Court: Court of Appeal (Civil Division)
Judgment Date: 24 November 1977
Where Reported: [1978] Ch. 231; [1978] 2 W.L.R. 621
Legal Issues in Daulia Ltd v Four Millbank Nominees Ltd
The legal issue in Daulia Ltd v Four Millbank Nominees Ltd focused on the nature of a unilateral contract and the requirements for its enforcement, particularly in the context of property transactions.
Daulia Ltd v Four Millbank Nominees Ltd dealt with whether acts done by a party could constitute part performance of such a contract, thereby overcoming the statutory requirement of a written memorandum as stipulated by the Law of Property Act 1925.
The central question was whether actions taken in reliance on an oral promise could be considered legally binding and enforceable in the absence of a written agreement​​.
Material Facts in Daulia Ltd v Four Millbank Nominees Ltd
Daulia Ltd sought to purchase properties from Four Millbank Nominees Ltd, who were in a position to sell as mortgagees.
The plaintiffs claimed that an oral agreement was made wherein the defendants would exchange contracts for the sale if the plaintiffs attended the defendants’ offices with a drafted contract and a banker’s draft for the deposit.
The plaintiffs fulfilled these conditions but the defendants refused to exchange contracts. The plaintiffs then sought damages for breach of the oral agreement.
The initial ruling by Brightman J. struck out the claim, stating that it did not disclose a cause of action since there was no written memorandum of the agreement, as required by section 40 (1) of the Law of Property Act 1925​​.
Judgment in Daulia Ltd v Four Millbank Nominees Ltd
On appeal, the court dismissed the appeal. It held that while the plaintiffs performed the conditions of the offer, creating a valid unilateral contract, the defendants’ failure to enter into a contract for sale constituted a breach.
However, the court noted that although the unilateral contract was not for the sale or an interest in land, it pertained to the disposition of an interest in land.
Consequently, due to the lack of a written memorandum, part performance was necessary for the contract’s enforcement.
The court also determined that the plaintiffs’ actions, though performed in response to the defendants’ offer, did not indicate the existence of a contract, but rather suggested preparation for a future contract.
Therefore, there was no act of part performance to exclude the provisions of section 40 (1) of the Act​​.
The Reason for the Decision in Daulia Ltd v Four Millbank Nominees Ltd
The decision was influenced by the concept that a unilateral contract requires the offeree to perform a specific condition, and upon such performance, the contract becomes enforceable.
However, the court highlighted that such performance must unequivocally indicate the existence of a contract.
In this case, the plaintiffs’ actions were seen as preparatory steps towards contract formation rather than part performance of an existing contract.
The court also emphasised the principle that in determining part performance, one must consider the acts in isolation from the oral contract to assess if they indicate a contract’s existence.
The court concluded that the plaintiffs’ acts were not sufficient to constitute part performance under these criteria.
This decision reflects the strict interpretation of part performance in contract law, particularly concerning property transactions that require formalities like written agreements​​.
Legal Principles in Daulia Ltd v Four Millbank Nominees Ltd
Daulia Ltd v Four Millbank Nominees Ltd reinforced several legal principles related to contract law and property transactions – see Scottish Power UK Plc v BP Exploration Operating Co Ltd (2016).
Firstly, it affirmed that a unilateral contract, where one party promises to perform upon the other party’s fulfilment of a condition, is valid.
Secondly, it established that for a unilateral contract related to property transactions to be enforceable, there must either be a written memorandum (as per the Law of Property Act 1925) or sufficient acts of part performance.
The case also highlighted the principle that the acts constituting part performance must clearly indicate the existence of a contract and be referable to it.
This decision underscores the legal system’s emphasis on formalities in property transactions and the nuanced interpretation of part performance in the context of unilateral contracts.
