Samarenko v Dawn Hill House Ltd

A contractual requirement to pay a deposit in a land sale is ordinarily a fundamental term because the deposit is earnest for performance. Failure to pay by an expressly essential date may therefore constitute repudiatory breach, entitling the seller to terminate. This remains so where the deposit falls due after the contract is made.

Alleged inspection or access rights relating to completion do not ordinarily excuse non-payment of the deposit unless the contract makes payment conditional upon them. A short period for payment may suffice where the contract or notice makes time of the essence and the buyer could pay within that period.

The claimant sought summary judgment concerning the sale of Dawn Hill House to the defendant. The varied contract made the purchase unconditional, required a £450,000 deposit by 3 March 2011, and fixed completion for 13 April 2011. The deposit was not paid. Following a notice requiring payment by 16 March, the claimant accepted the defendant’s repudiatory breach and terminated the contract.

The defendant contended that non-payment was excused by the claimant’s refusal to permit inspection and that five days was insufficient for payment. The central issue was whether failure to pay the deposit entitled the claimant to terminate.

1. Disposition. The claimant succeeded on the summary judgment application. The court held that the contract had been validly terminated, subject to hearing counsel on the precise form of relief.
2. Payment of a deposit is not a condition precedent to formation of a contract. However, following Myton v Schwab-Morris [1974] 1 WLR 331, Millichamp v Jones [1982] 1 WLR 1422 and, in particular, Damon Compania Naviera SA v Hapag-Lloyd International SA [1985] 1 WLR 435, the deposit term is fundamental. Its breach goes to the root of the contract and may justify termination.
3. The requirement remained fundamental although payment was scheduled several weeks after the contract was made. The notice extended the essential payment date by five days and made time of the essence. Five days was sufficient on the facts, and the defendant had funds available but chose not to pay.
4. The pleaded implied terms concerned inspection before completion and did not make payment of the deposit conditional upon inspection. They therefore afforded no answer to the admitted breach. The court also doubted that a broad inspection right could be implied, particularly where access would intrude upon the claimant’s privacy; any right needed to be clearly expressed and might extend only to checking continued usability under Standard Condition 5.1.
5. Any refusal of inspection would not have assisted the defendant. The defendant did not accept it as a repudiatory breach, and the court considered, applying Eminence Property Developments Limited v Heaney [2010] EWCA Civ 1168, that conduct honestly believed to be contractually permitted would not necessarily be repudiatory.