Daulia Ltd v Four Millbank Nominees Ltd

A unilateral offer becomes binding when the offeree completes the required condition. Once performance has begun, the offeror is under an implied obligation not to prevent completion.

A contract to enter into a written sale contract is distinct from the sale contract, but is a contract for the disposition of an interest in land within section 40 of the Law of Property Act 1925. Claiming damages does not avoid that requirement. Acts amount to part performance only where, viewed without first relying on the alleged oral contract, they show that some contract probably existed and are consistent with it.

Daulia Ltd negotiated to purchase commercial and residential properties from Four Millbank Nominees Ltd. No written sale contract was exchanged. Daulia alleged that Four Millbank promised to enter into a written contract if Daulia obtained a banker’s draft, attended before 10 a.m. and tendered its signed part of the contract. Daulia did so, but Four Millbank refused to exchange contracts.

On an application under O.18 r.19, Brightman J struck out the statement of claim and dismissed the action. The Court of Appeal considered whether the pleaded facts disclosed a unilateral contract, whether the contract was within section 40 of the Law of Property Act 1925, and whether the alleged acts amounted to part performance.

1. Disposition. The appeal was dismissed. The pleaded facts were to be treated as admitted. The court was entitled to determine the legal issues summarily because further evidence could not improve the appellants’ position and the points had been fully argued.
2. Unilateral contract. Lord Justice Goff held that the condition had been fully performed when the appellants attended at the appointed time with the banker’s draft and their signed part of the contract, and tendered them for exchange. Actual exchange was not part of the condition. It was the additional act required from the defendants to perform their promise. Alternatively, once the appellants had begun performance, the defendants were under an implied obligation not to prevent the condition becoming satisfied. Lord Justice Buckley agreed and added that the defendants could not rely on the absence of actual tender if their refusal to exchange had made tender futile.
3. Section 40. The promise was not itself a contract for the sale of land, but it was a separate contract for another disposition of an interest in land. If performed, it would have produced a specifically enforceable sale contract and an equitable interest in the properties. The statutory classification depended on the nature of the contract, not on the remedy claimed. Damages could not avoid section 40, particularly because the damages claimed would be the same as those for breach of the contemplated sale contract. The court also accepted, in the alternative, that a sufficiently particular contract to exchange agreements could be specifically performed.
4. Part performance. The alleged acts had to be considered without first relying on the alleged oral contract. They had to show, on the balance of probabilities, that some contract existed and be consistent with the contract alleged. Attendance with the draft and signed contract suggested that the parties contemplated making a contract, rather than that a contract already existed. The acts therefore did not constitute sufficient part performance.

There was no order as to costs in the Court of Appeal, and leave to appeal to the House of Lords was refused.

• Court of Appeal: Appeal dismissed; the order striking out the claim and dismissing the action was upheld. [1977] EWCA Civ 5.
• High Court, Chancery Division: Brightman J struck out the statement of claim against the first defendants and dismissed the action with costs under O.18 r.19 by order dated 31 March 1977.