Can I buy a property without an agreement for sale and purchase?

Most people who have purchased properties are familiar with the standard forms of agreements for sale and purchase. Section 24 of the Property Law Act 2007 (Act) specifically says that to sell or purchase property, a contract must be in writing and signed. Long gone are the days of handshake agreements - or are they?

Section 26 of the Act says that the doctrine of part performance is not affected. Part performance is an old, equitable doctrine which allows for "specific performance" of a contract (i.e., forces the parties to go through with a contract) where that contract has been partly performed when:1. There is an oral agreement which would be enforceable but for the Act;2. Part performance of that agreement has happened which:2.1 Is a step in the performance of an obligation under that oral agreement or exercising a right under that oral agreement; and2.2 Which was done on the basis that a contract relating to the land was in existence; and3. It would be unconscionable (fraudulent in equity) to rely on the existence of a written contract. Essentially, it would need to be shown that a party would suffer irreversible or irreparable loss if the agreement was not enforced.Does this mean people need to be overly careful then, with discussing properties with others and trying to secure properties? The short answer is no.We recently acted for the defendants in Khalesi v Lane in which the sale of two properties was discussed between the plaintiffs and the defendants and a sum of Bartercard dollars was transferred to the defendants prior to an agreement for sale and purchase being signed. After reviewing the draft agreement for sale and purchase, the defendants decided not to proceed. The plaintiffs sued the defendants under the doctrine of part performance.The High Court held that there was no oral agreement as there was no certainty as to the essential terms. In particular, it was not clear who the parties were. The defendants were not aware that the second purchaser would be the person who was portrayed as the first purchaser's lawyer. In addition, the use of Bartercard involved significant complications, including payment of commission to Bartercard of 15% of the sale price which would affect the purchase price - another essential term.Crucially, the Court found that there was no intention to be legally bound until a formal agreement for sale and purchase had been drafted, approved by their solicitors and signed. The correspondence following the initial meeting at which the plaintiffs say an oral agreement was entered into referred to agreements being drawn up and the defendants seeking legal advice. The Courts have traditionally found and reaffirmed in this case, that the general rule is that where the parties clearly intended to execute a formal agreement for the sale and purchase of property, it would be unreasonable to expect that the parties intended to create legal relations before execution of that document.So the short answer is generally - no - you usually can't buy a property without an agreement for sale and purchase and it is only in rare circumstances, where all essential elements of the agreement have been orally agreed and a party acts to their (irreversible) detriment that you can enforce an agreement for sale and purchase which is not in writing.If you have any questions about the enforceability of an agreement or are the subject of a claim such as this, get in touch with our litigation team

Section 26 of the Act says that the doctrine of part performance is not affected. Part performance is an old, equitable doctrine which allows for "specific performance" of a contract (i.e., forces the parties to go through with a conract) where that contract has been partly performed when:

1. There is an oral agreement which would be enforceable but for the Act;

2. Part performance of that agreement has happened which:

2.1 Is a step in the performance of an obligation under that oral agreement or exercising a right under that oral agreement; and

2.2 Which was done on the basis that a contract relating to the land was in existence; and

3. It would be unconscionable (fraudulent in equity) to rely on the existence of a written contract. Essentially, it would need to be shown that a party would suffer irreversible or irreparable loss if the agreement was not enforced.

Does this mean people need to be overly careful then, with discussing properties with others and trying to secure properties? The short answer is no.

We recently acted for the defendants in a case in which the sale of two properties was discussed between the plaintiffs and the defendants and a sum of Bartercard dollars was transferred to the defendants prior to an agreement for sale and purchase being signed. After reviewing the draft agreement for sale and purchase, the defendants decided not to proceed. The plaintiffs sued the defendants under the doctrine of part performance.

The High Court held that there was no oral agreement as there was no certainty as to the essential terms. In particular, it was not clear who the parties were. The defendants were not aware that the second purchaser would be the person who was portrayed as the first purchaser's lawyer. In addition, the use of Bartercard involved significant complications, including payment of commission to Bartercard of 15% of the sale price which would affect the purchase price - another essential term.

Crucially, the Court found that there was no intention to be legally bound until a formal agreement for sale and purchase had been drafted, approved by their solicitors and signed. The correspondence following the initial meeting at which the plaintiffs say an oral agreement was entered into referred to agreements being drawn up and the defendants seeking legal advice. The Courts have traditionally found and reaffirmed in this case, that the general rule is that where the parties clearly intended to execute a formal agreement for the sale and purchase of property, it would be unreasonable to expect that the parties intended to create legal relations before execution of that document.

So the short answer is generally - no - you usually can't buy a property without an agreement for sale and purchase and it is only in rare circumstances, where all essential elements of the agreement have been orally agreed and a party acts to their (irreversible) detriment that you can enforce an agreement for sale and purchase which is not in writing.

If you have any questions about the enforceability of an agreement or are the subject of a claim such as this, get in touch with our litigation team.