Enforcement
Enforcement of Land Sale Contracts
Issues arise in relation to the enforcement of the purchase/sale contract on the part of both buyer and seller. The seller has a significant remedy in that he may forfeit the deposit for breach. There is no equivalent sanction available to the buyer where the seller is in breach.
A person enforcing a contract may seek one or more remedies. However, he may have to choose between or elect to take certain remedies as an alternative to another remedy. If the buyer does not proceed with the contract, the seller must elect between acceptance of the buyer’s repudiation and insisting that the contract be completed.
The seller may choose to enforce the contract by a decree or order of specific performance against the buyer. There are limits on the possibility of specific performance against a buyer.
The seller may in the alternative, claim compensation for breach of contract. In the normal manner, this compensation is to put the seller in the position he would have been in had the contract been performed. He may resell the property in order to establish the quantum of his loss.
Damages
The party in breach of contract will usually be liable for damages where the innocent party has suffered loss. The courts will not allow a party to escape from a contract which turns out to be commercially less favourable than it appeared to be when it was made.
The court has jurisdiction and discretion to grant damages in place of specific performance. If the seller obtains the order but the buyer refuses to comply with, the seller can instead apply for an order to rescind the contract and forfeit the deposit, and the possibility of liberty to resell and recover damage for any loss suffered in resale if the deposit does not adequately compensate him.
In this latter case, rescission means a return to the pre-contract position so that there are no damages for breach of contract. The Law Society contract specifically governs the position and allows for recovery of damages on resale.
Rescission I
The seller may choose to accept the repudiation of the contract by the buyer and treat the contract as terminated and discharged. This is not true rescission in the sense that the contract is treated as never as having existed.
The seller may rescind the contract by reason of the buyer’s default provided the breach is sufficiently serious. This will include cases where time is made of the essence and the buyer does not buy. In this event, the seller may sell the property, forfeit the deposit and keep any profit on resale. This appears to be the position and has been widely accepted for many years, although there are arguments as to how strongly it is confirmed and supported by authority.
There is an argument that if the amount forfeited is a penalty that a court of equity court will not allow it. A penalty is an amount which is in excess of a reasonable pre-estimation of loss.
Rescission II
Where the seller takes this course, he may seek rescission in the sense that parties are to be restored to their original position. He may forfeit the deposit.
He may not claim damages as well in this situation as true technical rescission involves an unwinding so that there is deemed never to have been a contract.
Then above distinctions may not concern the seller in the vast majority of cases as he can forfeit the deposit and resell the land. This latter remedy does not require an application to the court, unlike a claim for damages and/or specific performance.
The seller may accept the repudiation and seek damages for breach of contract if the buyer has repudiated the contract prior to the completion date. Action may be taken immediately. If the repudiation is not accepted, he must wait until after the completion date.
Time a Strict Condition
The closing date stated in the contract is not usually “time of the essence” so that the failure of one party to perform on the day is not a fundamental breach of contract entitling the other party to terminate. Under the standard conditions, notice may be given, usually, 28 days making time as the essence. However, the position may be varied by an alternative special condition from the outset. Time may be made of the essence by the contract
In the absence of special conditions, the default equitable position is that time is not presumed to be of the essence, prevail. However, it is possible to make time as the essence by giving a further reasonable time to complete.
The common law position is somewhat uncertain and unsatisfactory. The innocent party may serve notice on the delaying party giving a further reasonable time for performance, but only after there has been an undue, unnecessary or improper delay.
Contract Notice to Complete
In practice, in land sale contracts the position is almost always governed by the standard Law Society contract which provides for a 28-day notice which may be served immediately on non-performance. Where the sale has not closed on the due date, the contract provides that a notice may be given by either party to the other party to complete the sale.
It is only effective if the party giving the notice is ready, willing and able to complete or if he is not ready, willing and able to complete, that this is due to the default or misconduct of the other party. This clause avoids the default common law difficulties mentioned above.
If the party giving the notice is not in fact in a position to complete the notice is invalid as against the other, but that other party may rely on it. This emphasises that making time is the essence is a double-edged sword whether originally provided for or provided for by notice.
The courts take a relatively strict view of notices providing for making time as the essence. If they are not in strict conformity with the contract, the court may refuse to give effect to them, because they seek to effect a forfeiture.
Forfeiture Procedure
Under the general conditions, if the buyer does not comply with the notice, the seller may forfeit the deposit and resell. If in a resale within a year, the seller incurs a loss, the buyer is obliged to make up the shortfall as liquidated damages. This does not apply to any surplus or profit on resale. Credit must be given for the deposit.
