BP0153371

The essay entails the critical analysis of the statement of Louise Tee,
according to whom that after the enactment of S2 of the Law of Property
(miscellaneous Provisions) Act 1989. Formalities for making contract for the
sale of land have been strict from its predecessor. According to him there are
many innocent people who get into oral agreement and fail to comply with the
formalities. This unfairness can be removed by the use of clear and precise
doctrines of constructive trust and proprietary estoppel to enforce these oral
contracts that do not comply with formalities. The use of proprietary estoppel
has been cleared by the law commission report; the essay will see what is the
court approach to that. The essay will also discuss the cases in which the
courts have granted constructive trust to the oral agreements. As this is
allowed by the statute under the S2(5).

Frome late 17th century until 1989, the requirement for making a contract of
sale of any interest in land was not enforceable until there was some evidence
of it either by writing or by part performance, but these rules by the passage of
time created many confusion as people were not sure what might constitute a
sufficient written evidence and what would be a part performance. Without
formalities it would be difficult to ascertain the exact time when a contract is
created, and this would lead to confusion. For consumer protect the formalities
are important. As a result, pre-contractual negotiations would be unnecessarily
uncertain and hazardous. 1 For this reason S2 of the Law of Property
(miscellaneous Provisions) Act 1989 was introduced to remove the confusion.
S2 (1) of the act states that “A contract for the sale or other disposition of an
interest in land can only be made in writing and only by incorporating all the
terms which the parties have expressly agreed in one document or, where
contract are exchanged.” Addition to these requirements the documents are

1Law commission Report No. 164, Transfer of Land Formalities for Contracts for
Sale etc of Land (1987)
needed to be signed on behalf of each parties of the contract under s2 (3) of
the Act. So there must be one document containing all the terms that the
parties have agreed upon and signed by the parties.2 The conditions provided
in section 2 provide certainty and remove the confusion. Courts insist upon
compliance of the requirement under s2, as in the case of North Eastern
Properties v Coleman 3 Biggs J, states “the reported cases in which the
courts have sought to interpret and apply section 2(1) of the 1989 Act
demonstrate that because of the rigorous disciple which it imposes upon
parties to land contracts, it does indeed enable persons who have genuinely
contracted to do just that. It enables parties to land contracts who have
changed their minds to look around for expressly agreed terms which have not
found their way into final form of land contract which they signed, for the
precise purpose of avoiding their obligations. On the ground that the lack of
discipline of their counterparty, or even their own lack of discipline, has
rendered the contract void.”

But on the other hand s 2 has been criticised, Lord Neuberger extra-judicially
offered the damming the indictment, “now that the law commission, by the
needlessly meddling, Parliament, with misconceived drafting, and the courts
through inconsistent decision, have had their wicked ways with section 2, we
are worse off than we ever were with section 40”4. The introduction of strict
formalities no doubt creates certainty and offer protection. But this also
enables the parties too escape from what appears to be a clear bargains. As
under s 40 of 1925 Act allowed the contract without evidence or which was oral
contract was a valid contract. It was also considered as a blunt instrument for
doing justice.5 The doctrine of part performance was also abolished.

2 Mark Davys, Land law.

3 [2010] 1 WLR 2715 CA
4 Neuberger, “The stuffing of Minerva’s Owl? Taxonomy and Taxidermy in Equity”

2009 68 CLJ.
5 Ben McFarlane, Nicholas Hopkins, Sarah Nield, Land Law: Text, Cases, and

Materials
So what if a person fails to comply with requirement of s2, answer to this
question is given in the Law commission report, according to which if there are
clear circumstance in which there would be injustice because the person can
not plead for part performance, the court can use the doctrine of estoppel to
achieve the very similar result by using their equitable discretion to do justice
between the parties.6 But its not that easy, the ability to invoke the estoppel
have proved to be contentious. Academic writer McFarlance suggests that the
result of the cases show that the failure to follow the formalities does not
prevent an estoppel, but the court have not been consistent in their reasoning
or providing any authoritative answers. 7

Where a person A allows another person B to act to B’s detriment in reliance

on a belief that B will acquire an interest in A’s property under an agreement
which A know is not a valid contract. We can see here that a person will try to
take advantage of the rule laid down in section 2, so A should be estopped
from denying that he is bound by the agreement between them. 8

In the case of Yaxley v Gotts 9 , the claimant and the first defender Gotts
senior had agreed that Gotts senior would acquire the freehold of a large
house, already divided into flats, and the claimant who was a builder would
carry out the work and act as a managing agent for the defendant. In return for
his services the claimant would get the ground floor of the house, which he
would divide, into two flats. Issue began when both parties didn’t make a
written contact. They relied on the gentleman’s agreement. After some time
the property was bought by the second defendant (Gotts junior). As the
property was registered in his name, no interest was granted to the claimant.
After four year the claimant was excluded form the property and brought a
claim that he was entitled to the ownership of the house.

