When transactions go wrong: 3 cases which highlight the importance of clear drafting and proper execution

When transactions go wrong: 3 cases which highlight the importance of clear drafting and proper execution

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Recent cases highlight the importance of clear drafting and proper execution of documents to avoid disputes and clarify the terms of a Zurich new-homes insurance policy.

1. Cohen - interpretation of planning conditionality

Cohen v Teseo Properties [2014] EWHC 2442 (Ch)

In Cohen, a seller sought a declaration that a contract for the sale of a property to the buyer had terminated, leaving the seller free to deal with the property as he chose. The buyer counterclaimed for specific performance of the contract and the sale of the property to it.

The issue was the interpretation and intended effect of a clause entitling the buyer to an extension of time if planning permission had not been obtained (the effective date) by a long-stop date.

The High Court noted that although the contract seemed to have been professionally drafted, the drafting was poor. The inter-relationship between important provisions was not clearly explained.

It was, therefore, particularly important to have regard to business common sense in drawing inferences as to the parties' intentions expressed in the contract, construed according to the usual objective approach.

The court decided that a sensible interpretation of the contract and business common sense meant that if the long stop date came and went without a request for an extension of time, it took effect as the termination date, and the effective date could not occur thereafter.

Further, even if there had been conflict between the literal language of the contract and business common sense, in the context of a poorly drafted agreement such as this, the interpretation indicated by business common sense would have prevailed over a contrary literal interpretation.

The buyer had not served notice requesting an extension of time by the long stop date and so the seller was free from any obligation to proceed with the sale of the property to the buyer.

The buyer's application for repayment of its deposit in exercise of the court's discretion under the Law of Property Act 1925, s 49(2) was also dismissed. The court should not exercise such discretion to return a deposit to a buyer who had failed to complete, in the absence of something special or exceptional to justify overriding the ordinary contractual expectations of the parties. That was not the case here.

2. Bank of Scotland - incorrect execution

Bank of Scotland v Waugh [2014] EWHC 2117 (Ch)

Bank of Scotland involved an application for summary judgment in proceedings forming part of a long-running dispute between the bank and Mr Waugh and other members of his family. The

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About the author:
Joanna is a commercial property specialist. Prior to joining the LexisPSL Property team, she was a transactional lawyer. She qualified in 1995 at Shoosmiths and subsequently worked at Nabarro, Charles Russell, Bircham Dyson Bell and Pemberton Greenish. She has wide-ranging experience of all non-contentious property transactions, with a particular emphasis on landlord and tenant work.