Specific performance of an oral sale contract

The right of a person seeking implementation and specific performance of an agreement concerning a contract of property sale, exchange, assignment, consideration or distribution can be safeguarded by a written agreement of the parties, after due diligence and filing with the Land Registry within a specified time period.

An oral agreement does not safeguard parties, except in rare cases and only if the court determines that it would be unjust and unreasonable not to order specific performance. The right to specific performance of an oral sale contract is therefore very weak and does not adequately protect the buyer or the party seeking to enforce the contract.

Requirements

For a court to order the specific performance of a contract it is required that the conditions specified in article 6(1) of the Sale of Land (Specific Performance) Law N.81 (I)/2011 be observed.

The contract must be filed with the Land Registry and the action for the issuance of the order must be brought within the period of limitation provided in the law for claims arising from breach of contract. The prescribed period of limitation for bringing an action concerning a contract is six years from the day the basis of the action was completed.

According to Article 6(2), in the event that the contract is in writing but has not been filed in accordance with the provisions of the law or the contract is oral, the court may order its specific performance when it deems this fair and reasonable under the circumstances and as long as the rights of third parties resulting from prior encumbrances or prohibitions are not affected.

In addition, the court should be satisfied that the contract sufficiently specifies the identity of the contracting parties and the subject of the contract, as well as that there is an entry in the Land Registry in the name of at least one of the sellers of the immovable property or the share thereof that constitutes the subject of the contract.

Supreme Court decision

The Supreme Court made a unanimous decision in C.A.189/2017, dated July 16, concerning a lawsuit for an alleged violation of an agreement to exchange immovable property. The challenge related to the decision of the district court to issue interlocutory orders that prevented the continuous and unhindered access to a strip of land of a neighbouring property and works for the construction of a residence on the adjacent property.

The dispute between the parties concerned the subject matter of the exchange agreement and in particular the width of the right-of-way granted for right-of-access on a public road.

The parties affected by the issuance of the decrees suggested that the alleged oral exchange agreement had been entered into before the activation of Law 81(I)/2011 and therefore its specific performance was not possible. It could not be considered that the first condition set by the reservation of article 32(1) of Law 14/1960 had been satisfied and the interlocutory orders were erroneously issued and finalised.

The Supreme Court held that the trial court’s finding of arguable case with reference to the remedy of specific enforcement, with the observation that the oral agreement for the exchange of land may be specifically enforceable under section 6(2) of the Law, is not correct.

It pointed out that the requirement for specific performance refers to a remedy and is not, in itself, a basis on which any breach of the alleged immovable property exchange agreement can be founded to satisfy the first condition of Article 32(1). This aspect, however, remained intact since it is not commented on by the court of first instance.

However, the relevant observation made by the Supreme Court is that Law N.81(I)/2011 seems to make a written agreement entered into before its entry into force specifically enforceable, through a lawsuit, under certain conditions.

From the provisions of article 6(2), but also in general, the specific law does not seem to be applied in relation to an oral contract which was entered into before it came into effect. The contention raised by the appellants is that the exchange agreement was entered into orally in 1997.

In any event, there is a complete lack of reference to anything to show that the oral agreement to exchange land is specifically enforceable in light of the provisions of the aforesaid law and therefore it was ordered that the interlocutory orders are set aside.

George Coucounis is a lawyer specialising in Immovable Property Law, based in Larnaca. E-mail: coucounis.law@cytanet.com.cy, tel: 24818288