Case Facts
In 1936, a father purchased a house at 27 Milvain Avenue, Newcastle, as a home for his son and daughter-in-law. He paid a lump sum of £250 towards the purchase price and left the remaining balance of £500 on mortgage to a building society, to be repaid by weekly instalments. Significantly, the father retained the conveyance in his own name and continued to pay the rates on the property. He handed the building society's passbook to his daughter-in-law, told her not to part with it, and promised that the property would be hers and her husband's once they had paid off the last instalment on the mortgage.
The couple moved into the house and began making the weekly mortgage payments. The father died in July 1945, leaving by his will all his property — including the house — to his widow, the plaintiff. Following the father's death, the son left his wife and went to live with his widowed mother. The daughter-in-law remained in the house with her sister and continued to pay the mortgage instalments throughout.
The plaintiff, as the father's widow and successor in title, sought possession of the property. In the county court, the judge dismissed the possession claim on the ground that the son and daughter-in-law had been tenants at will, and that accordingly the claim was barred by the Limitation Act 1939. The plaintiff appealed to the Court of Appeal, which disagreed with the county court's characterisation of the occupants' status.
Held
The Court of Appeal held unanimously that the daughter-in-law was entitled to remain in possession of the property. The son and daughter-in-law were licensees — not tenants at will, nor tenants paying rent. As licensees under a personal contractual arrangement arising from the father's promise, they were entitled to occupy the house for so long as they continued to pay the mortgage instalments to the building society. Since the daughter-in-law had continued making those payments after the father's death, the plaintiff could not obtain possession while she did so. The licence was personal and non-assignable.
The Court of Appeal expressly left open, as a matter requiring further consideration, whether the daughter-in-law and her husband would be entitled to demand a conveyance of the property once all the instalments had been fully paid. This point was not decided.
Ratio Decidendi
The central legal principle established by this case is that a promise to convey property, made in exchange for the promisee's performance of ongoing acts — here, the payment of mortgage instalments — gives rise to a licence that cannot be revoked so long as the promisee continues to perform. Once performance of a unilateral contract has begun, the promisor cannot withdraw the offer so as to deprive the performing party of the benefit of continuing.
The father's promise created a contractual licence — or at the very least an equitable licence — entitling the son and daughter-in-law to occupy the house for so long as they kept up the payments. Denning LJ expressed the view that this right would "grow into a good equitable title to the house itself as soon as the mortgage was paid," though the question of whether a full equitable interest arose was expressly left open by all three judges.
Somervell LJ drew an analogy between the daughter-in-law's position and that of a purchaser admitted into possession before completion under an ordinary contract of sale, whilst acknowledging the legal novelty of the arrangement. He further noted that the son and daughter-in-law were not contractually obliged to pay the instalments — if they ceased paying, their rights would come to an end, but they would not be in breach of contract. This distinguished the arrangement from a bilateral contract and confirmed its character as a unilateral one.
The licence was personal and non-assignable: it attached to the daughter-in-law as the person who had continued to perform, not to the property itself.
The potential entitlement to a conveyance upon full payment was noted to raise a question under s 53 and s 55 Law of Property Act 1925, given that the contract was entirely oral. However, Somervell LJ noted that the doctrine of part performance would clearly apply in such circumstances — though, as stated, this issue was not determined.
Obiter Dicta
Somervell LJ's observations regarding s 53 and s 55 Law of Property Act 1925 — and the potential application of the doctrine of part performance to an oral agreement of this kind — were made in the context of the unresolved question of whether full payment of the mortgage would entitle the defendants to a conveyance. Because that question was expressly left open, these observations were not part of the binding ratio and remain obiter.