Hafiz Mohammad Aslam v Abdul Rehman

Exchange of contracts requires a formal delivery by each party of its signed part, either physically or through clear words producing constructive delivery. The fact that one party holds both parts, or holds a part to the other’s order, does not itself establish exchange. The court must identify the parties’ intention and the act that constituted delivery. Where the factual findings do not explain how each party delivered its part, a finding that contracts were exchanged cannot stand.

The appellant appealed against a decision of the First-tier Tribunal (Property Chamber) concerning a unilateral notice protecting an alleged contract for the sale of 189 Walton Road, Woking. The FTT found that the parties had exchanged contracts on 14 September 2018, although one party retained both signed parts and no deposit was paid.

The appeal was limited to whether the FTT’s findings of fact could, as a matter of law, justify its conclusion that exchange had occurred. The central issue was whether the parties had each formally delivered their signed part of the contract.

1. Appeal allowed. The FTT’s finding that contracts were exchanged was set aside, and the Upper Tribunal substituted its own decision that contracts were not exchanged. The registrar was directed to deal with the appellant’s application as if the respondent’s objection had not been made.
2. Exchange of contracts involves formal delivery by each party of its signed part, with the intention that the parties become bound when exchange occurs. Delivery may be physical or constructive, but the relevant act and intention must be established.
3. In Commission for New Towns v Cooper [1995] Ch 259, the traditional method of exchange and the requirement of formal delivery were identified. The principle was applicable to the present issue.
4. Domb v Isoz [1980] Ch 548 showed that constructive delivery may occur when solicitors agree by telephone that contracts are exchanged. Before that agreement, however, possession of a part to the other party’s order is insufficient. Possession by an agent may constitute possession by the principal, but it does not itself prove delivery or exchange.
5. The FTT had not found that the appellant intended to deliver his part so as to exchange contracts. Nor had it explained why the respondent’s agency meant that he held his own part on the appellant’s behalf, or why that amounted to delivery. The findings were therefore inadequately explained and legally insufficient to establish exchange.
6. An alternative submission that exchange occurred at a later meeting with solicitors was unsupported by the findings and could not properly be advanced as an alternative factual case on appeal.

• Upper Tribunal (Lands Chamber): allowed the appeal, set aside the FTT’s finding that contracts had been exchanged, substituted a decision that no exchange occurred, and directed the registrar to proceed accordingly.
• First-tier Tribunal (Property Chamber): found that contracts for the sale of the property had been exchanged on 14 September 2018 and that the agreement was not a sham and was not procured by misrepresentation or undue influence.