We are often asked by housing associations to look at a contract for the purchase of land and to explain what it means. Legal contracts are supposed to provide certainty and clarity but the opposite can sometimes be the case. So how do you avoid contract confusion?
We recently looked at a contract for a housing association that had an 'option' to purchase some land for development. Rather than agreeing to buy the land outright the association had instead entered into an agreement where it could choose to buy the land in the future (within a certain period). This can be a flexible method of tying a landowner into a longer term arrangement when a client is not sure if it might want to buy a site for a number of months/years, if at all. The contract had been put in place by other lawyers, (this is always a comfort when asked to comment on something) but had then been amended due to changes in circumstances. What did a certain clause in the contract now mean, asked the association?
Unfortunately our legal opinion differed from what the housing association and the landowner had intended (if indeed they both intended the same thing). This could cause all sorts of problems.
There are some basic 'rules' that should be followed to help avoid confusion over contract terms:-
- Have your contract in one single document rather than in a complicated exchange of formal letters;
- If a term is capable of different meanings, then it should be clearly defined;
- If there is a term in the contract that is meaningless or makes no sense at all, then it should not be in the contract;
- When agreeing your deal with a landowner, don't overcomplicate things;
- If you don't know what a contract term means, don't guess, ask a lawyer.
And something else to remember - don't record your deal with the landowner in writing until you have taken legal advice - your letters could be regarded as contractually binding unless your correspondence is clearly marked with words such as "subject to contract" or "not to be construed as part of a legally binding contract".
If you'd like advice on avoiding contract confusion or on any development site sales, please contact our housing team.
