It is very important that conditional contracts must fulfill certain requirements. They are as follows:
Certainty
It is very important that the terms and conditions of the contract are mentioned clearly. This was highlighted in Lee Parker v Izzet (No. 2[1972]2All ER 800. In this case, an agreement to sell a freehold house ‘subject to the buyer obtaining a satisfactory mortgage’ was held void. The word ‘satisfactory’ was decided to be too vague to decide on the circumstances where the buyer would be allowed to validly withdraw from the contract. However, this does not mean that the phrase ‘subject to mortgage’ may not be used at all, especially when it is made clear by the draft that the word ‘satisfactory’ means an offer that is satisfactory to the buyer.
Certainty must also be provided with regards to other common conditions like satisfactory searches, planning permissions, etc. When the condition is void the whole contract fails.
Time for performance
Time for performance of the condition is of essence during a contract and this cannot be extended either by contract or by court. This was formally decided as a judgment in the Aberfoyle Plantations Ltd. v Cheng [1960] AC 115 case, where certain rules regarding the time for performance of a condition were laid down:
a) When a contract contains a date for completion of a condition, the same should be performed, irrespective of the fact that time was of essence in the contract.
b) When time is mentioned in the contract, the condition must be completed or else the contract will fail.
c) And when time is not mentioned, the condition must be completed within reasonable time. But this is not preferred, as there is no clear direction on what constitutes ‘reasonable’ time. Hence, it is important that the time for performance should be mentioned.
Withdrawal from a conditional contract
The contract can be withdrawn only for the reasons mentioned in the condition and only by the person who is to benefit from the condition. No other reason or person can withdraw from the contract, although this person should prove that there is sufficient reason behind the withdrawal. As for withdrawal from the contract before performance of the condition, it depends on the construction of the condition if this can be done.
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