Editorial Committee of the Cambridge Law Journal

Side Letters, Collateral Contracts and the Law of Property (Miscellaneous Provisions) Act 1989Author(s): Charles HarpumSource: The Cambridge Law Journal, Vol. 50, No. 3 (Nov., 1991), pp. 399-401Published by: Cambridge University Press on behalf of Editorial Committee of the Cambridge Law JournalStable URL: http://www.jstor.org/stable/4507568 .Accessed: 26/08/2013 20:54

Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at .http://www.jstor.org/page/info/about/policies/terms.jsp

.

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range ofcontent in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new formsof scholarship. For more information about JSTOR, please contact support@jstor.org.

.

Cambridge University Press and Editorial Committee of the Cambridge Law Journal are collaborating withJSTOR to digitize, preserve and extend access to The Cambridge Law Journal.

http://www.jstor.org

This content downloaded from 149.171.25.233 on Mon, 26 Aug 2013 20:54:46 PMAll use subject to JSTOR Terms and Conditions

C.L.J. Case and Comment 399

recent and marginal: to transpose the slogan to cases involving health and safety, the very central concern of tort law, is certainly not

necessary, and may not be right. It may be said that there is no longer any need for the common

law to intervene now that the duty to take care not to cause personal injury or death is reinforced by the 1977 Act in that it invalidates terms which purport to restrict that duty. But here the doctor was

allegedly so overworked as to be endangering the patients as well as himself. The common law must surely have something to say on the

question whether A can insist on B's performing his promise when to do so would threaten injury to C. Kores v. Kolok [1959] Ch. 108 (on "public policy") could be invoked.

But the solution may lie elsewhere. The employer's duty is not to avoid all foreseeable harm to the employee. It is a duty not to

endanger him needlessly, in view of all the circumstances. Those circumstances include what the employee has undertaken to do. Were it not so, we would never get the asbestos out of old buildings, or oil from under the sea. It has been held reasonable, in the interest of helping third parties, to expose an employee to quite foreseeable harm (Watt v. Herts. CC [1954] 1 W.L.R. 835). But that does not mean that the law permits people to bind themselves to work night and day until they drop, any more than the law allows a creditor to bind its debtor hand and foot (Horwood [1917] 1 K.B. 305). It is surely arguable, contrary to what the Court of Appeal held on this point, that the common law should, on grounds of policy, uphold the doctor's right to health against exploitation by the health authority.

Tony Weir.

C.L.J. Case and Comment 399

recent and marginal: to transpose the slogan to cases involving health and safety, the very central concern of tort law, is certainly not

necessary, and may not be right. It may be said that there is no longer any need for the common

law to intervene now that the duty to take care not to cause personal injury or death is reinforced by the 1977 Act in that it invalidates terms which purport to restrict that duty. But here the doctor was

allegedly so overworked as to be endangering the patients as well as himself. The common law must surely have something to say on the

question whether A can insist on B's performing his promise when to do so would threaten injury to C. Kores v. Kolok [1959] Ch. 108 (on "public policy") could be invoked.

But the solution may lie elsewhere. The employer's duty is not to avoid all foreseeable harm to the employee. It is a duty not to

endanger him needlessly, in view of all the circumstances. Those circumstances include what the employee has undertaken to do. Were it not so, we would never get the asbestos out of old buildings, or oil from under the sea. It has been held reasonable, in the interest of helping third parties, to expose an employee to quite foreseeable harm (Watt v. Herts. CC [1954] 1 W.L.R. 835). But that does not mean that the law permits people to bind themselves to work night and day until they drop, any more than the law allows a creditor to bind its debtor hand and foot (Horwood [1917] 1 K.B. 305). It is surely arguable, contrary to what the Court of Appeal held on this point, that the common law should, on grounds of policy, uphold the doctor's right to health against exploitation by the health authority.

Tony Weir.

side letters, collateral contracts and the law of property (miscellaneous provisions) act 1989

Record v. Bell [1991] 1 W.L.R. 853 (Judge Paul Baker Q.C.) is the second decision on the Law of Property (Miscellaneous Provisions) Act 1989, s. 2. That section, which replaces the Law of Property Act 1925, s. 40, introduces more stringent formality requirements for contracts for "the sale or other disposition of an interest in land". Such contracts can now

"only be made in writing", where before they could be made orally and merely evidenced in writing or proved by acts of part performance. They must incorporate "all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each". Previously, although the memoran- dum of the agreement was supposed to contain all the terms, this

side letters, collateral contracts and the law of property (miscellaneous provisions) act 1989

Record v. Bell [1991] 1 W.L.R. 853 (Judge Paul Baker Q.C.) is the second decision on the Law of Property (Miscellaneous Provisions) Act 1989, s. 2. That section, which replaces the Law of Property Act 1925, s. 40, introduces more stringent formality requirements for contracts for "the sale or other disposition of an interest in land". Such contracts can now

"only be made in writing", where before they could be made orally and merely evidenced in writing or proved by acts of part performance. They must incorporate "all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each". Previously, although the memoran- dum of the agreement was supposed to contain all the terms, this

