Lawyers love a paper trail.  And where land is involved, this is particularly true.

The normal rules of contract law are surprisingly informal: to create a valid commercial contract, parties generally need to demonstrate:

• a valid offer;
• acceptance of the offer;
• consideration (some sort of payment); and
• an intention to create legal relations. 

As long as the contract satisfies these conditions, it could be enforceable, whether oral or written down.

But when it comes to land, contracts must observe much stricter requirements.  The catchily-titled Law of Property (Miscellaneous Provisions) Act 1989 (“LP(MP)A”) stipulates that land-based contracts should be made in writing, should incorporate all agreed terms, and be signed by or on behalf of each party. 

These stricter requirements shouldn’t be taken lightly.  Following a 2008 decision, the courts now rigorously enforce these principles.

In Yeoman’s Row Managements Ltd v Cobbe [2008], a land owner apparently reached an oral agreement with a developer, in which the developer was to apply for planning permission, then redevelop and buy the land itself.  Nothing was written down, and the terms were not formalised.  The developer successfully applied for planning permission, which increased the value of the land.  At the same time, land values had risen dramatically, and the landowner decided that it didn’t like the bargain it had agreed, and wanted more.  So the landowner argued that since the “agreement” did not satisfy the conditions set out in the LP(MP)A 1989 in relation to land, the agreement itself was not enforceable.  The developer argued that the landowner should be prevented from saying that there was no agreement, on the basis that detailed discussions had taken place, and it had acted in reliance on the landowner’s assurances.

The House of Lords sided with the landowner, disagreeing with the judge at first instance and the Court of Appeal.  The agreement was not legally binding, although it did concede that the developer would have a claim for “unjust enrichment” in relation to the increased land value, which was significantly less valuable to the developer.  The Lords also explained that since commercial organisations have access to legal advice, they have no excuse for not observing the LP(MP)A rules.  So before agreeing a land-based contract, you should make sure it’s written down, it contains everything you intend to agree, and that it’s signed by both sides.