Mountford v Scott [1974] EWCA Civ 10 (17 October 1974)

The defendant granted the plaintiffs an option to purchase his house for £10,000, receiving £1 consideration. He later attempted to withdraw but the plaintiffs exercised the option. The Court of Appeal upheld specific performance, confirming that nominal consideration supports a valid irrevocable option, and the resulting contract was enforceable.

Facts

The defendant, Mr Scott, a house-painter who could not read but spoke and understood English perfectly well, granted the plaintiffs an option to purchase his house at 99 Chatsworth Road for £10,000. The consideration paid for the option was £1. The option agreement gave the plaintiffs six months to exercise the option. The plaintiffs were seeking to acquire Mr Scott’s property along with three neighbouring houses for development purposes.

On 3rd January 1972, before the option was exercised, Mr Scott sent a letter purporting to reject any obligation under the agreement. Despite this attempted withdrawal, the plaintiffs exercised the option on 29th March 1972. Mr Scott refused to complete the sale, and the plaintiffs sought specific performance.

Issues

Was the option agreement vitiated by misrepresentation?

The defendant alleged that Mr Sambruck, acting on behalf of the plaintiffs, represented that he could withdraw from the agreement at any time within six weeks.

Was the transaction an unconscionable bargain?

The defendant argued that equity should not enforce the agreement due to its allegedly unconscionable nature.

Was £1 sufficient consideration to support the option agreement?

The defendant contended that £1 was not valuable consideration in law.

Should specific performance be granted or only damages?

In the alternative, if the option was valid, the defendant argued that only damages should be awarded rather than specific performance.

Judgment

Misrepresentation

Lord Justice Russell held that this was a hopeless point. The trial judge had heard the evidence of both Mr Sambruck and Mr Scott, preferred Mr Sambruck’s evidence, and concluded that no such representation had been made and that Mr Scott was never under any misapprehension.

Unconscionable Bargain

The Court found nothing approaching the circumstances in which equity intervenes for unconscionable bargains. There was no evidence that £10,000 was inadequate; indeed, Mr Scott had successfully negotiated £1,000 more than his neighbours. Although Mr Scott could not read, there was nothing to suggest he was not intelligent or had any weakness of mind. The agreement was explained to him by his friend Mr Reid, and the matter had been subject to much discussion before signing.

Adequacy of Consideration

Lord Justice Russell described the proposition that £1 was insufficient consideration as startling. No English authority supported it. Lord Justice Cairns confirmed that anything of value, however small, is sufficient consideration to support a contract at law.

Specific Performance

The Court held that when a valid option is exercised, a contract for sale and purchase is constituted just as if it were an ordinary contract without a prior option agreement. Once the option agreement was valid and for valuable consideration and duly exercised, the consideration being described as a token payment was irrelevant to the question of remedy. Lord Justice Russell stated that if an owner contracts with his eyes open, it cannot be right to deny specific performance because the vendor later finds it difficult to find suitable alternative housing.

Implications

This case confirms several important principles in contract law. First, nominal consideration of £1 is legally sufficient to support an option agreement, making the offer to sell irrevocable for the stated period. Second, an attempted withdrawal of an offer during the option period is ineffective. Third, upon exercise of a valid option, a binding contract for sale and purchase is constituted, enforceable by specific performance. Fourth, the fact that a vendor may face personal difficulties in finding alternative accommodation does not justify refusing specific performance. The case also clarifies that for unconscionability to apply, there must be evidence of disadvantage coupled with a very bad bargain, inadequate time for thought, or lack of opportunity for legal advice—none of which were present here.

Verdict: Appeal dismissed. The option agreement was valid, and specific performance of the contract for sale and purchase was ordered in favour of the plaintiffs, with costs awarded against the defendant.

Source: Mountford v Scott [1974] EWCA Civ 10 (17 October 1974)