Exchange of Contracts Flashcards
(22 cards)
What is the legal effect of exchange of contracts in property transactions?
It creates a binding contract under which both parties are legally obliged to complete the sale or purchase.
Who prepares the draft contract in a property sale?
The seller’s solicitor, based on the heads of terms, title documents, and client instructions.
What is included in the contract bundle sent to the buyer’s solicitor?
The draft contract, official copies, and protocol forms.
What must the buyer’s solicitor check before approving the contract?
The contract terms against the heads of terms and client instructions, and whether amendments are needed.
What should a buyer’s solicitor check before exchange?
Search results, replies to enquiries, survey report, insurance arrangements, deposit, completion date, signed contract, and authority to exchange.
What should a seller’s solicitor check before exchange?
Redemption figure, response to final enquiries, signed contract, authority to exchange, and ensure readiness.
What is Law Society Exchange Formula B?
The standard telephone exchange method used for most property transactions, involving a set procedure and undertakings.
What must solicitors confirm in the Formula B telephone call?
That both hold signed contracts, agree final wording and figures, insert the completion date, and exchange with recorded names, date, and time.
What undertakings are given under Formula B?
To send the counterpart contract and deposit by post or DX, and to hold the signed contract to the order of the other solicitor.
What is a solicitor’s undertaking?
A binding professional promise to take action, enforceable by regulatory bodies.
What is Formula A used for?
When one solicitor holds both signed contracts (e.g. they are going abroad), and the other solicitor is only sent their client’s copy.
What is Formula C used for?
For chain transactions where exchange depends on other related exchanges, though it is rarely used due to its complexity.
What is a “release” in the context of Formula B?
A time-limited agreement allowing a solicitor to exchange later on a related deal before a deadline, or the original exchange lapses.
Why is it risky to exchange on one transaction without securing the related one?
Because if the second exchange fails, the client may be contractually bound without the means to complete.
After exchange, what administrative steps should the solicitor take?
Prepare a memorandum of exchange, send the counterpart contract, and retain a copy in case the original is lost.
When does risk pass to the buyer in property transactions?
At exchange of contracts, unless otherwise agreed.
What should the buyer have in place from exchange?
Property insurance and, if applicable, a protection notice on the register.
Why might a buyer protect their equitable interest after exchange?
To ensure priority, particularly in long-delayed completions (e.g., for new builds).
What notice protects an equitable interest on registered land?
A notice on the Land Registry register.
What protects an equitable interest on unregistered land?
A class c(iv) land charge at the Land Charges Registry.
What are some practical tasks parties carry out post-exchange?
Book removal vans, notify lenders, submit certificates of title, and request mortgage funds.
What is the significance of the completion date set during exchange?
It becomes contractually binding and determines the timing for final payment and physical handover.
