Samarenko v Dawn Hill House Ltd [2011] EWCA Civ 1445

Construction of contractual terms as ‘conditions’ and the right to terminate a contract.

Facts

A seller and buyer entered into a written contract for the sale of property, with Clause 16 of the contract requiring the payment of a deposit. The contract was conditional on receiving planning permission. After receiving the planning permission, the parties mutually altered the property value and the deposit was required of the buyer within 60 days of the planning permission. The deposit was not paid on the due date and the sellers wrote to the buyers giving them five-days notice for the required payment. No payment was made and the seller terminated the contract.

Issue

The question arose as to whether the payment of a deposit on time under a contract for the sale of land constitutes a condition of the contract, the breach of which entitles the seller to terminate the contract and claim for repudiatory damages.

Held

The Court considered the importance of the deposit payment in the vast majority of contracts for the sale of property and, accordingly, held that the clause requiring the payment of a deposit must be constructed as a fundamental contractual condition, rather than a mere innominate term. The Court referred to the ordinary understanding of buyers and sellers of land that a deposit plays a fundamental role. Accordingly, on the facts, the clause is constructed as a conditional term of a fundamental nature and the failure to comply thereto was a repudiatory breach. Further, in light of the commercial and legal importance of a deposit in property transactions, stipulated time periods ought to be strictly complied with. The subsequent five-days notice further made time of the essence. Thus, the failure to pay the deposit constituted a repudiatory breach of a fundamental contractual condition, entitling the seller to terminate.

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