The Law of Property (Misc Provisions) Act 1989 was passed in order to promote certainty, to reduce fraud and to simplify the form of contract for the sale of land or other disposition of an interest in land.

The Act may have come some way in achieving these objectives, yet there is no doubt it has created pitfalls for conveyancers - one of which was highlighted recently in the Court of Appeal case McCausland and another v Duncan Lawrie Ltd and Another [1996] The Times, 18 June.

In 1991 the plaintiffs, Mr and Mrs McCausland, brought an action against Duncan Lawrie Ltd (bankers) and SJS Securities Ltd (a property company).

The proceedings were settled on 26 January 1995; the principle term of the settlement being that the defendant would sell to the plaintiffs 1 Beechmore Road, Battersea, for 210,000.

By a written agreement dated 26 January 1996, the defendant, SIS, agreed to sell the property for this price.

The agreement contained a term relating to the deposit and all other usual terms, and stated that completion was to take place on 26 March 1995.

A week after the formation of the written agreement, the defendants' solicitors wrote to the plaintiffs' solicitors pointing out that the proposed date was a Sunday.

They decided completion should take place on the preceding Friday, to which the plaintiffs' solicitors agreed in writing.

However, the plaintiffs failed to complete on the 24 March 1995 and the defendants' solicitors served notice to complete.

Completion did not take place within the time specified, and the defendants purported to re scind the agreement.

On 14 June 1995 the plaintiffs issued proceedings against the defendants for specific performance and damages on the grounds that the agreement had not been validly rescinded.

On the following day, the plaintiffs entered a caution at HM Land Registry against the defendants' title.

On 30 June 1995 the defendants issued a notice of motion to vacate the caution and to strike out the plaintiffs' claim.

S 2 of the Law of Property (Miscellaneous Provisions) Act 1989 reads: (i) a contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or where contracts are exchanged in each; (ii) the terms may be incorporated in a document wither by being set out by reference to some other document.

In the court of first instance, the argument on behalf of the defendants was accepted and the judge ordered the caution to be removed and the plaintiffs' claim to be struck out.

In the Court of Appeal it was agreed on behalf of the plaintiffs that, if the contract dated 26 July 1995 had been varied by the exchange of correspondence, then the contract the defendants were relying on was the contract as varied by the correspondence.

It was not a case of two collateral contracts.

However, even if it were possible to treat the present case as one that had been an exchange of contracts, it was necessary by virtue of s 2 (ii) for the terms to be incorporated in one document, either by being set out in it or by reference to another document.

Countering these arguments, counsel for the defendants contended that s 2 had not altered the law on oral verification of a contract.

It had, he contended, always been the law that oral variations of written contracts were capable of proof.

Lord Justice Neil said he felt bound to reject the defendants' arguments and that Parliament's intention was demonstrated in s 2 of the Act that there was to be a major change in the law.

This view was supported by Lord Justice Peter Gibson in a case last year - Firstpost Home Ltd v Johnson [1995] WLR 1567.

Lord Justice Neil confirmed that, in his opinion, the counsel for the plaintiffs was correct when he submitted that the formalities prescribed by s 2 had to be applied to the contract.

In McCausland the agreement was not concluded by an exchange of contracts.

The only document actually signed by both parties was the contract dated 26 January 1995.

The appeal was accordingly allowed and the statement of claim re-instated.

In the light of the above judgment, what should solicitors do when confronted with a proposed amendment to the original binding contract? In order to comply with s 2 of the Act, it is suggested that there should be a meeting of the solicitors from both parties, at which the original contract is rescinded and a new contract should be immediately prepared in a single document containing all the terms as amended.

This should be signed and dated by both parties or solicitors.

It should be noted that, where the pre-existing law relating to the sale of land or of any interest in land governed by s 4O of the Law of Property Act 1925 provided that an agreement in irregular form could not be enforced by action, the new law under the 1989 Act goes further and renders such a purported agreement void unless it complies with the new formalities.

The new code also excludes the doctrine of part performance under the Statute of Frauds 1677 and s 40 of the Law of Property Act 1925.

The McCausland case will not be the last litigation arising out of the 1989 Act.

There are still questions to be solved, not least of which will be the ascertainment of the legal position where a seller or a buyer enter into a verbal agreement for the sale of land which is followed by a deed of conveyance.

Does the buyer obtain a good title, bearing in mind the verbal agreement is void?