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Editorial Committee of the Cambridge Law Journal
Side Letters, Collateral Contracts and the Law of Property
(Miscellaneous Provisions) Act 1989Author(s): Charles HarpumSource:
The Cambridge Law Journal, Vol. 50, No. 3 (Nov., 1991), pp.
399-401Published by: Cambridge University Press on behalf of
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C.L.J. Case and Comment 399
recent and marginal: to transpose the slogan to cases involving
health and safety, the very central concern of tort law, is
certainly not
necessary, and may not be right. It may be said that there is no
longer any need for the common
law to intervene now that the duty to take care not to cause
personal injury or death is reinforced by the 1977 Act in that it
invalidates terms which purport to restrict that duty. But here the
doctor was
allegedly so overworked as to be endangering the patients as
well as himself. The common law must surely have something to say
on the
question whether A can insist on B's performing his promise when
to do so would threaten injury to C. Kores v. Kolok [1959] Ch. 108
(on "public policy") could be invoked.
But the solution may lie elsewhere. The employer's duty is not
to avoid all foreseeable harm to the employee. It is a duty not
to
endanger him needlessly, in view of all the circumstances. Those
circumstances include what the employee has undertaken to do. Were
it not so, we would never get the asbestos out of old buildings, or
oil from under the sea. It has been held reasonable, in the
interest of helping third parties, to expose an employee to quite
foreseeable harm (Watt v. Herts. CC [1954] 1 W.L.R. 835). But that
does not mean that the law permits people to bind themselves to
work night and day until they drop, any more than the law allows a
creditor to bind its debtor hand and foot (Horwood [1917] 1 K.B.
305). It is surely arguable, contrary to what the Court of Appeal
held on this point, that the common law should, on grounds of
policy, uphold the doctor's right to health against exploitation by
the health authority.
Tony Weir.
C.L.J. Case and Comment 399
recent and marginal: to transpose the slogan to cases involving
health and safety, the very central concern of tort law, is
certainly not
necessary, and may not be right. It may be said that there is no
longer any need for the common
law to intervene now that the duty to take care not to cause
personal injury or death is reinforced by the 1977 Act in that it
invalidates terms which purport to restrict that duty. But here the
doctor was
allegedly so overworked as to be endangering the patients as
well as himself. The common law must surely have something to say
on the
question whether A can insist on B's performing his promise when
to do so would threaten injury to C. Kores v. Kolok [1959] Ch. 108
(on "public policy") could be invoked.
But the solution may lie elsewhere. The employer's duty is not
to avoid all foreseeable harm to the employee. It is a duty not
to
endanger him needlessly, in view of all the circumstances. Those
circumstances include what the employee has undertaken to do. Were
it not so, we would never get the asbestos out of old buildings, or
oil from under the sea. It has been held reasonable, in the
interest of helping third parties, to expose an employee to quite
foreseeable harm (Watt v. Herts. CC [1954] 1 W.L.R. 835). But that
does not mean that the law permits people to bind themselves to
work night and day until they drop, any more than the law allows a
creditor to bind its debtor hand and foot (Horwood [1917] 1 K.B.
305). It is surely arguable, contrary to what the Court of Appeal
held on this point, that the common law should, on grounds of
policy, uphold the doctor's right to health against exploitation by
the health authority.
Tony Weir.
side letters, collateral contracts and the law of property
(miscellaneous provisions) act 1989
Record v. Bell [1991] 1 W.L.R. 853 (Judge Paul Baker Q.C.) is
the second decision on the Law of Property (Miscellaneous
Provisions) Act 1989, s. 2. That section, which replaces the Law of
Property Act 1925, s. 40, introduces more stringent formality
requirements for contracts for "the sale or other disposition of an
interest in land". Such contracts can now
"only be made in writing", where before they could be made
orally and merely evidenced in writing or proved by acts of part
performance. They must incorporate "all the terms which the parties
have expressly agreed in one document or, where contracts are
exchanged, in each". Previously, although the memoran- dum of the
agreement was supposed to contain all the terms, this
side letters, collateral contracts and the law of property
(miscellaneous provisions) act 1989
Record v. Bell [1991] 1 W.L.R. 853 (Judge Paul Baker Q.C.) is
the second decision on the Law of Property (Miscellaneous
Provisions) Act 1989, s. 2. That section, which replaces the Law of
Property Act 1925, s. 40, introduces more stringent formality
requirements for contracts for "the sale or other disposition of an
interest in land". Such contracts can now
"only be made in writing", where before they could be made
orally and merely evidenced in writing or proved by acts of part
performance. They must incorporate "all the terms which the parties
have expressly agreed in one document or, where contracts are
exchanged, in each". Previously, although the memoran- dum of the
agreement was supposed to contain all the terms, this
This content downloaded from 149.171.25.233 on Mon, 26 Aug 2013
20:54:46 PMAll use subject to JSTOR Terms and Conditions
-
4 The Cambridge Law Journal [1991]
requirement could sometimes be sidestepped by waiver of the
omitted term or a submission to it. Furthermore, the contract must
now be signed by both parties (though on exchange of contracts it
is enough If each signs his part). In the past, it sufficed that
the memorandum was signed by the party against whom the contract
was to be enforced. Section 2 was enacted in response to
recommendations from the Law Commission: (1987) Law Com. 164.
