Explain the legal and practical effects of an exchange of contracts taking place on your clients’ purchase.

• A. The contract terms can be unilaterally varied after exchange
• B. The parties become bound by the contract and cannot withdraw without breach
• C. The seller must immediately hand over title deeds at exchange
• D. The property is transferred to the buyer on exchange

Answer: (B)

Exchange of contracts creates a binding agreement between buyer and seller. Once exchange happens, both sides are committed to proceed to completion on the agreed date, and withdrawing would amount to breach of contract. Practically, this means the buyer and seller move forward with the sale—the buyer typically pays a deposit, arrangements for mortgage funds and searches are finalised, and completion planning begins. Ownership and possession do not transfer at exchange; they occur on completion. Title deeds are not usually handed over at exchange in modern practice, since title is held electronically and transfer happens when completion takes place. Any changes to the contract after exchange require agreement by both parties; a unilateral variation is not permitted. If one party pulls out after exchange, the other can sue for damages (and in some cases seek specific performance), rather than the contract being discharged automatically.