Ruddick v Ormston

Contract of sale — Defendant selling flat below market value — Claimant aware of true value — Parties signing hand-written agreement in two parts — Whether parties intending to make contract — Whether contract specifying terms in writing — Whether parties making unconscionable bargain — Claim dismissed The claimant sought suitable properties to refurbish and let out. On 27 May 2004, he agreed to purchase the defendant’s flat for £25,000. The claimant was aware that the price was below market value, which was around £55,000. The claimant wrote on two opposite pages of his diary what he later alleged to be a binding contact for the sale of the flat at that price. One page stated that the defendant had agreed to sell the flat for £25,000 and the other stated that the claimant had agreed to buy the property at that price. The parties had signed each page. The property was subsequently valued at £65,000 and the defendant informed the claimant that he was not prepared to proceed with the sale and returned his deposit of £240. The claimant brought an action for specific performance of the contract that he alleged he had entered into with the defendant on 27 May. The issues were whether: (i) the signing of the written diary pages gave rise to a binding contract of sale; (ii) if so, the contract complied with the formal requirements of section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989 and was therefore unenforceable; and (iii) the defendant was entitled to rescind the contract in equity on the ground that the contract was an unconscionable bargain since the claimant had taken unfair advantage of the defendant’s ignorance and lack of advice, causing him to agree to sell his flat for less than it was worth. Held: The claim was dismissed. (1) Bearing in mind that the parties were not lawyers, the court was satisfied that they had intended to enter into a contract. (2) However, the diary pages had to be treated as two contracts that had no legal effect since each contract failed to incorporate all the terms of the agreement, as required by section 2(1). Although no formal exchange of contracts had taken place, the documents had been prepared on the basis that they should stand as separate self-contained agreements. As such, they did not comply with section 2(1), even if their execution was treated as being equivalent to an exchange contracts, because neither page contained mutual obligations to buy and to sell: First Post Homes Ltd v Johnson [1996] 1 EGLR 175; [1996] 13 EG 125 referred to. Moreover, even if the proper approach was to regard the two pages as parts of a single document, section 2(1) had still not been complied with, since the completion date, which was clearly a term of the agreement, had not been specified. (3) Finally, the court would not have been prepared to set aside the contract on the basis of an unconscionable bargain. The claimant owed no duty of care or fiduciary duty to warn the defendant that the price was below market value. The courts of equity would set aside contacts only where the party benefiting from, and seeking to uphold, the transaction was shown to have taken unfair advantage of the weaker party by a conduct that involved conscious and unfair exploitation. Jonathan Holmes (instructed by Ward Hadaway, of Newcastle upon Tyne) appeared for the claimant; Antoine Tinnion (instructed by Swinburne & Jackson, of Newcastle upon Tyne) appeared for the defendant. Eileen O’Grady, barrister