Kathleen Fitzgerald and Stephen Hubner consider a recent
Court of Appeal case that has highlighted the distinction
between guarantees and indemnities, and the importance of
ensuring that they are documented in writing
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Section 7(1) Powers of Attorney Act 1971 covers attorneys who are not
individuals. The basic rule is that a corporate attorney can execute a
deed in the same manner appropriate to the corporation on whose
behalf he is executing the deed. A company can therefore execute on the
donor’s behalf (i) by using its own common seal; (ii) by the signature of
two authorised signatories (ie two of its directors, or a director and
secretary); or (iii) by the signature of a single director in the presence of
a witness who attests the signature.
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Most contracts for the sale of property require that the buyer’s deposit
must be paid by a solicitor’s client account cheque, building society
cheque, or banker’s draft. The Standard Conditions (2.2.4) say that the
deposit is to be paid by direct credit or to the seller’s conveyancer by a
cheque drawn on a solicitor’s or licensed conveyancer’s client account.
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What happens if the seller gives a signed transfer to the buyer, even
though the full price has not been paid; can he argue that the deed was
sent in escrow (ie conditional on the rest of the money being paid)?
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If you are acting for a buyer who may want to sub-sell, then check that it
will be permitted under the terms of the contract. Whilst such a right to
sub-sell is automatically implied at common law (ie requiring the seller
to execute a transfer to the buyer’s nominee – such as a sub-buyer), that
is usually excluded. Standard Condition 1.5 says ‘the buyer is not
entitled to transfer the benefit of the contract’ (and there is identical
wording in Standard Commercial Property Condition 1.5.1).
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A contract for the sale of shares contained a detailed mechanism for
notifying a claim of breach of warranty. There had to be either (i) actual
service of a notice, or (ii) deemed service (which required notice to be
sent by first-class post to the sellers, plus a copy to named solicitors,
and to any other firm of lawyers subsequently instructed).
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Guarantees have been under the spotlight
recently, with the decision in Prudential Assurance
Company Ltd and others v PRG Powerhouse Group
Ltd and another. Provision of a third-party
guarantee, or indemnity, is often the key to enabling
a property transaction where weak tenant
covenant, for example, would otherwise make it
impossible. Landlords in particular need to be aware
of their characteristics and limitations. A recent
case serves as reminder of where the dividing line
lies between guarantee and indemnity, and the
required formalities which apply.
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From 6 April, it is no longer necessary for private companies to have a
company secretary. However, an existing company that is thinking of
doing without a secretary will have to check its articles and the company
will not be able to dispense with any such requirement (until the articles
are changed). Note also that a company secretary who is an individual
no longer has to provide a private residential address (instead a service
address – typically the company’s registered office – can be given).
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Throughout the 1990s much time and energy was expended on working
out how third parties to construction contracts (eg funders, purchasers,
Ts) could sue contractors, consultants and key sub-contractors. The
result was the creation of a maze of collateral warranties, with each third
party entering into warranties with each consultant, contractor and subcontractor.
Surprisingly, such relatively archaic procedures have remained the norm.
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When will a defaulting buyer have his deposit returned to him? Section
49(2) LPA 1925 says that ‘the court may, if it thinks fit, order the
repayment of any deposit’. So, if a buyer defaults, the court has a
discretion as to whether or not the deposit should be returned.
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To what extent can a defaulting party argue that the other side is not
‘ready, able and willing to complete’ because they have not completed
all the necessary administrative steps? The answer is that the courts
take a realistic approach, and do not expect a party to have necessarily
finalised every administrative detail – provided those details could have
been sorted out within a reasonable time.
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Emma Humphreys and Edwin Johnson QC consider a case
concerning a new long lease sought by a tenant pursuant to
the 1993 Act, providing welcome clarity on the extent to which
terms of the new lease can diverge from the existing one.
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If your client buys a property in Turkey, do they need to have a will drawn
up in Turkey or does their English will cover everything? If the client has
a valid English will the English courts would say that this applies to the
client’s worldwide assets.
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If a TOGC is to apply, it is important to check that the buyer personally
intends to carry on the same kind of business. This is well illustrated by
a recent case in which the sale of a restaurant was not a TOGC, because
the buyer did not carry on a restaurant business after the transfer
(instead, he granted a restaurant licence to someone else who paid him
a percentage of the restaurant’s turnover).
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