Chapter 4 Guidance on questions in the book

Certainty

Question

Amanda is offering a plot of land for sale for £1million, which Bridie is interested in buying, but only if it is likely to obtain planning permission for redevelopment. While Bridie makes the necessary planning enquiries, she is keen to prevent other potential buyers purchasing the land, so Amanda and Bridie enter into a written agreement whereby, for an upfront payment of £25,000 by Bridie, Amanda agrees not to negotiate with any other purchaser for ‘three months (assuming normal market conditions)’; in addition, in the event of ‘a satisfactory response’ from the planning authority, Amanda and Bridie agree to use ‘reasonable endeavours to agree the sale of the plot for its then market value’. The planning authority takes longer than expected to respond to Bridie’s enquiry, but after five months finally indicates that it would be willing to grant planning permission for redevelopment of the plot. Unfortunately, Bridie has now discovered that Amanda sold the plot two weeks after their agreement. Advise Bridie.

Answer guidance

Remember you are advising Bridie – at the very least she will wish to recover the upfront payment of £25,000 and also damages for loss of the chance of making a net profit on the purchase and redevelopment of the plot (see chapters 16-18 for remedial issues about recovery of money paid in advance, measure of damages and loss of a chance). Bridie will have to persuade a court that she and Amanda intended to create legal relations (remember there is presumption to that effect in commercial situations, but this can be rebutted – for example if the agreement was expressed to be ‘subject to contract’). She will also need to establish that the terms agreed in the written agreement are sufficiently certain to be enforceable, distinguishing authorities such as Walford v Miles, as well as proving that Amanda breached them (as she seems to have done). The first ‘lock out’ clause has a fixed time-limit, unlike the clause in Walford v Miles, but what (if anything) is the effect of the wording about normal market conditions? The second ‘reasonable endeavours to agree’ refers to market valuation, but does not provide such a detailed mechanism for calculating the price as seen in Queensland Electricity. Notice finally that the claimants in Walford v Miles did recover some damages representing the money wasted on the transaction (on the ground of misrepresentation by the defendant), though this was much less than the full expectation damages for loss of profit they were claiming.

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