North Eastern Properties Ltd v Coleman and another

Sale of land – Notice to complete – Specific performance – Claimant contracting to construct flats with all due dispatch and sell them to defendants at discounted price – Contract containing entire agreement clause – Defendants serving notice to complete when flats unfinished – Claimant subsequently completing flats and serving notice to complete on defendants – Whether claimant entitled to specific performance – Whether contract void for failure to set out all agreed terms – Whether defendants entitled to rescind – Claim allowedIn October 2007, the claimant entered into 11 contracts with the defendants to sell, for £1.21m, 11 flats that it was constructing as part of a larger development. During the course of the pre-contract negotiations, the claimant had agreed a discount of 10% from its standard price per flat owing to the number of flats that the defendants had agreed to buy. By agreement, 8% of this was recorded in the contracts as a “builder’s incentive”, while, at the defendants’ request, the remaining 2% was to be invoiced as a finder’s fee. The contracts incorporated the standard conditions of sale and an “entire agreement” clause; the claimant was required to complete the flats with all due dispatch and completion was to take place no more than 10 working days after notice was sent to the defendants that each property was completed.In May 2008, the defendants served a notice to complete on the claimant, considering that a reasonable time had expired for the claimant to finish the construction. The claimant did not comply with the notice. In July 2008, the claimant served notice on the defendants that construction of the flats was completed. The defendants did not complete their purchase of the flats within 10 days thereafter or comply with a notice to complete subsequently served by the claimant.The claimant brought proceedings for specific performance. The defendants contended that they were not obliged to complete since: (i) the contracts were void and unenforceable for failure to contain all the terms agreed, as required by section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, owing to the omission of any reference to the 2% finder’s fee; and (ii) the claimant’s failure to finish the flats within a reasonable time had entitled the defendants to serve their earlier notice to complete; the claimant’s non-compliance had entitled them to rescind the contracts.Held: The claim was allowed.(1) The defendants’ submission that the additional 2% discount was a term that should have been included in the written contracts was contrary to their express instructions that it should not be so included, but should be the subject of a separate agreement. Moreover, the parties had expressly agreed that the entire agreement was to be contained in the written contract: Inntrepreneur Pub Co Ltd v East Crown Ltd [2000] 3 EGLR 31; [2000] 41 EG 209 and Business Environment Bow Lane Ltd v Deanwater Estates Ltd [2007] EWCA Civ 622; [2007] 2 EGLR 51; [2007] 32 EG 90 applied. Consequently, the arrangement in relation to the 2% finder’s fee did not form part of the contract. There was no non-compliance with section 2 of the 1989 Act.(2) At the date when the defendants had served their notice to complete, the claimant had been in breach of its obligation to complete the flats with all due dispatch. However, that had not entitled the defendants to serve the notice. This was not an open contract for the sale of land with an implied term that completion should take place within a reasonable time of the contract. The contract contained an express provision that completion was to take place after the claimant served notice that the flats were finished. Since no such notice had been served by May 2008, the day for completion had not then passed and the defendants had not been entitled to serve notice to complete at that time.That did not mean that the defendants were locked into a contract without any option to rescind. They would be entitled to rescind if the claimant’s delay in constructing the property was so serious as to amount to a repudiation of the contract, which the defendants could accept, so discharging them from further performance of the contract. In the instant case, however, the claimant’s breach was not so serious as to be repudiatory in nature. The claimant was entitled to specific performance.Jonathan Rodger (instructed by Sintons, of Newcastle upon Tyne) appeared for the claimant; Charles Holland (instructed by Wholley Goodings, of Morpeth) appeared for the defendants.Sally Dobson, barrister