General

Upon exchange, a binding contract is forged:
- Neither can withdraw from the transaction without a penalty
- Beneficial interest passes to the buyer and it should be protected with either a C(iv) Land Charge or a notice on the title register
- Legal title remains with the seller
- Buyer will assume the risk if there’s no term to the contrary
Buyer should insure immediately from exchange (SCPC 7.1.4(a))
It must be in writing, with all the agreed terms and signed by both parties (s.2(1) LP(MP)A 1989)

Telephone Exchange

(“The Law Society’s formulas”)

Exchange occurs the moment both solicitors say it has, which is then followed by physical exchange in the post (but it is binding upon the telephone call)
As a solicitor, remember to record during or immediately after the telephone exchange:
- The date and time of the exchange
- The Formula used and the exact wording of variations
- The Completion date
- The deposit to be paid
- The identities of the solicitors
- To carry out physical exchange
- If conditional, say what the condition is

As the Solicitors are UNDERTAKING to do something they are liable for breach. Thus, making the undertakings gives certainty and reliability to the telephone exchange.

Formula A

P239

P471

Used: where one solicitor holds both signed contracts
Frequency: Rare
Procedure:
- Bsol sends his signed contract and cheque to Ssol
- Completion date is arranged
- On completion date, Bsol phones Ssol
- Ssol confirms he has his client’s signed contract
- Exchange takes place at that moment
- Ssol undertakes to send contract to Bsol same day

Formula B

P239

P472

Used: where each solicitor has his client’s signed copy
Frequency: Most common
Procedure:
- On phone, both sols say they have their clients’ respective contracts which are signed
- Exchange then takes place orally
- Each undertake to hold those contracts to the other’s order and to send them on to each other that same day
- Bsol undertakes to send over the deposit (usually by direct credit/cheques are rare)

Has the formula been varied because: ?

Post next day changed because missed the post or it was too late?
Method to make deposit payment changed because it is credit not debit?
Any other change?
If more than one change these are recorded in a memo as agreed by both parties.
- e.g. If Bsol’s fails to send post the contract on that same day then, it will be necessary to varyFormula B to allow Bsol’s to send his client's signed copy of the contract and the cheque for the deposit by first class post the next day. This should be agreed with the seller's solicitor at exchange and a written note made of this variation.

Formula C

P239

P472

Used: in chain transaction & Sol’s need obtain express permission from client
Frequency: Rare (used mainly in residential transactions)
Procedure:
- Both parties confirm they hold their clients’ signed contracts but agree to exchange later that day
- Both undertake to exchange contracts, but there is an undertaking to arrange the deposit to be sent at some point (not immediately)
- If deposit is held as stakeholder the formula would be automatically void = deposit needed to carry out the chain transaction.

Personal Exchange

Exchange occurs upon physical delivery of the contracts
This is method provides certainty and is reliable but it is costly and time consuming

Document Exchange

Subject to contract, exchange occurs when seller’s part is received by buyer
Exchange is deemed to occur when last contract left the document exchange if the SCPC is used

Post

Buyer will send their contract and deposit to the seller
On receipt, the seller will post their contract to the buyer
Exchanged is deemed to occur when seller posts his part of the contract, even if never received

Fax and Email

Legal Effect of the Exchange

#10256 - Methods Of Exchange Exchange Of Contracts - Property Law and Practice

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