Factual and Procedural Background
The Appellant plaintiffs were interested in purchasing certain commercial and residential properties from the first Defendant mortgagees. Although the parties never exchanged contracts or entered into a written agreement for sale and purchase, the Appellants claimed that the first Defendants made a unilateral contract promising to enter into a written contract of sale on agreed terms. The Appellants sought damages for breach of this unilateral contract.
The re-amended statement of claim detailed that on 21st December 1976 the terms of the proposed sale were agreed between representatives of the Appellants and the first Defendants, partly orally and partly in writing. On the afternoon of that day, a promise was made by the first Defendants to enter into a contract for sale if the Appellants procured a bankers draft for the deposit, attended the Defendants' offices before 10:00 a.m. on 22nd December 1976, and tendered their part of the contract and the deposit. The Appellants complied with these conditions but the first Defendants refused to exchange contracts.
The trial judge held that these facts did not disclose a cause of action. The Appellants appealed, raising three legal questions regarding the existence and enforceability of a unilateral contract, the applicability of Section 40 of the Law of Property Act 1925, and whether acts of part performance could take the case out of the statute.
Legal Issues Presented
- Whether the facts established a valid unilateral contract by the first Defendants to enter into a contract for sale on agreed terms.
- If such a unilateral contract existed, whether it was unenforceable under Section 40 of the Law of Property Act 1925 for lack of a written note or memorandum, unless sufficient acts of part performance existed.
- If Section 40 applied, whether the acts performed by the Appellants constituted sufficient part performance to take the case out of the statute.
Arguments of the Parties
Appellants' Arguments
- They claimed a unilateral contract was formed by the first Defendants promising to enter into a formal written contract upon performance of specified conditions.
- They argued that their acts in procuring the bankers draft, preparing and tendering their part of the contract constituted full performance of the condition, binding the first Defendants.
- They contended that the unilateral contract was not merely a contract to exchange agreements but a contract to enter into a contract for sale, which should be enforceable.
- They relied on cases such as Warlow v. Harrison and Johnson v. Boyes to support their position that the unilateral contract was binding and that the statute of frauds did not bar their claim.
- They asserted that their acts of performance should amount to sufficient part performance to take the contract out of Section 40.
First Defendants' Arguments
- They denied that a binding unilateral contract existed, emphasizing that no exchange of contracts or written agreement occurred.
- They argued that even if a unilateral contract existed, it was subject to Section 40 of the Law of Property Act 1925 and was unenforceable for lack of a written memorandum.
- They contended that the Appellants' acts did not amount to sufficient part performance to take the case out of the statute.
- They maintained that no acts could constitute part performance prior to the existence of a binding contract, and by definition there can be no part performance of a unilateral contract.
- They explained that the defendants acted as mortgagees and had been instructed not to proceed with the sale due to a higher offer, citing their duty to secure the best price.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Warlow v. Harrison (1 Ellis & Ellis 295) |
Contractual liability of auctioneer/vendor to highest bona fide bidder in a sale without reserve; relevance to unilateral contracts. |
Provided partial support for the appellants' contention but distinguished as the action was against the auctioneer, not the vendor, and concerned authority to sell rather than a unilateral contract. |
| Johnson v. Boyes (1899) 2 Chancery 73 |
Liability of vendor/auctioneer under conditions of sale; relevance to enforceability of contracts related to land sales. |
Approved Warlow v. Harrison; discussed the statute of frauds but held no liability due to non-acceptance of cheque deposit; distinguished from present case. |
| Rainbow v. Howkins (1904) 2 King's Bench 322 |
Personal liability of auctioneer as vendor; effect of statute of frauds on such claims. |
Held auctioneer not personally liable; case distinguished as it did not involve a collateral unilateral contract. |
| Wood v. Midgley (2 Smale & Gifford 115; 5 de Gex Macnaughten & Gordon 41) |
Effect of oral agreement and requirement of written memorandum under statute of frauds for contracts relating to land. |
Distinguished as it involved an oral agreement to an already concluded oral agreement; not directly helpful to present case. |
| Hillas v. Arcos (147 Law Journal 515) |
Principle that a contract to enter into an enforceable contract is itself enforceable. |
Applied to support the view that a unilateral contract to enter into a contract for sale can be viewed as a contract for disposition of an interest in land. |
| Union Car Advertising Co. v. Boston Elevated Railway Co. (26 F.2d 755) |
Application of statute of frauds to oral contracts to execute written contracts relating to land. |
