We often use the phrase ‘my word is my bond’ to indicate the binding nature of a verbal agreement, however the perils of relying on words alone have recently been highlighted in a dispute relating to the sale of land.
In the case of Matchmove Ltd v Dowding and Church a dispute arose between two former friends who had initially agreed on the sale of a building plot and a meadow, based on a spoken agreement.
Mr Francis, a director of Matchmove had initially agreed to sell both a building plot and a separate meadow to his friends Mr Dowding and Ms Church, so that they could build a new home.
The friends verbally agreed on a price of £120,000 for the building plot and £80,000 for the meadow and the couple paid Mr Francis a £66,000 deposit as a sign of good faith.
Although written contracts for both plots of land were later drawn up, only the contract for the building plot was agreed and signed. Problems relating to a legal right of way to the meadow meant this written contract was put on hold. Nevertheless, Mr Dowding and Ms Church handed over the full asking price for both the building plot and the meadow, selling their house in the meantime to help fund the deal.
Unfortunately, Mr Francis then fell out with the couple and told them he no longer intended to sell the whole meadow to them, instead offering them half the meadow and a £40,000 refund.
The parties took legal action to sort out the dispute and a Court of Appeal has now found in favour of Mr Dowding and Ms Church.
Mark Harris, a solicitor with Palmers, who specialises in civil litigation and property disputes, said: “Although Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 normally requires contracts to be put in writing and signed by both parties to be binding, there are a few exceptions.
“On this occasion the Court of Appeal agreed that such an exception should apply, based on an ‘implied or constructive trust’. The judge ruled that not only did both parties intend the verbal agreement to be immediately binding but that a constructive trust arose when the couple handed over the £66,000 deposit to Mr Francis.
“Although this case had a happy ending for Mr Dowding and Ms Church, it serves as a warning to anyone tempted to rely solely on a verbal agreement, particularly when buying or selling something which has significant value.
“Disputes such as this are often dealt with by our team in the General Litigation Department and can prove costly to clients. Our Commercial and Conveyancing departments can help to minimise the risk of disputes and substantially reduce associated costs by drawing up a written agreement.”
For advice and help with drafting contracts or issues relating to disputes, please contact us.