Summergreene v Parker

[16]

In the present case the question is whether by the letters which have been quoted the plaintiff effected a sale of the defendant's business. It is plain that he did not effect a sale to the company then in contemplation. That company has never come into existence. On the principle of Kelner v. Baxter [1] the Full Court held that Anderson and Jones were liable upon the contract and that a sale had been effected to Anderson and Jones. Accordingly the appeal was allowed and it was ordered that judgment be entered for the plaintiff for £500. In dealing with par. 6 of the letter of 20th December 1946 the learned judges distinguished between a case where terms of a transaction were left to be settled by a future agreement of the parties to that transaction - where there would be no contract between them - and cases in which, though some terms were left outstanding, those terms were to be settled by agreement between one of the parties and a third party who was not a party to the alleged contract. It was pointed out that par. 6 contemplated the making of a contract upon usual terms satisfactory to the proposed company and the defendant, and not the making of a further contract upon terms to be agreed between the defendant and Anderson and Jones. Reference was made to the following statement quoted from May & Butcher Ltd. v. The King [2] where Viscount Dunedin said: - " to be a good contract there must be a concluded bargain, and a concluded contract is one which settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the parties. Of course, it may leave something which still has to be determined, but then that determination must be a determination which does not depend upon the agreement between the parties." It was held, therefore, that par. 6 did not prevent the formation of a contract between Anderson and Jones and the defendant for the sale of the business, and that there was a contract, effected by the plaintiff, for the sale of the business to Anderson and Jones, so that the plaintiff had earned his commission.

[18]

In Kelner v. Baxter [1] the contract in question was a simple contract of sale of goods. There was no difficulty in substituting the agents for the principal in relation to all the terms of the contract. It was evident that the intention of the parties was that the proposed company should buy the goods and not that the agents should buy them, but the court nevertheless held that as there was plainly an intention to contract and the goods were delivered and no other person than the agents could be liable upon the contract the agents should be held to be liable. In the present case it is plain that it was not intended that Anderson and Jones should buy the business. The intention is quite clear that a company to be formed was to be the purchaser of the business, the lessee of the premises and the assignee of tenancies, and that the defendant and her daughter should be shareholders in the company. But in Kelner v. Baxter [1] the intention was equally evident that the proposed company and not the persons purporting to act as agents should be the contracting parties, and yet the court found no difficulty in substituting the agents for the supposed principal as the contracting party. In the same way in this case the Full Court has said that Anderson and Jones should be substituted for the company wherever reference is made in the relevant letters to the company. It is possible to make the substitution in relation to several of the terms proposed in the letter of 20th December. For example Anderson and Jones could pay the purchase price (par. 1), they could take a lease (par. 2), they could accept an assignment of tenancies (par. 3), they could take over the business on 1st February (par. 4). But par. 5 presents a difficulty when it is endeavoured to substitute Anderson and Jones for the company wherever the company is mentioned. The defendant and her daughter cannot each become shareholders in respect of 500 shares in a company unless the company exists. It is impossible to substitute "Anderson and Jones" for "the company" in par. 5. Thus the application of the principle of Kelner v. Baxter [1] in the present case would mean that par. 5 must be ignored. In my opinion it is not consistent with any principle to ignore an actual term of a proposed contract in this manner and to hold that the parties are bound by the other terms but not by the term in relation to which it is impossible merely to substitute the agent for the supposed principal. In my opinion, therefore, effect cannot be given to the proposed transaction as a contract between the defendant and Anderson and Jones. The rule in Kelner v. Baxter [1] does not, in my opinion, authorize a court, in holding an agent liable even though it is clear that it was intended only that his principal should be liable, to hold the parties to be bound by a contract which omits some of the terms to which the parties agreed. On this ground I am of opinion that the documents exchanged between the defendant and Anderson and Jones did not make a contract between them and that they therefore did not constitute a sale of the business, or a binding contract to sell the business, to Anderson and Jones.

[22]

In the Full Court it was held that par. 6 did leave terms outstanding, but it was emphasized that the new agreement contemplated was to be an agreement not between Anderson and Jones and the defendant, but between the defendant and a third party, namely the proposed company. It was held that the cases where it was decided that the necessity for a future agreement prevented the conclusion of a present agreement applied only when that future agreement was to be an agreement between the parties to the first agreement. Reference has already been made to May & Butcher Ltd. v. The King [3] . But it is impossible to hold that there is a contract between two persons unless the terms of the contract are certain. The terms must be identifiable, and not in the air. If the admissible evidence plainly shows that the matter was still in the stage of negotiation and that the parties had not reached an agreement by which each consented to be bound, it cannot be held that there was any contract (Hussey v. Horne-Payne [1] ; Sinclair, Scott & Co. Ltd. v. Naughton [2] ; Von Hatzfeldt-Wildenburg v. Alexander [3] ). The reason why the necessity for further agreement between the parties prevents the formation of a contract is that where this is the case the position is that all the terms of the transaction have not been agreed and that therefore the alleged contract is uncertain in its content. There is no consensus ad idem: Scammel and Nephew Ltd. v. Ouston [4] . The parties to a contract may bind themselves under a contract which is complete in itself to leave specified matters to be determined by a third party, e.g. by an architect or surveyor or arbitrator, but it is a quite different thing to provide that the actual terms of the contract shall depend upon what some two persons shall agree. There is no legal means of compelling any persons to agree upon anything. If the content of an agreement depends upon a further agreement between one of the parties and a third person, then the contract is as uncertain in its terms as if further terms had been left to be negotiated between the parties to the contract themselves. It is true that the cases relied upon do refer to the necessity for a further agreement between the parties as preventing the formation of a contract. But in these cases it happened that what was contemplated was an agreement in the future between the parties as to the terms which were to bind them. It was held that there was no finally concluded contract because there was uncertainty as to what those terms might be. Identical reasoning applies in any case where the terms which are finally to bind the parties depend upon one of the parties and any other person agreeing upon such terms.

