Facts
- Mr. and Mrs. Carpenter jointly owned several properties.
- Following marital disagreements, they engaged in negotiations through legal representatives to divide their assets.
- Draft agreements were exchanged, all marked ‘subject to contract’, detailing proposed divisions of the properties.
- Some terms were agreed upon, but no finalized or signed agreement was ever reached.
- Mr. Carpenter passed away before any final agreement was concluded.
- The question arose whether the negotiations and draft documents sufficed to sever the joint tenancy, which would have prevented Mrs. Carpenter from inheriting Mr. Carpenter’s share automatically.
Issues
- Whether negotiations and draft agreements labeled ‘subject to contract’ can sever a joint tenancy in property.
- Whether the parties had demonstrated a clear intention to end joint ownership of the properties in the absence of a signed, binding agreement.
Decision
- The Court of Appeal determined that the drafts and negotiations marked ‘subject to contract’ did not sever the joint tenancy.
- The phrase ‘subject to contract’ indicated that the parties did not intend to be legally bound until a formal agreement was executed.
- The joint tenancy remained intact, and Mrs. Carpenter inherited Mr. Carpenter’s share under the right of survivorship.
Legal Principles
- Severance of joint tenancy requires clear and final agreement; mere negotiations or drafts labeled ‘subject to contract’ do not suffice.
- The phrase ‘subject to contract’ is a strong indication that parties do not intend legal obligations until a final signed agreement is in place.
- To end joint ownership by mutual agreement, there must be unequivocal evidence and compliance with formal requirements, typically a signed written agreement.
Conclusion
The case establishes that property owners wishing to sever a joint tenancy must execute a signed, binding agreement; negotiations or drafts explicitly marked ‘subject to contract’ will not sever joint ownership, and the right of survivorship remains unless and until a formal agreement is completed.