Exchanging contracts: solicitor’s authority

In Domb v Isoz ([1980] Ch. 548, CA (Eng)) S agreed to sell her house to P. The form of the contract had been agreed and P’s solicitor sent the part of the contract signed by his clients to S’s solicitor together with a cheque for the deposit. S’s solicitor agreed to hold the contract to P’s solicitors order. S’s solicitor held his own client’s signed part of the contract. The two solicitors then spoke to each other and agreed that an exchange of contracts had been effected. Then S refused to complete. The question was whether there had been an effective exchange of contracts. The English Court of Appeal unanimously affirmed that there had been an effective exchange of contracts.

Conveyancing solicitors have implied and ostensible authority to effect an exchange of contracts by such method as they see fit (Templeman L.J. at 563):

‘Exchange by telephone, it seems to me, eliminates, or at any rate substantially reduces, the danger that any client will lose a bargain or be left without a home. Exchange by telephone can only take place after both vendor and purchaser sign contracts in identical form (subject to the question of rectification, which can apply to any contract) so that there is no doubt about the terms of the contract. Exchange by telephone can only take place when a contract signed by a client is in the physical possession of his own solicitor or in the possession of the solicitor on the other side who has agreed to hold that part to the order of the despatching solicitor … [I]f two solicitors exchange by telephone, they should then and there agree and record identical attendance notes.’ (Templeman LJ at 564)

The part of the contract signed by S had an extra clause (with the agreed apportionment of the price between the house and certain fittings). This did not prevent an exchange in this case since there was no doubt that the apportionment had been agreed and Buckley LJ would have been prepared to order rectification if need be (559).

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