In Keay v Morris Homes (West Midlands) Ltd ([2012] EWCA Civ 900, CA (Eng)) K entered into an agreement for the sale of land and the leaseback of part. MHL was to carry out building works on the part leased back. The agreement was later varied when a price reduction was agreed. The original agreement complied with section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989 and the supplemental agreement seemed also to do so. K alleged that a further term had been orally agreed at the time of the variation. The alleged term required MHL to proceed promptly with the building works. K was seeking damages for breach of this term.
This appeal concerned a preliminary point as to whether this term needed to be incorporated in the supplemental agreement (whether it needed to be part of an agreement that complied with section 2(1)). Rimer L.J. said that this was a question of fact. The question was whether the alleged term was part of the varied agreement for the sale and leaseback or whether it was a truly separate contract ([32]). This would need to be decided at trial. If it was part of the variation then the variation (and this term) were void for want of compliance with section 2(1).
In fact, the sale and leaseback were completed. K argued that once all the land elements of the sale and leaseback were complete any outstanding terms were valid contractual obligations even if the agreement had been void for failure to comply with section 2. This was rejected. If the alleged term was part of the supplemental agreement then the agreement was void and the fact that some terms of the void agreement had in fact been performed did not mean that any outstanding terms became valid ([47]).
