Posts Tagged ‘joinder’

SMS as a written memorandum of a contract?

May 15, 2012

In Distinct Fortune Ltd v Hyndland Investment Co Ltd ([2011] 1 HKLRD 817) P agreed to buy property in Tsim Sha Tsui from D. P signed a provisional agreement and paid earnest money. D did not sign a provisional agreement but preferred to sign a formal agreement prepared by the parties’ respective solicitors. The parties’ solicitors then corresponded with each other to negotiate the terms of the formal agreement. All correspondence was ‘subject to contract’. There were two or three telephone conversations between the parties’ solicitors and between the parties’ agents in which the terms of the formal agreement were settled.  D’s representative sent P’s representative a text message to say that P would tell his solicitors to go ahead with the deal. The SMS read ‘Kim said he’ll give instruction to pig to go ahead with the deal’. Kim was a director of D and ‘pig’ was the solicitor acting for D. The next day, D’s solicitors sent out an engrossment of the formal agreement for signature by P. The engrossment was sent out under cover of a letter marked ‘subject to contract’.  P signed the formal contract and returned it to D’s solicitors with a cheque for a further deposit. D’s solicitors returned the contract and the deposit payments since D had decided against proceeding with the transaction. P sought specific performance and D countered that there was no written contract or memorandum to satisfy section 3 of the Conveyancing and Property Ordinance. P relied on the SMS message  (read together with the engrossment of the formal agreement) as the memorandum. Alternatively it argued that returning the signed formal agreement together with a cheque for the deposit amounted to part performance. D succeeded in having the action struck out on the basis that there was neither a memorandum nor part performance.

There was no memorandum. The SMS  could not simply be read together with the formal agreement to form a memorandum since the formal agreement was accompanied by a ‘subject to contract’ letter. The reference in the SMS to the intructions to be given to D’s solicitor would include the instruction to send the agreement with a ‘subject to contract’ letter. The SMS merely referred to ‘the deal’ and so there was not enough detail to forge a link with the engrossed formal agreement. Another problem was that the formal agreement was not in existence at the time of the SMS. Further, the SMS could not be a memorandum since it did not in any sense purport to be signed by D’s representative.

Nor was there part performance; the acts of submitting the signed formal agreement with a deposit were acts preparatory to a contract and not part performance of it.

The case for saying that an oral agreement had been concluded was very weak. The solicitors had been careful to label all of their letters to each other ‘subject to contract’ and to declare that their respective clients were not to be bound by anything said in the correspondence until both parties had signed a formal agreement. Properly understood, the conversations between the parties had not crossed the boundary between negotiations and a concluded contract. The court would not have struck out the action on this basis, however, since a full consideration of the facts would be necessary.

Michael Lower


Reading two documents together to form a memorandum satisfying CPO, s.3

September 24, 2010

Section 3 of the Conveyancing and Property Ordinance requires that land contracts either be in writing or that there be a written memorandum of the terms of a contract that was concluded orally. The contract or memorandum has to be signed by ‘the party to be charged’ (the party trying to escape from performance of the contract).

It is permissible to read two documents together in order to produce a memorandum satisfying section 3. So, in Timmins v Moreland Street Property Co Ltd ([1958] Ch 110) a buyer and seller orally agreed terms for the sale of land in London. A director of the buyer gave the seller a signed cheque for the agreed deposit. The seller then gave him a receipt that identified the parties, the property and the price and made it clear that a contract had been concluded. The buyer wanted to escape from the contract and the seller sought damages for the repudiation of the contract.

One of the buyer’s defences was that there was not a memorandum to satisfy the (now repealed) English equivalent of section 3 of the Conveyancing and Property Ordinance. The receipt was not signed by the buyer. The seller contended that it was possible to read the cheque (signed on behalf of the buyer) together with the receipt.

The buyer’s defence was successful. The English Court of Appeal reiterated the requirements to be met before two documents can be read together to form a memorandum. Jenkins LJ suggested that the two documents must be ‘so manifestly connected without the aid of oral evidence as to justify their being read together.’ (at 129).

This was not so in the present case:

‘But before a document signed by the party to be charged can be laid alongside another document to see if between them they constitute a sufficient memorandum, there must, I conceive, be found in the document signed by the party to be charged some reference to some other document or transaction.’ (at 130)

The cheque contained no reference to the receipt and so they could not be read together.

Michael Lower