Contracts as Referred by the High Court in Masters v Cameron - Assignment Example

Contracts as referred by the High Court in Masters v Cameron (1954) 91 CLR 353. The high court held, when the negotiating parties have reached an agreement, said agreement will come within 3 of the categories of contracts referred to by the High Court in Masters v Cameron1. The specific category which is applicable in the case of Pagola and Takeovers states; they intend to postpone the creation of contractual relations until the formal contract is drawn up and executed. This type of agreement is referred too as heads of agreement. The matter which comes into play is whether the heads of agreement is binding.The binding aspect of this type of agreement goes directly to the intent of the parties involved. If the intent of the parties was to be bound by the heads of agreement, then it would be binding in a court of law. However, it is clearly stipulated that both parties are in favor of a formal document, and no signatures will be affixed to the document until sale price is agreed upon. In this instance, the terms of agreement is not intended to have any binding effect. A second class case came before the court in Niesmann v Collingridge2 where an agreement had occurred on all of the essential elements of a contract, and the mention of price was the only reference to a further document being introduced, and mentioned that payment should be affected when the contract is signed. Rich and Starke JJ3 observed (1921) 29 CLR, at pp 184-185, that the agreement was not based on the signing of a contract, but it spoke more to the obligation to pay, and bore the implication that neither party was adverse to signing a contract which adhered to the terms previously agreed upon. There are several reasons why the parties may have put forth these conditions; they feel that they have adequately addressed the major issues and have the vision that specific provisions will be included in the formal document, such as it was in Summergreen v Parker4 . It could also be the product of shrewd business acumen which affords them with an out, prior to signing the formal contract. These possibilities were both referred to in Rossiter v Miller5 Lord O'Hagan said: "Undoubtedly, if any prospective contract, involving the possibility of new terms, or the modification of those already discussed, remains to be adopted, matters must be taken to be still in a train of negotiation, and a dissatisfied party may refuse to proceed. But when an agreement embracing all the particulars essential for finality and completeness, even though it may be desired to reduce it to shape by a solicitor, is such that those particulars must remain unchanged, it is not, in my mind, less coercive because of the technical formality which remains to be made"6 Further, As far as English Common law is concerned, there is no way in which parties can reach an agreement in the eyes of the law, if the contract terms are uncertain or if the contract is not complete. An agreement to agree does not constitute a contract. This principle which is known as Certainty in English Law is addressed in Fry v. Barnes7 The scope and nature of an agreement will not give it the power of a contract. Additionally, as in this instance, where the parties have not agreed on price, the entire agreement could fail. It should be noted that with certain commercial contracts, judges have discretion to give effect, however, as in this instance, the existence of real property is also involved, consequently the scope of the courts discretion can not be affected. As expressed by Lord Blackburn said: parties will often engage one another in negotiating, when they have or perceive that they have met minds, the result of this process shall be formalized, if they then agree on the terms stipulated, they will sign the document and make it binding. However, each party has the right to quit the contract if he feels that it does not reflect what he intended to convey or accomplish. Parties should not be bound until they have actually signed the contract.8 (1878) 3. So, as Parker J said in Von Hatzfeldt-Wildenburg v Alexander9 in such a case there is no enforceable contract, either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract. I would advise Gerald that he and Phoebe did in fact have a contract. They had an informal exchange of promises which are as binding, and are as legally valid as a written contract. As a matter of law, a spoken contract, when referred to correctly is known as an oral contract; it should be noted that any contract which uses words, spoken or written is characterized as a verbal contract. The creation of contracts in common law judisdictions consists of three key