A combine harvests a cereal crop

Buyer allowed to rescind contract where seller made innocent misrepresentations

The Court of Appeal has held that a buyer was entitled to rescind a contract to purchase a site that had potential for development as a block of flats.   The case was Cleaver and another v Schyde Investments Ltd [2011] EWCA Civ 929.

This is a timely reminder for all property transactions, not just agricultural property and equestrian property sales, that a seller must disclose all information it has to hand.  Failure to do so could result in the buyer finding out something that stops them wanting to purchase the property and claiming under this case.

In this case, the seller had provided replies to enquiries to the buyer.  However, it failed to update its replies when it became aware of a third party’s planning application, despite knowing that this would be a material consideration for the buyer, and would go to the merits of the buyer’s development proposals.  The buyer only became aware of the planning application following exchange of contracts and refused to complete the contract.

The buyer sought the return of its deposit.  The seller argued that the buyer was not able to rescind the contract under condition 7.1.3 of the Standard Conditions of Sale (Fourth Edition) (SCS) as a buyer was only entitled to rescind where the error or omission resulted from fraud or recklessness or where the buyer would be obliged to accept property differing substantially from what the error or omission had led the buyer to expect.

The county court judge had concluded that the buyer was entitled to the deposit as condition 7.1.3 of the SCS was not fair and reasonable in the circumstances of the case.  Consequently, it failed to satisfy the requirements of section 3 of the Misrepresentation Act 1967 and section 11 of Unfair Contract Terms Act 1977.

The Court of Appeal could only interfere with the county court’s decision if it was based on some erroneous principle or was plainly and obviously wrong.  The Court of Appeal therefore dismissed the appeal and held that the buyer was entitled to rescind.

In agricultural property and equestrian property transactions it is vitally important for sellers to answer as fully as possible the buyer’s solicitor’s preliminary and additional enquiries and to keep their own solicitor informed should any replies need changing throughout the transaction.  Any new information relating to an agricultural property or equestrian property sale must be provided to the seller’s solicitor, who will be in the best position to decide whether or not it needs disclosing to the buyer.