Marlbray Ltd v Laditi & Anor

A contract for the sale of land may bind a purchaser who signs for himself and purports to sign for a co-purchaser without authority. The question is whether, objectively, the signatory’s agreement was conditional on the co-purchaser signing. Joint and several wording may create a separate obligation of the signatory.

Under section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, the contract may be enforceable if the document incorporates the terms of that separate contract and is signed by its parties. Ratification requires knowledge of the full circumstances and unequivocal conduct. If the contract is absent or formally invalid, recovery of a deposit depends on total failure of consideration; a stakeholder arrangement does not automatically require repayment.

The respondents agreed to purchase a hotel unit from Marlbray Limited. The first respondent signed the contractual documents for himself and purportedly for his wife, the second respondent, without her authority. They later failed to complete, and Marlbray rescinded the transaction and retained the deposit.

On a preliminary issue, the High Court held that no valid or enforceable contract existed because the second respondent had not authorised or ratified the first respondent’s signature. It rejected estoppel arguments and refused permission to add a counterclaim for breach of warranty of authority. The appeal concerned contract formation, ratification, statutory formalities, deposit recovery, amendment, set-off and costs.

1. Disposition. Lady Justice Gloster gave the leading judgment, with Lord Justice McFarlane and Lord Justice Jackson agreeing. The appeal was allowed and the cross-appeal dismissed.
2. Contract with the first respondent. The first respondent’s signature objectively operated both for himself and purportedly for his wife. The contract imposed joint and several obligations. There was no universal rule that a contract cannot bind a signatory merely because an intended co-purchaser did not sign. The question was whether the signatory’s agreement was conditional on the other person signing. On the facts, it was not. The first respondent therefore had a binding several contract with Marlbray. Suleman v Shahsavari [1988] 1 WLR 1181 was distinguishable and provided no basis for the contrary conclusion.
3. Ratification and section 2. Ratification required an act or omission showing an intention to adopt, knowledge of the full circumstances and unequivocal conduct. The second respondent had not ratified the first respondent’s signature. However, the first respondent’s several contract complied with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. The documents incorporated the agreed terms and were signed by or on behalf of the parties to that several contract. The second respondent’s signature was unnecessary.
4. Deposit and restitution. Even if there had been no contract, or non-compliance with section 2, the claim for repayment failed at this stage. Following Sharma and another v Simposh Ltd [2011] EWCA Civ 1383, the essential question was whether there had been a total failure of consideration. The first respondent had received substantial benefits, including reservation of the unit and its availability at the agreed price. The stakeholder arrangement did not alter the substantive entitlement. Retention of the deposit therefore involved no injustice, subject to unresolved issues concerning unconscionable bargain, penalty and section 49(2) of the Law of Property Act 1925.
5. Further orders. The proposed counterclaim for breach of warranty of authority arose from the same or substantially the same facts and permission to amend should have been granted. The warranty claim could also be pleaded by way of equitable set-off. The costs condition was set aside, while the costs of the preliminary issue were reserved.

1. Court of Appeal (Civil Division): Allowed Marlbray’s appeal and dismissed the cross-appeal. Declared that there was a valid and enforceable contract between Marlbray and the first respondent, subject to the unresolved deposit issues. The court also allowed the warranty-of-authority amendment and set aside the costs condition. [2016] EWCA Civ 476
2. High Court, Chancery Division: A deputy judge held that there was no valid or enforceable contract between Marlbray and the respondents because the second respondent had neither authorised nor ratified the first respondent’s signature. Estoppel was rejected, and permission to plead a warranty-of-authority counterclaim was refused.