This content downloaded from 149.171.25.233 on Mon, 26 Aug 2013 20:54:46 PMAll use subject to JSTOR Terms and Conditions

4 The Cambridge Law Journal [1991]

requirement could sometimes be sidestepped by waiver of the omitted term or a submission to it. Furthermore, the contract must now be signed by both parties (though on exchange of contracts it is enough If each signs his part). In the past, it sufficed that the memorandum was signed by the party against whom the contract was to be enforced. Section 2 was enacted in response to recommendations from the Law Commission: (1987) Law Com. 164. Unfortunately that report failed to consider many obvious situations which do not fit the new section comfortably: e.g., it is unclear whether a contract for the sale of land can now be created by an exchange of letters, or whether section 2 applies to the creation and exercise of rights of pre-emption. One situation which the Commission did consider was that of collateral contracts: Law Com. 164 p. 20. It is common practice for parties to refuse to enter into a contract for the sale of land or to execute a new lease without some collateral undertaking contained in a side letter e.g. a tenant may agree to take a lease only if the lessor undertakes not to enforce certain of the covenants against him. Such side letters have long been thought to be effective as collateral contracts. At one time, collateral contracts were frowned upon either (i) because they provided a means of obtaining damages for a non-fraudulent misrepresentation (Heilbut, Symons & Co. v. Bllskle- ton [1913] A.C. 30) a consideration made irrelevant by the Misrepre- sentation Act 1967, s. 2; or (ii) because they offended against the parol evidence rule (Henderson v. Arthur [19071 1 K.B. 10), a rule now largely ignored: Cit & Westminster Properties (1934) Ltd. v. Mudd [1959l Ch. 129. If A contracts to buy land from B, on the basis of some assurance by B contained in a side letter, the issue which the court has to resolve is whether there is in substance just one contractz or whether there are two one genuinely collateral to the other. If the court finds as a fact that there is a separate collateral contract, then the existence of that agreement cannot invalidate the main contract of sale. Its terms are necessarily quite separate and distinct from that main contract. It is difficult to see why the enactment of section 2 should have changed the law at all in this regard, granted that under the Law of Property Act 1925 s. 40, a memorandum had in general to contain all the terms agreed. Such collateral agreements were well-recognised under the old law: Jameson v. Kinmell Bay Land Co. Ltd. (1931) 47 T.L.R. 593. The Law Commission expected the practice to continue? rightly as it now appears.

In Record v. Bell the plaintiff had contracted to sell a property in Westminster to the defendant. The invasion of Kuwait seriously affected the defendant's financial position, and he tried to renege from the contract. Under its terms, the defendant had agreed to buy subject to the covenants and conditions referred to on the register of

This content downloaded from 149.171.25.233 on Mon, 26 Aug 2013 20:54:46 PMAll use subject to JSTOR Terms and Conditions

C.L.Je C.L.Je Case and Comment Case and Comment 401 401

title. However, the plaintiff was not in a position to produce up-to- date office copies of the register. As there was some urgency over the transaction the parties agreed to proceed to exchange on the strength of an undertaking given by the plaintiff's solicitors, that the office copies would be produced, that they would reveal the plaintiff as registered proprietor, and that there were no adverse entries save for mortgages which would be discharged on completion. Tl2at undertaking was embodied in a side letter and it was in due course honoured. The defendant's principal argument was both technical and unmeritorious. The side letter had not been expressly incorpora- ted into the written contract for the sale of land. That contract was therefore invalid because it did not contain all the terms agreed between the parties as section 2 required. Judge Baker rejected that contention. The plaintiffs solicitor had given a warranty as to the state of the vendor's title to induce the defendant to exchange. That offer had been accepted by the exchange of contracts. Following De Lassalle v. GuiZdford [1901] 2 K.B. 21S, he held that the essential elements for the existence of a collateral contract were therefore unequivocally established. That contract was not itself a contract for the sale of land and accordingly did not have to comply with section 2.

lshe result is very welcome. Side letters are an everyday fact of life in dealings with land, and it would be unfortunate lf, as Judge Baker observed, "common transactions of this nature should nevertheless cause the contract to be avoided". The more stringent requirements of section 2 may, as both the Law Commission and Judge Ba}er suggested, "lead to a greater use of the concept of collateral warranties than has hitherto been necessary" (though parties can always ensure that this will not happen by use of appropriate special conditions: McGrath v. Shah, The Times, 22 October 1987). This does not undermine the policy of the section, provided that the terms of any collateral agreement are unambiguous. Taken with the earlier decision in Spiro v. Glencrown Properties Ltd. [1991] 2 W.L.R. 931, noted at p. 236 ante, Record v. Bell suggests that the judiciary intend to make section 2 workS and that they wilJ be unsympathetic to unmeritorious technical defences.

CHARLES HARPUM.