Unfortunately that report failed to consider many obvious
situations which do not fit the new section comfortably: e.g., it
is unclear whether a contract for the sale of land can now be
created by an exchange of letters, or whether section 2 applies to
the creation and exercise of rights of pre-emption. One situation
which the Commission did consider was that of collateral contracts:
Law Com. 164 p. 20. It is common practice for parties to refuse to
enter into a contract for the sale of land or to execute a new
lease without some collateral undertaking contained in a side
letter e.g. a tenant may agree to take a lease only if the lessor
undertakes not to enforce certain of the covenants against him.
Such side letters have long been thought to be effective as
collateral contracts. At one time, collateral contracts were
frowned upon either (i) because they provided a means of obtaining
damages for a non-fraudulent misrepresentation (Heilbut, Symons
& Co. v. Bllskle- ton [1913] A.C. 30) a consideration made
irrelevant by the Misrepre- sentation Act 1967, s. 2; or (ii)
because they offended against the parol evidence rule (Henderson v.
Arthur [19071 1 K.B. 10), a rule now largely ignored: Cit &
Westminster Properties (1934) Ltd. v. Mudd [1959l Ch. 129. If A
contracts to buy land from B, on the basis of some assurance by B
contained in a side letter, the issue which the court has to
resolve is whether there is in substance just one contractz or
whether there are two one genuinely collateral to the other. If the
court finds as a fact that there is a separate collateral contract,
then the existence of that agreement cannot invalidate the main
contract of sale. Its terms are necessarily quite separate and
distinct from that main contract. It is difficult to see why the
enactment of section 2 should have changed the law at all in this
regard, granted that under the Law of Property Act 1925 s. 40, a
memorandum had in general to contain all the terms agreed. Such
collateral agreements were well-recognised under the old law:
Jameson v. Kinmell Bay Land Co. Ltd. (1931) 47 T.L.R. 593. The Law
Commission expected the practice to continue? rightly as it now
appears.
In Record v. Bell the plaintiff had contracted to sell a
property in Westminster to the defendant. The invasion of Kuwait
seriously affected the defendant's financial position, and he tried
to renege from the contract. Under its terms, the defendant had
agreed to buy subject to the covenants and conditions referred to
on the register of
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C.L.Je C.L.Je Case and Comment Case and Comment 401 401
title. However, the plaintiff was not in a position to produce
up-to- date office copies of the register. As there was some
urgency over the transaction the parties agreed to proceed to
exchange on the strength of an undertaking given by the plaintiff's
solicitors, that the office copies would be produced, that they
would reveal the plaintiff as registered proprietor, and that there
were no adverse entries save for mortgages which would be
discharged on completion. Tl2at undertaking was embodied in a side
letter and it was in due course honoured. The defendant's principal
argument was both technical and unmeritorious. The side letter had
not been expressly incorpora- ted into the written contract for the
sale of land. That contract was therefore invalid because it did
not contain all the terms agreed between the parties as section 2
required. Judge Baker rejected that contention. The plaintiffs
solicitor had given a warranty as to the state of the vendor's
title to induce the defendant to exchange. That offer had been
accepted by the exchange of contracts. Following De Lassalle v.
GuiZdford [1901] 2 K.B. 21S, he held that the essential elements
for the existence of a collateral contract were therefore
unequivocally established. That contract was not itself a contract
for the sale of land and accordingly did not have to comply with
section 2.
lshe result is very welcome. Side letters are an everyday fact
of life in dealings with land, and it would be unfortunate lf, as
Judge Baker observed, "common transactions of this nature should
nevertheless cause the contract to be avoided". The more stringent
requirements of section 2 may, as both the Law Commission and Judge
Ba}er suggested, "lead to a greater use of the concept of
collateral warranties than has hitherto been necessary" (though
parties can always ensure that this will not happen by use of
appropriate special conditions: McGrath v. Shah, The Times, 22
October 1987). This does not undermine the policy of the section,
provided that the terms of any collateral agreement are
unambiguous. Taken with the earlier decision in Spiro v. Glencrown
Properties Ltd. [1991] 2 W.L.R. 931, noted at p. 236 ante, Record
v. Bell suggests that the judiciary intend to make section 2 workS
and that they wilJ be unsympathetic to unmeritorious technical
defences.
CHARLES HARPUM.
