Daulia Ltd v Four Millbank Nominees Ltd [1978] Ch 231
Facts
D Ltd negotiated with F Ltd for the sale of certain properties. D Ltd alleged that there was an oral agreement that F Ltd would exchange contracts for the sale of the properties if D Ltd attended at their offices with a draft contract in terms already agreed and a banker’s draft for the deposit. D Ltd complied with those conditions, but F Ltd refused to exchange contracts. D Ltd claimed damages for breach of the oral agreements. The judge struck out the statement of claim as disclosing no cause of action in that there was no note or memorandum of the agreement sufficient to satisfy the Law of Property Act 1925. D Ltd appealed.
Legal Issue
Did a unilateral contract exist between the parties meaning the defendants were bound to complete the written contract for the property.
Held
The Court of Appeal dismissed the appeal because the alleged agreement could not be enforced under the land formalities then applicable. On the pleaded facts, the requested attendance with documents and deposit could constitute performance of a unilateral promise to exchange contracts. However, that did not remove the statutory requirement governing the land transaction, and the acts relied upon did not establish sufficient part performance.
The case is also known for observations that, once an offeree begins the requested performance, a unilateral offeror may be under an implied obligation not to prevent completion. Those observations must be distinguished from the actual reason the claimant failed. Establishing an offer and performance does not necessarily establish compliance with an independent statutory formality.
⭐ Legal Principle
A unilateral bargain may arise through performance of the stated condition, and the offeror may be constrained from preventing completion once performance begins. Separate statutory formalities can nevertheless prevent enforcement. Daulia's actual result concerned the historical writing requirement for a transaction disposing of an interest in land.
Significance
Daulia is frequently cited on revocation of unilateral offers, but its unsuccessful claim also demonstrates the importance of statutory formalities. The discussion of protecting commenced performance should not obscure the land issue that determined the outcome. Section 40 of the Law of Property Act 1925 has since been replaced for relevant contracts by section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. A current problem therefore requires the current statutory test rather than automatic application of the old part-performance doctrine.
Common exam questions about this case
Why did performance of the requested acts not secure judgment for Daulia?
Formation was not the only issue. The alleged undertaking concerned a transaction within the land formalities then applicable, and the required written memorandum or sufficient part performance was absent. A claimant can therefore establish the ingredients of a unilateral arrangement yet fail to enforce it because of an independent statutory requirement.
What is the relevance of beginning performance of a unilateral offer?
The observations in Daulia support an implied obligation not to prevent completion once the requested performance has begun. They address protection during performance rather than a promise by the offeree to finish. The exact offer and context remain important, and those observations must be distinguished from the formalities point deciding the appeal.
Would the same land-formality test apply to a modern transaction?
The historical section 40 framework should not be applied without checking the date and current legislation. Relevant modern land contracts fall under section 2 of the 1989 Act. An exam answer must therefore distinguish Daulia's formation discussion from its now historical treatment of written memoranda and part performance.