FORFEITURE COMMANDO SrYLE

THE landlord of commercial property whose right of re-entry has been activated has a choice. He can issue proceedings, claiming that he is now forfeiting the lease, and seek a possession order from the

title. However, the plaintiff was not in a position to produce up-to- date office copies of the register. As there was some urgency over the transaction the parties agreed to proceed to exchange on the strength of an undertaking given by the plaintiff's solicitors, that the office copies would be produced, that they would reveal the plaintiff as registered proprietor, and that there were no adverse entries save for mortgages which would be discharged on completion. Tl2at undertaking was embodied in a side letter and it was in due course honoured. The defendant's principal argument was both technical and unmeritorious. The side letter had not been expressly incorpora- ted into the written contract for the sale of land. That contract was therefore invalid because it did not contain all the terms agreed between the parties as section 2 required. Judge Baker rejected that contention. The plaintiffs solicitor had given a warranty as to the state of the vendor's title to induce the defendant to exchange. That offer had been accepted by the exchange of contracts. Following De Lassalle v. GuiZdford [1901] 2 K.B. 21S, he held that the essential elements for the existence of a collateral contract were therefore unequivocally established. That contract was not itself a contract for the sale of land and accordingly did not have to comply with section 2.

lshe result is very welcome. Side letters are an everyday fact of life in dealings with land, and it would be unfortunate lf, as Judge Baker observed, "common transactions of this nature should nevertheless cause the contract to be avoided". The more stringent requirements of section 2 may, as both the Law Commission and Judge Ba}er suggested, "lead to a greater use of the concept of collateral warranties than has hitherto been necessary" (though parties can always ensure that this will not happen by use of appropriate special conditions: McGrath v. Shah, The Times, 22 October 1987). This does not undermine the policy of the section, provided that the terms of any collateral agreement are unambiguous. Taken with the earlier decision in Spiro v. Glencrown Properties Ltd. [1991] 2 W.L.R. 931, noted at p. 236 ante, Record v. Bell suggests that the judiciary intend to make section 2 workS and that they wilJ be unsympathetic to unmeritorious technical defences.

CHARLES HARPUM.

FORFEITURE COMMANDO SrYLE

THE landlord of commercial property whose right of re-entry has been activated has a choice. He can issue proceedings, claiming that he is now forfeiting the lease, and seek a possession order from the

This content downloaded from 149.171.25.233 on Mon, 26 Aug 2013 20:54:46 PMAll use subject to JSTOR Terms and Conditions

Article Contentsp. 399p. 400p. 401

Issue Table of ContentsThe Cambridge Law Journal, Vol. 50, No. 3 (Nov., 1991), pp. 379-581+vii-xixVolume Information [pp. vii-xix]Case and CommentA Metewand for Reasons? [pp. 379-381]Direct Effect of E.C. Directive on Impact Assessment [pp. 382-384]The Crown's Seabed Estate. A Valuable Prerogative [pp. 384-386]Sanitising Insanity. Sleep-Walking and Statutory Reform [pp. 386-388]Thief or Swindler: Who Cares? [pp. 389-392]The Nature of the Warranty in Contracts of Insurance [pp. 393-394]Sea Carriage Rights [pp. 394-397]Physician. Kill Thyself! [pp. 397-399]Side Letters, Collateral Contracts and the Law of Property (Miscellaneous Provisions) Act 1989 [pp. 399-401]Forfeiture Commando Style [pp. 401-404]Laying Lord Eldon's Ghost: Donatio Mortis Causa of Land [pp. 404-407]Following Money. Changing Position [pp. 407-409]Equitable Liability for Money Laundering [pp. 409-411]Flexibility in Adoption [pp. 411-413]Pre-Incorporation Contracts Revisited [pp. 413-416]Income Tax. Purposes and Trading Transactions [pp. 416-418]Issue Estoppel and Changes of Precedent [pp. 419-421]

Penal Regressions [pp. 422-444]Domicile Revisited [pp. 445-463]Stealing from the Small Family Business [pp. 464-489]The Argument from Consistency for Overruling Selvey [pp. 490-516]Book ReviewsReview: untitled [pp. 517-519]Review: untitled [pp. 520-522]Review: untitled [pp. 522-524]Review: untitled [pp. 524-525]Review: untitled [pp. 525-527]Review: untitled [pp. 528-529]Review: untitled [pp. 529-532]Review: untitled [pp. 532-534]Review: untitled [pp. 534-536]Review: untitled [pp. 536-539]Review: untitled [pp. 539-540]Review: untitled [pp. 540-542]Review: untitled [pp. 542-544]Review: untitled [pp. 544-547]Review: untitled [pp. 547-550]Review: untitled [pp. 550-551]Review: untitled [pp. 551-553]Review: untitled [pp. 553-554]Review: untitled [pp. 555-556]Review: untitled [pp. 556-557]Review: untitled [pp. 558-559]Review: untitled [pp. 559-560]Review: untitled [pp. 560-561]Review: untitled [pp. 561-563]Review: untitled [pp. 563-564]Review: untitled [pp. 564-565]Review: untitled [pp. 565-567]Review: untitled [pp. 567-568]Review: untitled [pp. 568-569]Review: untitled [pp. 570-571]Review: untitled [p. 571]Review: untitled [pp. 571-573]Review: untitled [pp. 573-574]Review: untitled [pp. 574-575]

Books Received [pp. 576-579]Cambridge University Law Society 1990-1991 [pp. 580-581]