[31]

I do not find anything in the letter of 20th December 1946 at variance with Anderson and Jones becoming personally liable on a contract made between them and the appellant except the sixth condition. The letter provides for the lease being granted and the assignment of the tenancies being made not to Anderson and Jones but to the company. But it is quite usual for a contract between a trustee on behalf of a proposed company as a purchaser and a vendor of property to provide that the vendor shall sell the property not to the trustee but to the proposed company. In In re Northumberland Avenue Hotel Co. [1] the agreement with the trustee for the proposed company (Doyle) provided that the vendor (Wallis) who had an agreement for a building lease, should grant an underlease to the company and that the company should erect the buildings. Nevertheless Cotton L.J. said: "that was a contract which was binding as between Mr. Wallis and the other gentleman (Doyle) whom I have mentioned, and was a contract which provided that certain things should be done by the company" [2] . Lopes L.J. said [3] : "There no doubt was an agreement between a man called Nunneley, who was agent for Wallis, and a man named Doyle, who described himself as trustee for the company." Under such a contract the trustee for the proposed company would be personally liable to pay the purchase money and the vendor would be bound to dispose of the property sold to the company when formed by the direction of the trustee. If, in addition to a cash payment, other consideration was to move from the company to the vendor, such as the company, as in the present case, entering into a lease with and becoming the assignee of other leases from the vendor and giving the vendor the right to apply for shares in the capital of the company, the trustee would be personally liable for any damage the vendor might suffer if the proposed company failed to achieve existence, or having succeeded refused to enter into a new contract with the vendor and undertake these obligations.

[36]

Were it not for the sixth condition in this letter, I would be of the opinion that the appeal should fail. But this condition appears to me to be at variance with any intention that Anderson and Jones should be under any personal liability. Mr. Kerrigan contended with force and plausibility, and I should be pleased if I could to accede to his argument, that this condition only related to a possible novation at a future date of the existing contract between Anderson and Jones and the appellant into a contract between her and the new company when incorporated, and did not prevent the making of a contract between Anderson and Jones and the appellant for the purchase and sale of the business on the five preceding conditions. But I am unable to place this construction on the condition. It must be taken into consideration in determining whether it is possible to read the letters so as to impose any personal liability on Anderson and Jones, and it appears to me to be decisive that the parties intended and intended only to bring a binding contract into existence between anyone when, and only when, after negotiations, all the terms and conditions of a contract of sale had been agreed upon between the appellant and the new company and those terms and conditions had been embodied in a formal document and executed by the appellant and the new company. Condition 6 does no doubt differ from similar clauses that have been before the courts in decided cases in that it relates not to a further contract to be entered into between Anderson and Jones and the appellant but to a contract to be entered into between the appellant and the new company. If the condition had provided for a contract to be entered into between Anderson and Jones and the appellant containing usual terms of sale and these terms to be in a form satisfactory to both parties, it would be beyond doubt that such a condition could not be construed as a mere expression of the desire of the parties as to the manner in which a transaction already agreed to would in fact go through and would make the execution of a further contract a condition or term of the bargain, so that until the further contract was executed there would be no binding contract (Von Hatzfeldt-Wildenburg v. Alexander [1] ). In the first place the meaning of the words in condition 6 "the usual agreement for sale and purchase to be entered into by you and the company containing the usual terms of sale" is quite uncertain and prevents the existence of an enforceable contract (In re Vince; Ex parte Baxter [2] ; Scammell and Nephew Ltd. v. Ouston [3] ; Bishop & Baxter Ltd. v. Anglo-Eastern Trading and Industrial Co. Ltd. [4] ). In the second place the words "these terms in a form satisfactory to you (i.e. the appellant) and the Company" clearly indicate that the letters are at most an agreement to enter into an agreement and contemplate the negotiation and execution of a formal contract between the parties. In such a case there is no binding contract until the formal contract is executed, and if the contract is recorded in two parts until the parties have signed and exchanged their copies (Eccles v. Bryant and Pollock [5] ). As I have said condition 6 does not relate to the execution of a further contract between Anderson and Jones and the appellant, but it is nevertheless an integral and essential part of the bargain between them and the appellant, and is, in my opinion, expressly at variance with any intention to attribute any personal liability to Anderson and Jones or to create any contractual relations other than a contract between the appellant and the company.

Summergreene v Parker - [1950] HCA 13 - HCA 1950 case summary — Zoe

At a glance

Court

Decision date

Before

Source

Judgment (53 paragraphs)

Parties

Cited By (7)