A solicitor holding monies as a stakeholder must give notice to the buyer of receipt of a direction from the seller seeking to appropriate the deposit. The deposit may be forfeited and returned to the seller unless the buyer issues the proceedings disputing the relevant rights within 21 days.
If the seller fails to comply with the notice served by the buyer, the buyer may elect to exercise certain rights. He may give notice for repayment of the deposit. If this occurs, he waives specific performance and all documents must be returned.
Where time is made of the essence, either party may waive it or extend it either expressly or by implication. Where the waiver is for a definite paid, time becomes of the essence in relation to that extended period.
Deposit
The deposit is security for the performance of the contract by the buyer. It represents part of the price and on completion will be appropriated towards the purchase price. However, if the buyer fails or refuses to complete due to his default and not the default of the seller, the deposit may be forfeited.
By default, the deposit is inherently forfeitable being paid as security for the performance of the contract by implication. The position is determined by the contract.
If the buyer fails in a material respect to comply with any of the conditions, the seller may be without prejudice to any rights or remedies may be entitled to forfeit the deposit. He may direct the solicitor holding it as a stakeholder to furnish it. The solicitor must give notice to the other side of his intention to release.
Buyer Remedies
If the seller refuses to close and complete the contract, the buyer may elect between alternatives. He may affirm the contract and seek specific performance or alternatively damages for breach of contract. If he accepts the repudiation he may rescind the contract, returning to pre-contract position or seek damages for breach of contract. He will seek the return of deposit.
If the seller defaults the buyer may recover the deposit with interest. He may also recover his costs in relation to the investigation of title. The Conveyancing and Land Law Reform Act has repealed the rule that limited his damages to these categories of recovery.
Interest is not allowed where the seller terminates the contract under a condition allowing him to do so on a no-fault basis, such as where the buyer raises requisitions which the seller is unable or unwilling to comply with. Interest is not payable provided there has been no fraud on the seller’s part.
A buyer has a lien on the land for recovery of the deposit due. Generally, the deposit is held by the seller’s solicitor as stakeholder who is obliged to return it to him where he is clearly entitled to it.
The seller may be refused specific performance on equitable principles on the basis that there should not be forced on the buyer a title that is not in accordance with the terms of the contract. Theoretically, the buyer may not be entitled to his return of deposit in all cases, as there is no total failure of consideration. However, the courts have the discretion to order the return of the money on an equitable basis and are likely to do so.
Specific Performance
See the section on remedies in relation to specific performance. This is an equitable remedy and is subject to the discretion of the court. It is only available where damages are inadequate. In the case of the purchase of land, damages will usually be inadequate from the buyer’s perspective as the courts readily accept that each property is unique.
Equitable principles mean that an order of specific performance will not be issued in vain. The courts do not wish to enforce, supervise performance or force contracts in cases which are impossible or highly impractical to monitor and enforce.
Defences to Specific Performance
There are defences to specific performance which are wider than the defences to breach of contract. It may happen that the contracts are not specifically enforceable against a party but that party is still liable for breach of contract. Where a specific performance is not complied with, it may be possible to seek another alternative order for payment or damages in lieu.
The defences against the specific performance are broader than those for breach of contract. See generally the section on equitable remedies. Grounds of refusal which would not necessarily constitute a breach of contract include the following.
Lack of mutuality. Generally, an order for specific performance may be made only if a reverse order could equally be made against the party who seek it.
Specific performance may be refused on the of hardship or unfairness. The court looks at the effect of the order on the defendants.
A delay in taking proceedings may be a bar to specific performance. A delay of a number of months may be sufficient, well short of the Statute of Limitations period. The common law right to damages remains.
The court may not force specific performance on a buyer where there has been where there is a shortcoming or doubt in the title, short of a breach of contract. However, the courts will not generally force a bad or doubtful title. The court may be in a position to resolve the doubt in some cases.
In other cases, the buyer may choose to accept the title which the seller has to give subject to compensation or an abatement of the price. The same principle applies to a relatively small misdescription.
Damages in Alteernative or in Addition
The courts have the power to award damages either in addition to or in substitution for specific performance. This particular power applies where there is jurisdiction to award specific performance. It will be available even if specific performances is denied on a discretionary ground. Damages may be awarded here even though there is a technical defect such as lack of formality provided the agreement is enforceable in equity.
