In Eyestorm Ltd v Hoptonacres Homes Ltd, the buyer missed the contractual completion date. The parties exchanged letters in which they agreed to extend the completion date. In its letter, the seller also agreed to cease remarketing the property (it had commenced remarketing once it became clear that the buyer was going to default).
The buyer did not complete on the revised date for completion, and the seller served a notice to complete. This was not complied with. Since time was now of the essence, the seller rescinded the contract and forfeited the deposit.
The buyer alleged that the seller was in breach of the agreement on the basis that it had continued to remarket the property. As a result, the buyer argued that the notice to complete served by the seller was invalid as it was not “ready, able and willing” to complete.
The court held that the exchange of letters did not create a binding contract, since it did not comply with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. This provides that a contract for the sale or other disposition of an interest in land must be in writing, incorporate all the terms which have been agreed in one document and be signed by or on behalf of both parties.
Since the buyer could not enforce a contractual obligation to cease marketing against the seller, it then tried to argue that the seller was estopped from denying this obligation. Estoppels fall into a number of different types, but the buyer did not specify which type it was relying on.
There is case law which supports the proposition that a proprietary estoppel can in certain circumstances “save” a contract which is void for non-compliance with section 2. This is because a proprietary estoppel can give rise to a constructive trust, which is specifically excluded from the scope of that section.
However, the court in Eyestorm Ltd v Hoptonacres Homes Ltd doubted whether anything other than a proprietary estoppel would be enough to avoid the consequences of a failure to comply with section 2. In particular, a promissory estoppel would not assist, since this cannot be used to found a cause of action but only as a defence. This is sometimes expressed as that such an estoppel can be used as a shield, but not as a sword.
In any event, the court found that any remarketing that the seller may have carried out was not the cause of the buyer's failure to complete. In these circumstances it could not be said that the alleged breach meant that the seller was otherwise than “ready, able and willing” to complete when it served the notice to complete.
Things to consider
The courts will not usually adopt a favourable view towards any attempt to get around section 2. There are circumstances in which it may be possible to establish a proprietary estoppel. However, the safest course of action is to assume that any variation to a contract which falls within section 2 must itself comply with that section if it is certain to be enforced.