Daulia Ltd v Four Millbank Nominees Ltd
Court of Appeal
Citations: [1978] Ch 231; [1978] 2 WLR 621; [1978] 2 All ER 557; (1978) 36 P & CR 244; (1977) 121 SJ 851; [1978] CLY 2501.
Facts
The claimant wanted to purchase a set of properties which the defendant owned. The defendant agreed orally to exchange formal contracts of sale if the claimant attended their office with the deposit and a copy of the draft contract which the parties had previously agreed. When the claimant attended the defendants’ offices, the defendants refused to exchange contracts. The claimant sued for damages for breach of the oral agreement.
Issue(s)
- Had a contract arisen out of the defendant’s oral promise?
- Was any such contract unenforceable due to the failure to comply with the formalities required of contracts for the disposition of interests in land?
Decision
The Court of Appeal held in favour of the defendant. The defendant had made an oral unilateral offer to sell the properties if the claimant performed certain acts. The claimant performed those acts, thereby accepting the offer. This created a contract for the exchange of contracts.
However, even though the unilateral contract was not strictly for the sale of land, it still concerned the disposition of land. It therefore had to satisfy the formalities required by the Law of Property Act 1925. Since it did not fulfil these formalities, it was unenforceable. The claim therefore failed.
This Case is Authority For…
Where the offeror promises to do something if the offeree meets certain conditions or performs certain actions, this is known as a ‘unilateral offer’. It is accepted by performance of the relevant actions or satisfaction of the relevant conditions.
Lord Goff stated that where the offeror makes a unilateral offer, once the offeree starts performing the offeror is under an obligation not to impede or prevent full performance. This also means that once the offeree has begun performing, the offeror can no longer revoke his offer.
For a contract to fall under the formalities provisions of land law statutes, there is no need for it to directly dispose of the relevant interest. It is also not necessary that the relevant interest exist at the time of contracting. It need only be a contract to do an act which would have the effect of disposing of a legal or equitable interest.
In this case, if the contract had been valid the claimant could enforce it with an order for specific performance. Under the maxim that equity treats as done that which ought to be done, this would mean that it would immediately grant the claimant an equitable interest in the land. It was therefore a contract to do an act which would have the effect of creating an equitable interest.
Other
This case also discussed the old equitable doctrine of part performance, a rule which allowed land contracts to be enforced in the absence of formalities in some cases. This rule has since been abolished.
