Even when a document recording the terms of the parties' agreement specifically refers to the execution of a formal contract, the parties may be immediately bound. Upon the proper construction of the document, it may sufficiently appear that "the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms": Sinclair, Scott & Co Ltd v Naughton (at 317)."
20 In the present case, the terms of the document of 1 May 2002, seen in the light of the circumstances known to both parties in which the document came into existence, comfortably satisfy me that the document was intended by the parties to be an immediately binding contract for sale, although it was intended to be followed by a formal contract possibly containing further terms to be agreed. I am further satisfied that the terms of the document are capable of having contractual effect. My reasons for arriving at these conclusions are as follows.
21 First, the terms of the document themselves strongly indicate an intention that there be an immediately binding contract. The document is expressed in relatively formal and legalistic terms, although drawn by Mr Bennett who is, apparently, not a lawyer. The document carefully identifies the parties, describing them as "vendor" and "purchaser" ; it states that the parties "hereby agree as follows" ; it carefully identifies the subject matter of the sale being the Hotel land and the plant, equipment and furnishings - the addition "etc." is, in my opinion, a shorthand reference to other chattels ejusdem generis owned by the vendor and used in the conduct of the business; the document carefully excludes stock in hand, which was the subject of previous discussion; it states only one condition to "this sale" , namely, the payment of $1,000; it states a date for settlement; it is signed by all parties, provision is made for the signatures to be witnessed and all of the signatures are, in fact, witnessed.
22 It is clear, therefore, that both sides to the transaction have taken considerable care to ensure that the perceived formalities requisite for an important legal document have been observed.
23 Second, there is no reference in the document to the sale being "subject to contract" or "subject to finance" , although these conditions were previously discussed in negotiations between the parties.
24 Third, despite the natural presumption that parties to a transaction of this size would expect the transaction to become binding only upon exchange of formal contracts prepared by solicitors, the prior course of dealing between the parties, in my opinion, rebuts that presumption. That course of dealing indicates that on 1 May 2002 both sides to the transaction wished to put an end to the 'to-ing and fro-ing' which had been taking place since November 2001, and wished to secure a firm and binding commitment to the transaction on which neither party could renege. Impatience and frustration at the lack of finality can be seen on both sides of the transaction: Mr Souter thought that Shyamba had reneged on the handshake agreement of 18 November 2001, and he was clearly chagrined at Shyamba's changes of mind on 5 December 2001 and 19 March 2002. On the other hand, Mr Bennett was clearly impatient at what he saw as Mr Souter's changes of mind and his imposition of unnecessary conditions: see especially Mr Bennett's letter of 11 December 2001.
25 In my opinion, it is clear that each side wanted the 1 May document to put an end to the other side's perceived manoeuvring. However, that end could only be achieved if an agreement was made which was immediately legally binding.
26 Fourth, the parties had already had advice from their solicitors. They knew that there were additional matters which could be incorporated into a subsequent formal contract, if agreement on those matters were reached. But the 1 May document contains the essential terms of the transaction, namely, the parties, the property, the price and the promises. From those essential terms all other essential matters would necessarily follow by implication. What did not follow by necessary implication and could not be agreed later for incorporation into a formal contract would simply remain at the risk of the relevant party.
27 In arriving at this conclusion, I have given careful consideration to the cogent submissions of Mr Officer QC and Mr Hennessy of Counsel, who appear for Shyamba. I shall deal with those submissions as briefly as I may without disrespect to Counsel.
28 Mr Officer's fundamental point is that when one looks at the history of negotiations between the parties and sees that the 1 May document failed to deal with so many matters previously discussed between the parties but not decided, one must come to the conclusion that the parties intended to give each other only a firm commitment about price, but did not otherwise intend that there be any binding contract. He instances a number of matters with which I will now deal.
29 Mr Officer refers to the fact that no provision is made in the document for a transfer of a business name for a restaurant conducted in the Hotel. He conceded that this was not an essential matter to the sale, but said that it was one of a number of 'loose ends'. I do not think that this matter has any real significance. There is nothing in the evidence to suggest that if the transfer of the restaurant business name was not effected, Mr Souter would not have proceeded.
30 Mr Officer draws attention to the fact that the 1 May document does not apportion the price as between plant and equipment on the one hand and goodwill on the other. However, although lack of apportionment may have tax consequences for the parties, it does not prevent a sale from being implemented.
31 Mr Officer relies on the fact that the 1 May document does not provide for the transfer of the Hotel licence to Mr Souter or his nominee. He concedes, however, that the sale of a hotel business must carry with it a necessarily implied term that the vendor must do all things necessary to procure transfer of the relevant liquor licences to the purchaser. I do not think that this point has any substance.
32 Mr Officer draws attention to the absence of agreement in the document as to the sale of stock, particularly in light of the fact that the parties had previously discussed this matter. In my view, stock was expressly excluded from the sale in the 1 May document precisely because the parties did not wish absence of agreement upon that point to prevent a binding contract from coming into existence.
33 Mr Officer refers to a number of other matters raised by the parties' solicitors in their attempts to draft a formal contract after 1 May but before 31 May 2002. None of these matters is so important to the sale of the land and the business of the Hotel that one could conclude that neither party would wish to be bound until those matters had been agreed.
34 In short, I am unable to see anything in the 'loose ends' to which Mr Officer refers which detracts from my very clear impression, derived from the terms of the 1 May document and from the previous history of negotiations, that both sides to the transaction intended to conclude an immediately binding contract for sale and that all conditions other than price and the subject matter of the sale were regarded as non-essential, so that if they were not necessarily implied to give business efficacy to the contract and if they could not later be agreed and incorporated into a formal contract, then the consequences would lie where they fell.
35 Accordingly, I find that the 1 May 2002 document constituted a binding contract for sale of the Hotel and its plant, furnishings and equipment upon the terms set out in the document. I note that there is no issue as to Mr Souter's readiness, willingness and ability to complete the contract. The Plaintiff is, therefore, entitled to an order for specific performance of that contract.
Orders