Section 2 does not apply to dispositions of interests in land; it applies only to contracts for the disposition of such interests

Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 imposes strict requirements that affect contracts for the sale or disposition of an interest land. Any such contracts must be made in writing, must incorporate all the terms that have been expressly agreed, and must be signed by or on behalf of the parties. It pays to observe these formalities; contracts that do not comply with the requirements are void. The sole issue in Rollerteam Ltd v Riley [2016] EWCA Civ 1291; [2016] PLSCS 352 was whether an agreement intended to settle bitter family litigation was void for failure to comply with section 2. The agreement was that one of the parties would execute declarations of trust over two properties in London in favour of her brother and his company. In return, her brother was to make two payments of £1m each to herself and her sister, as well as discharging various other financial obligations. The declarations of trust were executed then and there, as were various other documents, and the brother paid £300,000 out of the £2m that he was obliged to pay. But he subsequently claimed that the parties had never reached a final settlement agreement, with the result that he was not liable to pay the remaining £1.7m. If section 2 of the 1989 Act applied, it was common ground that the requirements of the section had not been met and that the agreement was void. But the Court of Appeal’s decision reminds us that the section affects contracts and does not invalidate actual dispositions of interests in land (the formalities for which are governed by sections 51 to 55 of the Law of Property Act 1925). As a result, a contract to transfer a freehold or assign a lease in the future, a contract to grant a lease in the future, or a contract for a mortgage in the future, are all within the ambit of section 2. But, by contrast, an actual transfer, conveyance or assignment, or an actual lease or mortgage, are not within the scope of the section at all: Target Holdings Ltd v Priestley [1999] PLSCS 87. The Court of Appeal ruled that there is no conceptual or legal reason why a contract cannot be formed by the exchange of a promise for a performance. In this case, the declarations of trust were not executed to comply with any prior obligation. The contract was made when the declarations of trust were signed and they constituted the consideration for the £2m that the brother promised to pay. There was never an executory, or future, obligation to execute the declarations of trust. The execution of the deeds constituted the sister’s acceptance of her brother’s offer, as well as the consideration provided for his promises. As such, the agreement was one that disposed of interests in land immediately. Therefore, there had been a contract of disposition of the sister’s interests in land – and not a contract for the disposition of such interests at some future time. Consequently, section 2 did not apply and the brother was liable to pay the balance due to his sisters. Allyson Colby is a property law consultant