Remedies, Default, Misrepresentation and Professional Conduct
This domain tests remedies when a transaction goes wrong, and the conduct rules that apply while it goes right.
Remedies for breach
- Damages for losses arising naturally from the breach or within the parties' contemplation (Hadley v Baxendale); the buyer may claim cost of cure or diminution in value.
- Specific performance is available because land is unique, but it is discretionary and refused where damages suffice or the buyer is in default.
- Late completion: default interest, a notice to complete making time of the essence, and ultimately rescission with forfeiture of the deposit.
- Misrepresentation: rescission and/or damages. Under s.2(1) Misrepresentation Act 1967 the representor is liable unless they prove reasonable grounds for belief; fraud attracts damages in deceit.
- Exclusion of liability for misrepresentation is subject to the reasonableness test (s.3 MA 1967) and, for consumers, the Consumer Rights Act 2015.
Conduct
- Conflicts: acting for both seller and buyer is generally prohibited unless the clients have a substantially common interest, give informed consent in writing, and it is reasonable - rarely appropriate in a straight sale.
- Acting for lender and borrower is permitted but requires full disclosure of anything material to the lender.
- Undertakings are personal and must be honoured even if the client fails to provide funds; a solicitor cannot make an undertaking conditional on a third party.
- Client money must be held under the SRA Accounts Rules; completion monies must not be used for another client.
- Money laundering: verify identity, source of funds and source of wealth, and report suspicions.
Worked example
On completion the seller's solicitor undertakes to redeem the existing charge and forward the DS1. The seller absconds with the funds. The undertaking still binds the firm, which must discharge the charge from its own resources and report the matter.
Traps
- Assuming a general no-warranty clause defeats a claim based on the seller's replies.
- Treating an undertaking as a promise subject to the client's authority.
- Acting for both parties where one is unrepresented or the sale is by auction.