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Improper Amendment Void, Rules Court

9th January, 2013

A recent case shows how important it is to make sure that contracts are properly drafted and agreed.

Although the law allows contracts to be created verbally, sales of land are required (under the Law of Property (Miscellaneous Provisions) Act 1989) to be in writing and to be signed by or on behalf of both parties. In addition, all of the salient terms must be incorporated into the signed document.

In 2004, landowners sold six plots of land to a developer. The agreement required the developer to construct a medical centre which was to be leased back to one of the vendors.

The deal was dependent on obtaining planning permission, which proved to be problematic, and an agreement to reduce the price paid for the land was made in exchange for which it was agreed orally that the works would be completed expeditiously. The new sales agreement made no reference to any such obligation, however. The sale went ahead in 2006, but the leaseback did not commence until 2011.

The vendors then sought compensation from the developer on the ground that it had not made reasonable progress to construct the medical centre. They claimed £2.7 million in damages.

Although the legal arguments were complex, the Court of Appeal ruled that the new sales agreement was void because it did not contain a reference to the obligation to complete the building works within a reasonable period of time.

The practical effect of the argument was that the original contract was left as the only valid contract and no claim could be brought with regard to the delay in completing the project.

Had more care been taken when drafting the second document to ensure that all the relevant terms were included, this outcome could have been avoided.

For any advice or assistance on drafting contracts, please contact Nick Clarke at [email protected] or on 01244 405558.

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