Buyer’s Failure to Complete

13 August, 2013

Where a buyer fails to complete the purchase of a property it is clear that the seller may sue the buyer for damages. What has been less clear is whether the amount of damages should be based on the value of the property at the date of the breach, or some later date, when the property market had fallen.

 

The Court of Appeal considered this issue in the recent case of Hooper v Oates [2013]1. In this case, a buyer of residential property failed to complete on the contractual completion date in 2008. The sellers then tried to find another buyer for the property, but ultimately failed and they gave up some 2 years later in 2010.  The sellers then sued the buyer for damages.

 

The Court had to consider whether the sellers’ damages arising from the buyer’s failure to complete the purchase of the property should be based on the value of the property at the date of breach i.e. as at the contractual completion date in 2008, or at the later date when the sellers’ efforts to sell had been exhausted which was in 2010, by which time the property market had fallen.

 

The Court of Appeal held that the property should be valued, not at the date of breach, but at the later date when the sellers’ attempts to market the property had proved unsuccessful.  The Court felt that there was no suggestion in this case that the sellers had failed in any way in their duty to mitigate their loss.

 

The sellers were awarded £110,000 in damages, representing the difference between the contract price and the estimated open market value in 2010.

 

The key point that the Court made was that the availability of a market is a very relevant factor in relation to the date for assessment of damages for breach of a contract for the sale of land where the buyer fails to complete.

 

The date of breach is the right date for assessment of damages only where there is an immediately available market for the sale of the relevant asset. Since land usually takes some time to sell, the date of breach is unlikely to be the relevant date where the asset in question is land.

 

1Link to judgment: Hooper v Oates [2013] EWCA Civ 91

 

 

Reviewed in 2015