6 Law commission Report No. 164, Transfer of Land Formalities for Contracts for
Sale etc of Land (1987)
7 McFarlance, The Law of Proprietary Estoppel.
8 Judith-Anne MacKenzie, Aruna Nair, Textbook on Land Law

9 [1999] EWCA Civ 3006 Court of Appeal

At the first instance the judge allowed the proprietary estoppel, and granted the
claimant rent-free lease of the ground floor for 99 years. Even though the court
of appeal agreed on dismissing the appeal and upheld the award. But the
decision was reached from a different path. The claimant could not rely on the
estoppel in the case, the alternative was of assisting those who act in reliance
of an informal agreement was to be found in another equitable concept, the
remedy was awarded under the constructive trust.

Robert Walker LJ gave weight to the argument of public policy, and identified
that the parliaments requirement for written contracts as being based on the
conclusion that the need for certainty in contract relating to the interests in land
outweighs the disappointment of those who made informal bargains in
ignorance of the statutory requirements. He states in his judgment that “if an
estoppel would have the effect of enforcing a void contract and subverting
parliaments purpose its may have to yield to the statutory law which confronts
it.

In the case of Shah v shah10 in this case the use of estoppel for s1 of the 1989
Act was considered as the contract was made without the witness and the
argument of Public policy could not be used to disallow a party from asserting
that a deed was valid despite the fact that the signature had not been properly
witnessed. Estoppel was allowed in the case. 11

Obiter dicta of the case Cobbe v Yeaoman’s row Management12 Lord Scott
expressed his view as, “Proprietary estoppel cannot be prayed in the aid in the
order to render enforceable an agreement that statute has declared to be void.
The proposition that an owner of land can be estopped from asserting that an
agreement is void for the want of compliance with the requirement of s2 is, in
my opinion, unacceptable. The assertion is no more that the statute provides.
Equity can surely not contradict that statute.” 13

10 [2002] QB 35
11 Martin Dixon, Moder Land Law
12 [2008] UKHL 55
13 Mark P. Thompson, Modern Land Law
In the case of Shirt v Shirt14 a son could not rely on the estoppel to claim
possession of the family farm because the agreement between him and his
father was vague and unspecific. 15 So it can be seen that the courts are
reluctant use the operation of estoppel as S2(5) of does not mention the
operation of estoppel arising as a result of failure to comply with s2. Even in
the case of Dudley Muslim Association and Dudley Metropolitan Borough
council16 Lewison LJ construe proprietary estopple cases as always being
constructive trust cases.

So the general reason that the party cannot rely on an estoppel in the face of a
statue is depended upon the nature and purpose of the enactment and the
social policy behind it.

The courts can impose constructive trust under equity law, where they believe
that the conduct of the party has been unconscionable. As stated above s2 (5)
expressly states that there can be operation of constructive trust in connection
with the contracts that do not comply with formalities. As stated in Yaxley v
Gotts, the courts held that a constructive trust can be pleaded where there is a
non compliance of s2, the incompliance will not be fatal. 17

In the case of Matchmove Ltd v Dowding18 the question in front of the courts
was again regarding an oral contact regarding the sale of land. In the case, a
couple who agreed orally, to buy from a friend a plot of land for £120,000 in
order to build themselves a house, together with a meadow for £80,000 on
which they intended to keep horses. Before any written contract was entered
into the buyers paid the seller £66,000 cash and once they had obtained
planning permission he allowed them to start construction. Where there was
third party claiming that they had an easement over the medow. During this the
solicitors were instructed to deal with the conveyance but the seller’s solicitors
said that the seller would only be proceeding in respect of the sale of the

14 (2010)
15 Martin Dixon, Moder Land Law
16 [2016] 1 P&CR 10
17 Judith Bray, Unlocking Land Law.

18 [2016] EWCA Civ 1233

building plot at this stage due to the dispute regarding the meadow.
Correspondence was headed ‘subject to contract’; and in due course the
contract was completed.19

The claim by the third part was later abandoned. The buyer who paid the seller
the agreed sum for the meadow. But the other party fell out and only agreed to
sell the half the meadow and returned half the money.

