Chapter 10 Residential transaction case study

Exchange of contracts

Exchange of contracts

Our clients:
1. Shilpa Jennings - sale of 19 Minster Yard Blakey
2. Shilpa Jennings and Daniel Rodriguez - purchase of 9 Castle Hill Blakey

We act for Shilpa Jennings ('Shilpa') who is selling 19 Minster Yard Blakey for ?100,000 and Shilpa and Daniel Rodriguez ('Daniel') who are buying 9 Castle Hill Blakey for ?200,000 to include chattels.

We hold on file our sale and purchase contracts duly signed by our clients. We are intending to utilize the deposit on the sale towards the deposit on the purchase. We hold cleared funds from our clients for the balance of the deposit on 9 Castle Hill (?10,000). We are instructed to exchange contracts today.

We will telephone the solicitor acting for Shilpa and Daniel's seller and also the solicitor acting for Shilpa's buyer to verify that they are both ready to exchange today. A convenient completion date for all parties will have to be agreed in principle. We will ask our clients for their irrevocable authority to allow us to effect a telephonic exchange today.

We must check that the solicitor acting on the sale of 9 Castle Hill holds a signed contract which is identical to the part signed by our clients. We will advise the solicitor that we have a signed contract and 5% deposit and that the remaining 5% will be coming from our client's buyer's solicitors (19 Minster Yard). The Standard Conditions permit our client to use the sale deposit for the deposit on her related purchase, provided it is held ultimately as stakeholder (SC 2.2.6). Accordingly, we must check that there is no special condition in the 9 Castle Hill contract providing for the deposit to be held as agent for the seller.

Once we are satisfied on this point, we will ask the seller's solicitor on 9 Castle Hill to 'release' the seller's part of the contract to us until a time later in the day. The release of the contract is important to aid synchronization where there is a dependent sale and purchase. The effect of releasing the contract is that the seller's solicitor undertakes to exchange if, by an agreed time later in the day, we ring back to request an exchange. This gives us the security to exchange on Shilpa's related sale and then to ring back the seller's solicitor to exchange. The 'release contract' conversation is Formula C, Part 1.

Following the release of the 9 Castle Hill contract, we will telephone the solicitor acting on the purchase of 19 Minster Yard to effect a telephonic exchange under Law Society Formula B. This is the appropriate formula where each solicitor holds their own client's signed parts of the contract. We will advise the buyer's solicitor that our client's signed contract is identical to the buyer's part. We will then formally agree the exchange and, as a result, undertake to send to the other side today our client's signed part of the contract. We will ask for an undertaking from the buyer's solicitor to send the ?10,000 deposit that they hold direct to our client's seller's solicitor acting on 9 Castle Hill.

We will then immediately ring back the seller's solicitor on 9 Castle Hill to effect a Formula C exchange. This conversation is Formula C, part II. Both solicitors will undertake to send their respective clients' signed contracts to each other that day. In addition, we will send the other side our firm's client account cheque for half of the deposit (?10,000). We will advise that the remaining ?10,000 will be forwarded to them direct by our client's buyer's solicitors acting on 19 Minster Yard.

We will prepare memoranda for our files recording the details of our conversations and, in our covering letters to the other solicitors, confirm details of the telephonic exchanges.

Click on the links below to see the following documentation:

  1. Memorandum of exchange of contracts on 19 Minster Yard (for our sale file)
  2. Memorandum of exchange of contracts on 9 Castle Hill (for our purchase file)
  3. Post-exchange letter to the solicitors acting for the buyer of 19 Minster Yard
  4. Post-exchange letter to the solicitors acting for the seller of 9 Castle Hill