• news-banner

    Expert Insights

Q&A: Terminating a contract – matters of materiality

Question

I am buying an off-plan house from a developer. The contract contains a provision that says the developer won’t make changes that will “materially affect the size, layout, or appearance of the rooms”. I have now been told that the layout and size of the master bedroom will be very different to the plan. The room is going to be 10% smaller and I am also not happy with the changed layout. The developer has confirmed practical completion is imminent. Can I terminate the contract?

Answer

It is going to depend on both the wording of your contract and the circumstances of the case. Without a bit more detail on either of those, we cannot give a definitive answer. The first step would be to check the contract to see whether: (i) it defines what a “material change” on the size, layout, etc is; and (ii) whether it provides that any material change in size, layout, etc is also a material breach allowing you to terminate the contract. Although both use the term “material”, these two issues are different. It is only if a breach of the contract is material that it might allow you to terminate it.

Explanation

If either or both of “material change” and “material breach” are not defined, then in order to assess whether or not (i) the change is material and (ii) it is likely to amount to a material breach, you have to look at all the circumstances of the case. For example, if you’ve bought a 12-bedroom mansion with a master bedroom bigger than most flats, a 10% reduction may not be either a material change or, even if it is, may not be a material breach. If it is a small one-bedroom house and that reduction takes it below nationally required space standards, it might be different. As questions like this are fact and contract dependent, we suggest that you seek legal advice.

A similar situation to this was considered by the Court of Appeal in Mears v Costplan Services (South East) Ltd and others [2019] EWCA Civ 502; [2019] EGLR 22, which concerned the construction and lease of two blocks of student accommodation. The landlord wanted to get substantial building works done and then lease out the blocks. It entered into an agreement for lease (AFL) with Mears, under which the landlord agreed to carry out the “Landlord’s Works” (ie building works) and that five days after practical completion it would grant Mears (and Mears would execute) a lease. The “Landlord’s Works” were defined to include key components of the construction contract between the landlord and its builder. The AFL also included a provision that the landlord would not vary the Landlord’s Works or Building Documents so as to “[m]aterially affect the size (and a reduction of more than 3% of the size of any distinct area… shall be deemed material), layout or appearance of the Property”. As built, there were 56 failures to meet that 3% tolerance. Mears argued that, on a true construction of the AFL, any failure to meet the 3% tolerance was a material and substantial breach, permitting the termination of the AFL.

The Court of Appeal disagreed. It held that while it was open to the parties to agree, in advance, that a breach of a particular clause is a “material” or “substantial” breach of contract allowing it to be terminated, this had to be set out in clear terms. Looking at the wording of the clause and the commercial context, this is not what the clause did. Instead, the wording was fairly clear in that the clause identified what would be a “material” reduction in room size (enough to constitute a breach of contract), but not whether that breach would be material. This made sense in the construction context, where there may be all sorts of reasons why a room might be built smaller than in the drawings, and the extent of any departure might be very modest. It would have been commercially unworkable if say, one 3% reduction would have allowed Mears to determine the AFL. Therefore, although failing to meet that 3% threshold was a material change on size (and so a breach) and although there were therefore 56 breaches of the contract, whether those breaches were enough (individually or together) to constitute a material breach of the contract was a matter of fact and degree.

Against that background, we would really need to look at the whole contract and the context in order to properly advise you. The discrepancy here (10%) is obviously bigger than the one in Mears, both overall, and (given that you’re buying a house not blocks of flats) in relation to what you’re buying. But, the extract you have given us does not define what is a “material change”, nor does it say that would be a material breach. Therefore, we would suggest that you consult a lawyer.

This article was first published in Estates Gazette on 15 December 2020 and was published by Associate, Megan Davies and barrister, Nicholas Grant at Landmark Chambers.

Our thinking

  • IBA Annual Conference 2025

    Simon Ridpath

    Events

  • Next Gen Rural Professionals Drinks Reception

    Events

  • Retail Collection – Episode 4: Caffé Nero – lessons from a life in retail management

    Michael Powner

    Podcasts

  • Beyond Gateway 2

    Mark Barley

    Insights

  • Dubai chocolate craze and related allergen concerns in the workplace

    Jamie Cartwright

    Quick Reads

  • HR Magazine quotes Jamie Cartwright on the Dubai chocolate craze and related allergen concerns in the workplace

    Jamie Cartwright

    In the Press

  • Business Assets in an English Divorce – How Can Parties Protect their Interests?

    Sarah Jane Boon

    Insights

  • Triple Play "Bid Fever": UK Tech's ability to scale and go global

    Mark Howard

    Quick Reads

  • The Future of AI and Copyright Regulation in the UK: The Data (Use and Access) Bill finally gets Lords approval in the UK

    Rebecca Steer

    Quick Reads

  • HM Land Registry's Digital Drive - Delays Persist but perhaps there is light at the end of the tunnel?

    Maisy-Jane Cook

    Quick Reads

  • Key aspects of the FCA’s PISCES Sourcebook

    Jodie Dennis

    Insights

  • Mike Barrington and Mary Perham write for Tax Adviser on what the proposed changes to business property relief mean for investors and entrepreneurs, and for their businesses

    Mike Barrington

    In the Press

  • Bloomberg quotes Catrin Harrison on the recent exodus of non-doms from the UK

    Catrin Harrison

    In the Press

  • Trusts and Matrimonial Disputes in England

    Tom Watts

    Insights

  • The Financial Times and Daily Mail quote Emma Humphreys on the impact of the UK Government's Spending Review on housebuilding targets

    Emma Humphreys

    In the Press

  • Alumni Drinks Reception

    Events

  • Consultation on Private International Law and Digital Assets Law Commission Proposes Landmark Reforms

    Racheal Muldoon

    Insights

  • Navigating International M&A Disputes: Insights and Strategies for 2025

    Stephen Burns

    Quick Reads

  • Bridging Differences: The Role of Mediation in Resolving Cross-Border Trust Disputes

    Tamasin Perkins

    Insights

  • Planning essentials case update: what changes can I make to my listed building?

    Sadie Pitman

    Quick Reads

Back to top