The High Court held that the oral agreement to sell the meadow was
enforceable through proprietary estoppel and constructive trust despite the
absence of a written contract. The ‘subject to contract’ label on the
correspondence was not material because it ‘followed the agreement which the
parties had already made and which they regarded as immediately binding’. 20

In the case of Ely v Robson 21 in the case there was an oral agreement
between the parties, the issue was again the compliance of 2 (1) Law of
Property (Miscellaneous Provisions) Act 1989. The courts held that Mr Ely
would hold the property on constructive trust for them both with Ms Robson’s
interest limited to that set out in the agreement. It would be unconscionable for
her to assert otherwise, and she was estopped from so doing. In the case if
Kinane v MacKie- Coneth 22 the courts used the doctrine of proprietary
estoppel and constructive trust to validate a mortgage that failed to meet any of
the formality requirement usually required for the creation of legal and
equitable mortgage. Lord Neuberger states that “… one must, I think, avoid
regarding [s 2 (5) of the 1989 Act] as an automatically available statutory
escape route from the rigours of section 2(1) of the 1989 Act, simply
because fairness appears to demand it. A provision such as section 2 …
was enacted for policy reasons which, no doubt, appeared sensible to
the legislature … Accordingly … the Court should not allow its desire to

19 Judith Bray, Unlocking Land Law.

20 http://communities.lawsociety.org.uk/property/news-and-updates/property-
commentary/is-an-oral-contract-for-the-sale-of-land-
enforceable/5060160.fullarticle
21 [2016] EWCA Civ 774
22 [2005] EWCA Civ 45
avoid what might appear a rather harsh result in a particular case to
undermine the statutory policy”.23 Even though Lord Neuberger says that
S2(5) must be seen as an escape route, but the pattern used by the court is
that they use the doctrine of constructive trust and proprietary estoppel to
enforce oral contracts. We see here that the where someone make an oral
agreement or cannot fulfil the agreement is not fully deprived of the justice.
The law under equity grants them their rights under the doctrine of constructive
trust and proprietary estoppel.

The conclusion of the essay is that the parliament to ensure certainty and save
guard of the buyer and seller of the land has introduce S2 of the Law of
Property (miscellaneous Provisions) Act 1989. Without formalities it would be
difficult to ascertain the exact time when a contract is created, and this would
lead to confusion. So if a contract fails to comply with these formalities would
be void. The issue arose that people who for various reason were unable to
comply with these formalities and have informal or oral contract of sale or
interest in land. Answer to this question is given in the Law commission report,
according to which if there are clear circumstances in which there would be
injustice because the person cannot plead for part performance, the court can
use the doctrine of estoppel to achieve the very similar result by using their
equitable discretion to do justice between the parties. Under s 2(5) of the act
the court were also allowed to used the doctrine of constructive trust to valid
these contract. As seen through the series of cases it can be seen that court
uses these two doctrines of equity to grant justice to the people who could not
comply with the formalities and were subject to some fraud.

‘I [BP0153371] declare that this piece of work contains [2277] words. I have
read and fully understood the University Policy relating to Academic
Misconduct as cited on the VLE.

23https://www.familylaw.co.uk/news_and_comment/oral-agreements-and-
interests-in-land-a-walk-in-the-park-10102016#.W4LeGS97GYU
Bibliography:

Law commission Report No. 164, Transfer of Land Formalities for Contracts for
Sale etc of Land (1987)

Mark Davys, Land law.

Neuberger, “The stuffing of Minerva’s Owl? Taxonomy and Taxidermy in

Equity” 2009 68 CLJ.

Ben McFarlane, Nicholas Hopkins, Sarah Nield, Land Law: Text, Cases, and
Materials

McFarlance, The Law of Proprietary Estoppel

Judith-Anne MacKenzie, Aruna Nair, Textbook on Land Law

Martin Dixon, Moder Land Law

Mark P. Thompson, Modern Land Law

Judith Bray, Unlocking Land Law.

Website:

http://communities.lawsociety.org.uk/property/news-and-updates/property-
commentary/is-an-oral-contract-for-the-sale-of-land-
enforceable/5060160.fullarticle

https://www.familylaw.co.uk/news_and_comment/oral-agreements-and-
interests-in-land-a-walk-in-the-park-10102016#.W4LeGS97GYU