Damages should put the innocent party in the position in which he would have been in, but for the breach. Where the seller obtains an order against the buyer who cannot or will not comply, he may apply for an order of rescission, forfeiture of the deposit and resale. He may recover damages to compensate for any further loss.
Where the buyer obtains a order against the seller who refuses to comply, he may apply to court lodge money in court and seek an order authorising a person nominated by the court to execute the conveyance. Alternatively, the court may make an order vesting the property in him.
Rescission
Rescission is the procedure by which a person terminates a contract, regards himself as discharged and potentially sues for compensation. However, rescission in the strict legal and equitable sense is a restoration to the pre-contract position as if there never was a contract. This means that parties are restored to their pre-contract position without compensation for the loss of bargain.
Rescission at common Law is available on certain grounds such as mistake, misrepresentation etc. See the section on Contract Law. The remedy is available unilaterally without recourse to the court. It is necessary that the status quo prior to the contract is capable of being assumed.
The courts of equity were not strict in requiring a full restoration. They also allowed more liberal grounds for rescission of the contract. See the sections on Mistake and Misrepresentation. As set out there, the grounds for relief at equity are much broader than of Common Law.
Rescission requires that the innocent party be put in the position in which he would have been in if there was no contract. The seller must account for payments received from him by the purchaser but not the deposit. He is still entitled to forfeit. He cannot, however, sue for breach of contract even if he resells the property at a loss for which the deposit does not compensate him. Rescission destroys the contract retrospectively.
The standard contract of sale, however, provides a right of resale and right to claim cost and expenses of resale and loss.
Where the buyer rescinds the contract, he may recover his deposit and legal expenses in investigating title. However, if he has received any rents or income, he will have to return these to the seller. He cannot sue the seller for breach of contract. He may seek damages as an alternative to rescission.
Misprepresentation and Mistake
Rescission may be allowed for misrepresentation or misdescription. Where there is a duty to disclose the defects, this is also a basis for rescission.
The mistake may allow rescission on a very narrow basis. See the separate sections on mistake in the context of contract and restitution. Some mistake destroys the contract entirely so that there has been no contract. Other mistakes do not render the contract void but render it voidable. Rescission, in this case, unwinds the contract.
If a buyer finds a fundamental defect in this seller’s title he may repudiate the contract and free himself or discharge from it. If he does not do so within a reasonable period he may be deemed to have accepted the title. Indeed the seller may be able to rectify it in the meantime.
There is a right to terminate the contract under the standard terms where a buyer makes objections and requisitions which cannot be met.
Damages Issues
A buyer or seller may sue for breach of contract. Where the contract is sufficiently serious, he may rescind the contract and claim damages for loss. Alternatively, he may affirm the contract and perform it or sue and seek set off of damages for the breach.
In accordance with the general principles of law, the party who suffers a breach of contract must take reasonable steps to minimise his loss. He must mitigate his loss. If the seller does not resell, the value of the loss is commonly the value estimated on a resale within a reasonable time. He will be entitled to expenses of resale.
He must, however, give credit for the deposit s forfeited. Accordingly, such claims are relatively unusual and only occur where the market has fallen significantly.
The Conveyancing and Land Law Reform Act abolished the rule which restricted damages which could be claimed by a buyer for breach of contract by the seller in many cases. Where the breach is due to failure to show good title then provided the seller did not act fraudulently or in bad faith, the seller is not entitled to damages for loss of bargain. The rule has been reversed by the Land and Conveyancing Law Reform Act 2009 so that compensation for loss of bargain is now available in such circumstances.
References and Sources
Primary Texts
Law society of Ireland: Conveyancing 9th Ed Brennan et al.
Investigating Unregistered Title- Magee 2012
Irish Conveyancing Law- Wylie & Woods 4th Ed 2019
Irish Conveyancing Precedents- Laffoy
Irish Conveyancing Statutes – Wylie 2020 6th Edition:
eConveyancing and Title Registration quantity
Complex Conveyancing Law Society PPG Hession 2nd Edition
Registration of Deeds and Title in Ireland – Deeney 2014
UK Textbooks
Conveyaning Handbook 28th Ed. Silverman et. al (annual)
A Guide to Conveyancing Residential Property by Alan Stewart
A Practical Approach to Conveyancing (22nd ED) Robert Abbey and Mark Richards
A Practical Approach to Commercial Conveyancing and Property 5th Ed Robert Abbey