FORFEITURE COMMANDO SrYLE
THE landlord of commercial property whose right of re-entry has
been activated has a choice. He can issue proceedings, claiming
that he is now forfeiting the lease, and seek a possession order
from the
title. However, the plaintiff was not in a position to produce
up-to- date office copies of the register. As there was some
urgency over the transaction the parties agreed to proceed to
exchange on the strength of an undertaking given by the plaintiff's
solicitors, that the office copies would be produced, that they
would reveal the plaintiff as registered proprietor, and that there
were no adverse entries save for mortgages which would be
discharged on completion. Tl2at undertaking was embodied in a side
letter and it was in due course honoured. The defendant's principal
argument was both technical and unmeritorious. The side letter had
not been expressly incorpora- ted into the written contract for the
sale of land. That contract was therefore invalid because it did
not contain all the terms agreed between the parties as section 2
required. Judge Baker rejected that contention. The plaintiffs
solicitor had given a warranty as to the state of the vendor's
title to induce the defendant to exchange. That offer had been
accepted by the exchange of contracts. Following De Lassalle v.
GuiZdford [1901] 2 K.B. 21S, he held that the essential elements
for the existence of a collateral contract were therefore
unequivocally established. That contract was not itself a contract
for the sale of land and accordingly did not have to comply with
section 2.
lshe result is very welcome. Side letters are an everyday fact
of life in dealings with land, and it would be unfortunate lf, as
Judge Baker observed, "common transactions of this nature should
nevertheless cause the contract to be avoided". The more stringent
requirements of section 2 may, as both the Law Commission and Judge
Ba}er suggested, "lead to a greater use of the concept of
collateral warranties than has hitherto been necessary" (though
parties can always ensure that this will not happen by use of
appropriate special conditions: McGrath v. Shah, The Times, 22
October 1987). This does not undermine the policy of the section,
provided that the terms of any collateral agreement are
unambiguous. Taken with the earlier decision in Spiro v. Glencrown
Properties Ltd. [1991] 2 W.L.R. 931, noted at p. 236 ante, Record
v. Bell suggests that the judiciary intend to make section 2 workS
and that they wilJ be unsympathetic to unmeritorious technical
defences.
CHARLES HARPUM.
FORFEITURE COMMANDO SrYLE
THE landlord of commercial property whose right of re-entry has
been activated has a choice. He can issue proceedings, claiming
that he is now forfeiting the lease, and seek a possession order
from the
This content downloaded from 149.171.25.233 on Mon, 26 Aug 2013
20:54:46 PMAll use subject to JSTOR Terms and Conditions
Article Contentsp. 399p. 400p. 401
Issue Table of ContentsThe Cambridge Law Journal, Vol. 50, No. 3
(Nov., 1991), pp. 379-581+vii-xixVolume Information [pp.
vii-xix]Case and CommentA Metewand for Reasons? [pp. 379-381]Direct
Effect of E.C. Directive on Impact Assessment [pp. 382-384]The
Crown's Seabed Estate. A Valuable Prerogative [pp.
384-386]Sanitising Insanity. Sleep-Walking and Statutory Reform
[pp. 386-388]Thief or Swindler: Who Cares? [pp. 389-392]The Nature
of the Warranty in Contracts of Insurance [pp. 393-394]Sea Carriage
Rights [pp. 394-397]Physician. Kill Thyself! [pp. 397-399]Side
Letters, Collateral Contracts and the Law of Property
(Miscellaneous Provisions) Act 1989 [pp. 399-401]Forfeiture
Commando Style [pp. 401-404]Laying Lord Eldon's Ghost: Donatio
Mortis Causa of Land [pp. 404-407]Following Money. Changing
Position [pp. 407-409]Equitable Liability for Money Laundering [pp.
409-411]Flexibility in Adoption [pp. 411-413]Pre-Incorporation
Contracts Revisited [pp. 413-416]Income Tax. Purposes and Trading
Transactions [pp. 416-418]Issue Estoppel and Changes of Precedent
[pp. 419-421]
Penal Regressions [pp. 422-444]Domicile Revisited [pp.
445-463]Stealing from the Small Family Business [pp. 464-489]The
Argument from Consistency for Overruling Selvey [pp. 490-516]Book
ReviewsReview: untitled [pp. 517-519]Review: untitled [pp.
520-522]Review: untitled [pp. 522-524]Review: untitled [pp.
524-525]Review: untitled [pp. 525-527]Review: untitled [pp.
528-529]Review: untitled [pp. 529-532]Review: untitled [pp.
532-534]Review: untitled [pp. 534-536]Review: untitled [pp.
536-539]Review: untitled [pp. 539-540]Review: untitled [pp.
540-542]Review: untitled [pp. 542-544]Review: untitled [pp.
544-547]Review: untitled [pp. 547-550]Review: untitled [pp.
550-551]Review: untitled [pp. 551-553]Review: untitled [pp.
553-554]Review: untitled [pp. 555-556]Review: untitled [pp.
556-557]Review: untitled [pp. 558-559]Review: untitled [pp.
559-560]Review: untitled [pp. 560-561]Review: untitled [pp.
561-563]Review: untitled [pp. 563-564]Review: untitled [pp.
564-565]Review: untitled [pp. 565-567]Review: untitled [pp.
567-568]Review: untitled [pp. 568-569]Review: untitled [pp.
570-571]Review: untitled [p. 571]Review: untitled [pp.
571-573]Review: untitled [pp. 573-574]Review: untitled [pp.
574-575]
Books Received [pp. 576-579]Cambridge University Law Society
1990-1991 [pp. 580-581]