Considered persuasive authority supporting the application of statute of frauds to such contracts; supported court's reasoning on unenforceability. |
| Sarkisian v. Teele (201 Mass. 596) |
Oral promise to execute written contract within statute of frauds. |
Supported the principle that oral promises to enter into contracts requiring writing are invalid unless statute satisfied. |
| McLachlin v. Village of Whitehall (95 N.Y. 721) |
Damages recoverable for breach of oral agreement to enter into written contract within statute of frauds. |
Illustrated the policy behind statute of frauds and the limitation on oral agreements to enter into written contracts. |
| Steadman v. Steadman ([1976] AC 536) |
Principles governing acts of part performance and their evidential role in establishing contracts within statute of frauds. |
Applied to determine that acts must prove existence of contract independently of the alleged oral contract; acts here did not suffice. |
| Kingswood Estate Co. Ltd. v. Anderson (1963 2 QB 189) |
Principle that acts of part performance must be referable to the alleged contract and prove its existence. |
Supported the court's view that the appellants' acts did not prove any contract existed. |
| Law v. Jones ([1974] Ch 112) |
Effect of "subject to contract" stipulations on the sufficiency of written memoranda under statute of frauds. |
Clarified that documents written subject to contract do not constitute sufficient memorandum; the case was discussed extensively to explain the statutory requirements. |
| Tiverton Estates Ltd. v. Wearwell Ltd. (1975 1 Ch 147) |
Interpretation of "subject to contract" and requirements for written memorandum under statute of frauds. |
Referenced for commentary on Law v. Jones; noted conflict between authorities on the effect of "subject to contract". |
| Johnston v. Boyes (1899) 2 Ch 73 |
Liability for breach of contract in auction sales; relevance of statute of frauds to contract to purchase land. |
Supported the view that refusal to allow signing of contract could constitute breach; statute of frauds not applicable to certain contracts in that case. |
| Buxton v. Rust (7 Ex 279) |
Written documents denying liability but admitting contract existence under statute of frauds. |
Referenced in discussion of written memorandum requirements; supported view that written note need not acknowledge contract existence expressly. |
| Thirkell v. Cambi (1919 2 KB 590) |
Similar to Buxton v. Rust on written memorandum under statute of frauds. |
Referenced for the same purpose as Buxton v. Rust in statutory interpretation. |
Court's Reasoning and Analysis
The court considered the three principal legal questions in turn. First, it held that the Appellants had fully performed the condition required by the unilateral contract when they attended at the appointed time and place with the bankers draft and their part of the written contract ready for exchange. The court rejected the notion that actual exchange was part of the condition precedent to the contract’s formation. Thus, a valid unilateral contract was established.
Second, the court analyzed whether the unilateral contract was enforceable given Section 40 of the Law of Property Act 1925, which requires contracts for the sale or disposition of land to be in writing. It concluded that the unilateral contract was a contract for the disposition of an interest in land, even if it was a contract to enter into a contract of sale rather than the sale itself. Therefore, the contract fell within Section 40 and was prima facie unenforceable without a written memorandum.
The court examined relevant English and American authorities, including decisions on contracts to enter into written contracts and the statute of frauds, concluding that oral agreements to execute contracts within the statute’s scope are invalid unless the statute’s requirements are met. The court rejected the Appellants’ argument that limiting their claim to damages rather than specific performance circumvented the statute.
Third, regarding acts of part performance, the court held that the Appellants’ acts did not amount to sufficient part performance to take the case out of the statute. It emphasized that acts relied upon must independently prove the existence of a contract and be consistent with it. Here, the acts suggested only contemplation of a contract, not its existence. The court declined to consider the acts in light of the alleged oral contract, following the principle in Steadman v. Steadman.
Despite regret over the outcome and the Defendants’ conduct, the court found no basis to overturn the trial judge's decision and dismissed the appeal.
Holding and Implications
The court’s final decision was to DISMISS THE APPEAL.
The direct effect is that the Appellants’ claim for damages based on the alleged unilateral contract was not upheld due to the application of Section 40 of the Law of Property Act 1925 and insufficient part performance. No contract for sale or enforceable contract to exchange agreements was found to exist. The decision does not establish new precedent but reaffirms the strict application of the statute of frauds to contracts relating to land and the evidential requirements for part performance. The court expressed regret that the Defendants’ conduct appeared unmeritorious but emphasized adherence to legal principles over equitable considerations in this context.