elements; (1) offer and acceptance, (2) consideration and (3) intention to create legal relations.According to Treitel, an offer is an expression of willingmess to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed.10 When Phoebe made an offer to Gerald to purchase the vehicle for four thousand pounds, and introduced the terms by which she would settle the debt, and when Gerald handed her the keys to the vehicle and she accepted them, this was a contract implied by the acts of the parties.It is clear that Gerald and Phoebe were in agreement that there should be a purchase and sale, and the parties, the property, the price, and the date for possession were all clearly settled between them. All the essentials of a contract are there…11The use of the word expression in Treitel’s definition may manifest itself in numerous ways, in this instance, it was the conduct of both parties.Having said all of that, I would be compelled to further advise Gerald that while all of the essentials of a contract are in fact present, they are not all present in the law. That the contract which he and Phoebe have entered into is not enforceable. In Von Hatzfeldt-Wildenburg v. Alexander12 Parker J pointed out, that there is no enforceable contract, either because the condition is unfilled or because the law does not recognize a contract to enter into a contract. The question is reliant upon the disclosed intention, or by what the parties have said, and there are no restrictions on the types of words which the parties must present, but there shall be no binding contract until the parties execute the document in its final form. Farmer v Honan13 It was stipulated the, nor is any formula, such as "subject to contract", so intractable as always and necessarily to produce that result: Lord Westbury in Chinnock v Marchioness of Ely14 added basis to the words when he pointed out "if to a proposal or offer an assent be given subject to a provision as to a contract, then the stipulation as to the contract is a term of the assent, and there is no agreement independent of that stipula-tion.15 Also, it is emphatically stated by Sir George Jessel MR in Crossley v Maycock16 (1874) : if the agreement is made subject to certain conditions then specified or to be specified by the party making it, or by his solicitor, then, until those conditions are accepted, there is no final agreement such as the Court will enforce.17 This being the natural meaning of "subject to contract", "subject to the preparation of a formal contract", and expressions of similar import, it has been recognized throughout the cases on the topic that such words prima facie create an overriding condition, so that what has been agreed upon must be regarded as the intended basis for a future contract and not as constituting a contract. Indeed.18 The intention is an area when the courts employ an objective assessment. In the case of Smith v. Hughes19 it was pointed out that the important matter is not the real intention of the party but how the situation would be viewed by a reasonable person. This is attributable to common sense, lending to the presumption that neither side would be willing to breach the terms which they had put forth because it would render them susceptible to damages.I would further advise Gerald that he and Phoebe formed what is characterized as a unilateral contract and that in so being, they did create legal relations. In Winn v. Bull20., the court held that not only was it a good idea in the sale real property to fortify oneself, but that parties should be fortified in the transaction of any property, that it is important to create safeguards during negotiation. I would further advise Gerald that he seek the services of a solicitor to have a formal contract prepared. References Masters v.Cameron (1954) 01 CLR 353 Niesmann v. Collingridge (1921) 29 CLR 177 Niesmann v. Collingridge (1921) 29 CLR, at pp.184-185 Summergreen v. Parker (1950) 80 CLR 304 Rossiter v. Miller (1878) 3 App Cas 1124 Rossiter v. Miller (1878) 3 App Cas 1124 ao p.1149 Fry v. Barnes (1953) 2 D.L.R. 817 (B.S.S.C.) Rossiter v. Miller (1878) 3 App Cas at p. 1152 Von-Hatzfeldt-Wildenburg v. Alexander (1912) 1 Ch 284 p. 289 G. H. Treitel, The Law of Contract, 10th edn. P.8 Masters v. Cameron (1954) 91 CLR 353 VonHatzfeldt-Wilderburg v. Alexander (1912) 1 Ch 284 at p. 289 Farmer v. Honan (1919) 26 CLR 183 Chinnock v. Marchioness of Ely (1865) 4 De GJ & S 638 (46 ER 1066) Chinnick v. Marchioness of Ely (1865) 4 De GJ & S 638 (46 ER 1066) at p. 646 (46 ER at p. 1069 Crossley v. Maycock (1874) LR 18 Eq 180 Crossley v. Maycock (1874) LR !8 Eq ar pp. 181-182 Masters v. Cameron (1954) 91 CLR 353 Smith v. Hughes (1871) L R 6 QB 587 Winn v. Bull (1877) 7 Ch D 29 Read More