that the Courts are taking action, to assist with the enforcement of informal agreements that may otherwise fall foul of the requirements of the Law of Property (Miscellaneous Provisions) Act 1989 that contracts and agreements relating to land be in writing.