Chapter 13: Delayed Completion and Remedies

Question 1

What is it important to distinguish between when considering remedies for delayed completion?

Answer 1

1. Whether completion is delayed beyond the contractual completion date, or
2. Whether completion does not take place at all.

Question 2

What does a delay to completion entitle the innocent party to?

Answer 2

Any delay to completion will be a breach of contract that entitles the innocent party to damages caused by the delay

Question 3

When will the innocent party have the right to cancel the contract due to a delay in completion

Answer 3

The innocent party will not have the right to cancel the contract unless the time for completion was ‘of the essence’, meaning the date in the contract is firm + cannot be moved.

Question 4

What is the general position re time being of the essence in a residential contract?

Answer 4

Generally, in a residential contract for sale, time is not of the essence unless specified in the contract.

In a Standard Conditions of Sale contract, the parties can choose to make time of the essence by adding a special condition to that effect, but this is rare.

Question 5

When will damages be available for delay?

Answer 5

Even if the contract doesn’t provide that time is of the essence, any delay in completion, even a delay of only a couple of hours, still amounts to a breach for which damages re available.

Question 6

When must completion take place under the Standard Conditions of Sale?

Answer 6

Under the Standard Conditions of Sale, the money due on completion must be received by 2pm on the day set for completion.

Question 7

What happens if completion funds are received after 2pm?

Answer 7

Completion is treated as taking place on the next working day.

The seller is then entitled to interest at the contract rate on the outstanding balance for the number of days that completion was delayed.

Question 8

How is interest calculated?

Answer 8

Interest is calculated on the amount equal to the purchase price and contents price less any deposit paid for the period between the contractual completion date + the actual completion date

Question 9

What may be done if completion is delayed and the property being sold/purchased has a tenant in situ?

Answer 9

The innocent party can elect to take the rental income until completion instead of compensation by notifying the other party

Question 10

What must be done if the innocent party wants to be able to withdraw or terminate the contract following a delay in completion?

Answer 10

They must serve a notice to complete on the other party, which makes time of the essence

Question 11

When can a ‘notice to complete’ be served?

Answer 11

Can be served at any time after the completion date by a party who is ready, able, and willing to complete.

Question 12

In practice, who will serve the notice to complete?

Answer 12

The innocent party’s solicitor.

Question 13

What should the innocent party’s solicitor do prior to serving a notice to complete?

Answer 13

They should not assume that their client will want a notice to complete served on the defaulting party.

They should first find out the reason for the delay + take instructions from the client.

If it seems likely that completion will take place soon, it may not be necessary to serve a notice to complete.

Question 14

What happens after service of the notice to complete?

Answer 14

The defaulting party has 10 working days, excluding the date of serving the notice, to complete.

Note - if the buyer had paid only a reduced deposit, on receiving a notice to complete, the buyer must pay any balance necessary to bring the deposit up to the full 10%.

Question 15

What dictates what will happen if the notice to complete is not complied with?

Answer 15

The Standard Conditions of Sale

Question 16

What happens if the buyer is the defaulting party and has not complied with the notice to complete?

Answer 16

The seller may rescind the contract, and may also:
i. retain the buyer’s deposit,
ii. resell the property, and
iii. claim damages

Question 17

What happens if the seller is the defaulting party + has not complied with the notice to complete?

Answer 17

The buyer may rescind the contract, and may also:
i. reclaim their deposit monies with interest at the contract rate, and
ii. claim damages

Question 18

What provides provisions re the innocent party being entitled to compensation for a defaulting party’s delay?

Answer 18

The innocent party is entitled to compensation for the defaulting party’s delay.

The Standard Conditions for Sale include provisions for calculating compensation available to the innocent party.

Question 19

What do remedies for breaches other than delayed completion depend on?

Answer 19

I. the nature of the breach, and
II. whether the breaches arises before or after completion

Question 20

What remedies does the innocent party have if there is a breach of control before completion?

Answer 20

1. Specific performance,
2. Claim for compensation by way of damages, and
3. Rescission

Question 21

What is specific performance?

Answer 21

An equitable remedy (given at the discretion of the court) that compels the defaulting party to perform and complete the contract.

Because land is considered unique, damages may be insufficient to compensate for the breach of a contract involving land.

Can be sought together with claims for rescission + damages, but the claimant would have to decide which option to pursue by the time of the hearing.

Question 22

What claim for damages may the innocent party make for a breach before completion?

Answer 22

In the event of delayed completion or failure to complete, the innocent party may make a standard claim for damages based on losses flowing naturally from the breach plus reasonably foreseeable consequential losses.

