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Property Vendor Pays Price for Contract Ambiguity

Published: 09 September 2014, in categories: Landlord and Tenant Updates | Legal Updates | News and Updates

Property Vendor Pays Price for Contract Ambiguity

In a cautionary tale for property professionals, a vendor of commercial premises has ended up substantially out of pocket following a Court of Appeal ruling – simply because the words ‘plus VAT’ were left out of the sale contract.

The vendor had opted to waive the usual exemption from VAT in respect of the property. Accordingly, after the sale went through at a price of £130,000, HM Revenue and Customs demanded that VAT be paid on that sum.

The vendor sought to recover the VAT payable – £22,750 – from the purchasers. However, the latter refused to pay on the basis that, throughout the pre-contract negotiations, no mention was made of any VAT liability. The contract had also referred in unequivocal terms to £130,000 as ‘the purchase price’.

The vendor pointed to a condition in the contract which it argued placed liability to pay VAT on the purchasers. Although the words ‘plus VAT’ had been omitted, it was submitted that it was ‘abundantly clear’ on the face of the contract that the £130,000 was exclusive of VAT.

However, in dismissing the vendor’s appeal against an earlier ruling to like effect, the Court identified a conflict between provisions in the sale contract. The purchasers had been given ‘no hint’ that VAT would be payable on top of the £130,000 and, in the circumstances, that sum was rightly viewed as inclusive of VAT.

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