When vendors of a property signed a contract containing a clause that stated (in essence) that the vendor had to inform the prospective buyer of a property ‘on becoming aware of anything’ that might make its replies to enquiries raised by the purchaser’s solicitors incorrect, they little anticipated the problems that non-compliance could bring.
They owned land which a property developer wished to purchase for development. Unbeknown to the property developer (who was acting through a third party), a doctor also wished to buy the property to build a surgery and he applied for planning permission to do this.
An oral agreement was made to sell the property to the person acting for the developer. Two days after responding to the standard enquiries about the property, the owners discovered, but did not disclose, the fact that a planning application had subsequently been made by the doctor. This changed the ‘risk landscape’ of the property, the value of which was dependent on its development potential.
Contracts for sale of the property were exchanged between the owners and the agent for the developer. The doctor could not be persuaded to withdraw his planning application and, before completion was due, the prospective purchaser claimed a rescission (cancellation) of the contract, on the ground that the owner had made a misrepresentation, and asked for their deposit back.
The Court of Appeal upheld the decision of the lower court that the contract could be rescinded on the basis that the failure to disclose the planning application after they became aware of it was a misrepresentation and the contract was therefore in breach of the Unfair Contract Terms Act 1977.