Question 23

How are damages measured?

Answer 23

The measure of damages is the standard measure - the innocent party is entitled to be placed, so far as possible, in the position they would have been in had the contract been performed.

When calculating damages, credit must be given for any deposit funds forfeited by the seller

Question 24

How will damages be calculated for a buyer’s breach?

Answer 24

An innocent seller is limited to recovering the difference in value between the contract price + the value on resale.

So, if the resale price is higher, the seller’s solicitor should advise them to retain the buyer’s deposit + not pursue a claim for damages as well.

Question 25

What is rescission?

Answer 25

Rescission has 2 meanings:

1. An order of court to put parties back in a position as if the contract had never existed, which is made when there is fraud, misrepresentation, or mistake, and
2. The innocent party’s acceptance of the repudiation of the contract when the defaulting party breaches a major term of the contract

Question 26

When is rescission permitted?

Answer 26

Under the Standard Conditions, rescission is permitted in 2 specific circumstances:

1. When there has been a misrepresentation because of an error or omission, and
2. When the landlord’s consent for an assignment is required + the licence to assign is not forthcoming

Question 27

When will rescission of a contract for misrepresentation be allowed?

Answer 27

The Standard Conditions allow rescission of a contract for misrepresentation but only when:

i. there is an element of fraud or recklessness, or

ii. if the innocent party took the property, it would be substantially different from the property the innocent party expected to take, to that party’s prejudice.

Question 28

What is misrepresentation?

Answer 28

A false statement of fact made by one party or their agent that induces the other party to enter into the contract and, as a consequence, suffer loss.

The innocent party must have been induced by the misrepresentation + must have suffered loss as a result.

Question 29

What are remedies for misrepresentation dependent upon?

Answer 29

The remedies available for misrepresentation depend on the type of misrepresentation

Question 30

What are the types of misrepresentation?

Answer 30

1. Fraudulent
2. Negligent
3. Innocent

Question 31

What is fraudulent misrepresentation?

Answer 31

Fraudulent misrepresentation involves deliberate dishonest - the statement was made knowingly or recklessly as to whether it was true or false.

The party alleging fraudulent misrepresentation must prove the fraud, which is not easy, so these claims are not common.

Question 32

What is the remedy for fraudulent misrepresentation?

Answer 32

The remedy is to sue of damages and rescission of contract.

Question 33

What is negligent misrepresentation?

Answer 33

A careless statement which turns out to be untrue.

Question 34

What is the remedy for negligent misrepresentation?

Answer 34

Remedy is to sue for damages and/or rescission of contract

Question 35

What is an innocent misrepresentation?

Answer 35

A statement that was a genuine mistake, made innocently.

Question 36

What remedies are available for innocent misrepresentation?

Answer 36

Rescission or damages in lieu of rescission - the claimant cannot claim both.

Question 37

What is misdescription?

Answer 37

An error in the property particulars of the contract, such as indicating the tenure is freehold when it is, in fact, leasehold.

Question 38

What is the effect of a misdescription?

Answer 38

If the misdescription is significant, it will entitle the innocent party to rescind the contract and claim damages.

Question 39

What is an example of a misdescription?

Answer 39

The seller overstating the size of the property by 40%

Question 40

Why are fewer remedies available once completion has occurred?

Answer 40

Because on completion, the majority of contract terms merge with the purchase deed + so are no longer actionable.

Question 41

Who will mainly wish to pursue remedies after completion?

Answer 41

It will mainly be the buyer, because the seller will have received the sale proceeds

Question 42

What are the primary claims available after completion?

Answer 42

1. Breach of title guarantee, or
2. Misrepresentation

Question 43

What are the different classes of title guarantee?

Answer 43

There are 3 classes of guarantee, which differ in the scope of assurances they provide:
1. Full title (most common),
2. Limited title (provided to PRs or trustees),
3. No title

Question 44

When might the buyer be able to claim a breach of the title guarantee?

Answer 44

E.g., if the seller gave a full title guarantee but after completion a superior title holder contested by the buyer’s title, the buyer might be able to claim a breach of the title guarantee.

Question 45

What additional title guarantees are given on the sale of a lease?

Answer 45

1.That the lease is valid and subsisting, and

2. That there is no breach of covenant rendering the lease liable to forfeiture (although this is commonly modified by the contracting parties)

Question 46

What happens if any of the title guarantees are breached?

Answer 46

The only remedy for breach of covenants for title is damages.

However, in practice, suing for breach of the title guarantee is rare.