The Gazette 1980

GAZETTE

MARCH/APRIL

1980

In the discussion session which followed, the queries raised fell under four main headings: (1) As to when an agreement between the parties existed; (2) As to what was the meaning of "in writing"; (3) As to the question of the authority of a solicitor or other agent to bind his principal; (4) As to the nature and effect of "booking deposits". (1) Agreement between the Parties The absence of some normal terms of a contract for sale, such as a closing date, does not mean that there could not be said to be an agreement between the parties. This is one of the terms which a Court would be willing to imply and a reasonable closing date would be fixed by a Court. It is very doubtful, however, whether the Court would imply the terms in a lease. The Supreme Court has confirmed that the date of commencement of a lease must be either stated or ascertained before there could be a binding agreement. The only way to keep the position open is by making it clear in negotiations that they are only negotiations and are subject to contracts being signed, preferably exchanged, and a deposit paid. (2) "In Writing" A solicitor will find it difficult to protect his client, and indeed himself, against providing the necessary evidence in writing by merely sending out a draft contract. The Supreme Court has held in the Park Hall case that the attempted imposition, by solicitors for a vendor of a new term of the contract by seeking the return of the contract within a specified period, was not permitted. The most a solicitor can do is to send out a covering latter which, by its wording, indicates that the parties are still in negotia- tion, but there can be no guarantee that this will succeed. Even if no covering letter is sent, there must clearly be a danger that the mere sending of the draft contract, with the parties names on it, or the solicitors' names, might be held to be sufficient. In the Irish Intercontinental Bank, case the auctioneer's headed notepaper has been held to be sufficient. The use of the words "without prejudice" has to be rejected because the mere use of these words does not, of itself, give any protection to the letter. Letters are only truly "without prejudice" if they are written with the purpose of trying to settle or resolve a dispute. It can hardly be suggested that letters sending out a draft contract for the sale of a house should fall into that category. (3) Authority The position regarding the authority of a director or an employee of a body corporate to bind it presents particular problems and must largely depend on the potition in individual cases; it is suggested, for example, that a director of a company whose principal purpose is dealing in land could hardly avoid the allegation that he had appropriate authority. On the question of solicitors' liability, an extract from the judgement of Mr. Justice Kenny in Law & Another v. Robert Roberts, where he adopted the view expressed by Mr. Justice Murnaghan in Kearns v. Manning that "comparatively slight evidence, in accordance with

ing that the memorandum in writing must record a completed agreement and all the terms thereof and must "contain not only all the essential terms, but a recogni- tion that a contract had been made". Mr. Justice Hamilton also referred to the judgement of Mr. Justice Kenny in the case of Law & Anor v. Robert Roberts and quoted him "when a principal has entered into a binding contract, neither he nor his solicitor can deprive it of the binding effect by unilaterally treating the transaction 'subject to contract' " and again quoted from Mr. Justice Henchy's judgement in Kelly v. Park Hall "we have agreed terms subject to contract must be taken to mean that the contract had been made, subject to its being formalised in writing." The view that the recent decisions represent a departure from a previously understood position does not stand up to examination. It is clear that the Irish Courts have over the years, established a clear distinction between the situation where, on the one hand, parties had agreed on all the necessary terms for the sale of land or a house and all that remained to be done was to reduce the terms of the agreement into writing and the situation, on the other hand, where the parties were still in negotiation. If people have been surprised by the decisions, it can only be because they were operating in the mistaken belief that the addition of the words "subject to contract" to correspondence had, of themselves, the magic effect of denying the existence of a previously concluded verbal agreement. This, of course, had not been the law in Ireland and the Courts have now confirmed in a series of cases that the use of these words would have no effect if there had been a previously concluded verbal agreement, but would be of significance if the parties were still in negotiation. The decisions serve as timely reminders to those engaged in the sale of property, whether as principals or agents, of the necessity of ensuring that the parties to any proposed sale are clear at all stages as to precisely how far they are committed. It is difficult to avoid the conclusion that the vendor frequently attempts to ensure that the purchaser will be bound by an offer which he has made, but that the vendor is still free to consider other offers. If a vendor wants to remain in that position, it is difficult for him to do so unless it is made clear to the purchaser that the vendor still regards himself as free to consider other offers up to the time of his accepting the purchaser's offer. Such a stance may, of course, meet with substantial sales resistance from a purchaser, parti- cularly if it has been indicated to him that the vendor is prepared to sell at a particular price and the purchaser offers that price. Persons acting as agents for vendors (or purchasers) are well advised to ensure that their clients clearly understand that they will be bound by any figures at which they agree to sell (or buy), following negotiations. The writer does not see why parties should not expect to be bound by bargains which they had reached. The constant thread running through the cases which have come to the Courts is one of a vendor who thought he got the best price obtainable and agreed to sell, but subsequently had succumbed to the temptation to try to accept a higher offer. It would be difficult to justify any change in the law which would improve the position of such a party.

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