Abberley & Ors v Abberley

A signed document headed “heads of terms” may constitute a binding contract even where the parties contemplate later formal documentation. The question is whether the parties objectively agreed the essential terms, not whether every implementation detail was settled.

Contractual uncertainty is resolved by examining the words used in their factual and commercial context. The court should strive to give effect to an ascertainable intention to contract, and should find uncertainty only where no definite meaning can safely be extracted. A contract for the disposition of land must also incorporate all terms expressly agreed by the parties, as required by Law of Property (Miscellaneous Provisions) Act 1989, section 2.

The claimants and defendant were members of the same farming family. After a long-running dispute concerning partnership interests, farmland, mortgage obligations and related matters, they attended a mediation.

At the mediation, the parties’ solicitors signed handwritten heads of terms concerning transfers of land, a farm business tenancy, payment obligations, mortgage premiums, overage and a right of way. The typed draft had been lost, and the parties later contemplated a more formal agreement and conveyancing documents.

The central issues were whether the heads of terms were intended to be binding, whether their terms were sufficiently certain, and whether they complied with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.

1. Binding agreement. The heads of terms constituted a binding contract. The mediation agreement required a settlement to be reduced to writing and signed before becoming legally binding, and that requirement was satisfied by the signed document. The objective principles stated in RTS Ltd v Molkerei Alois Muller GmbH [2010] 1 WLR 753 and approved in Wells v Devani [2019] UKSC 4 were applied.
2. The later intention to prepare a formal agreement did not prevent contractual formation. Applying Von Hatzfeldt-Wildenburg v Alexander [1912] 1 Ch 284, the further documents were intended to implement the agreement rather than operate as a condition precedent to it. The later correspondence supported that conclusion.
3. The essential terms were sufficiently certain. The land to be transferred could be identified from the Brightwells Plan and surrounding circumstances. The intended tenant and option-holder under the farm business tenancy could be inferred from the heads of terms and the factual context. The tenancy commencement, option, overage and right-of-way provisions contained sufficient essentials, even though further mechanics remained to be documented.
4. The court applied the approach to contractual certainty stated in G Scammell & Nephew Ltd v HC and JG Ouston [1941] AC 251, as cited in Wells v Devani, and the further guidance discussed in Westvilla Properties Ltd v Dow Properties Ltd [2010] EWHC 30 (Ch). Difficulty of interpretation did not amount to uncertainty where a definite meaning could be extracted.
5. The heads of terms complied with section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. Although some matters were discussed after the mediation, the evidence showed that they had not been expressly agreed at the mediation. Accordingly, all agreed terms were incorporated in the signed document. The claimants were entitled to a declaration and enforcement of the agreement.

First-instance decision. The court directed the parties to agree the form of the order, or to make written submissions within 14 days.