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Hall v Busst

(1960) 104 CLR 206

Overview

Contracts for sale of land must include reference to price (and parties and subject matter) in order to be sufficienly certain to be enforced by a court.

House for sale

Catchwords

Vendor and Purchaser - Contract of sale of land with fixed improvements and chattels - Restraint by covenant on alienation of the land by the purchaser without the consent of vendor - Validity - Option of re-purchase - Price - Original sale price plus the value of additions and improvements to the property since original sale less the value of all deficiencies of chattel property and a reasonable sum to cover depreciation of all buildings and other property on the land - Uncertainty - Enforceability of option.

Appeal - As of right - Competency - Order on special case - Final or interlocutory.

Facts

Case involved the grant of an option to purchase land (an Ilsand named Bedarra). A 'purchase price' was specified but clause 5 also stated that added to that would be additions and improvements and a reasonable sum to cover depreciation.

Clause 5: The purchase price relating to such option shall be the sum of Three thousand one hundred and fifty-seven pounds four shillings (3157 pounds 4s. 0d.) to which shall be added the value of all additions and improvements to the said property since date of purchase by the Grantor (such value to be taken as at date of exercise of this option) and from which shall be subtracted the value of all deficiencies of chattel property and a reasonable sum to cover depreciation of all buildings and other property on the land

Held

Chief Justice Dixon

Noted that the problem was not with the sum of money specified, but with 'what is added':

[para 10] ... "the value of all additions and improvements" is not, in my opinion, sufficiently certain to give rise to an enforceable contract. There could be no external standard of value of additions and improvements to the island: no standard yielding a figure reasonably fixed or ascertainable. Still less would it be possible to find an external standard for the reasonable sum to cover depreciation even if one knew what "other property" is referred to. And indeed the value of deficiencies is another uncertain element in the ascertainment of the price....

[para 11] 'In my opinion the price described in cl. 5 is unascertained and is too uncertain to be the basis of an enforceable contract. The option is therefore unenforceable.'

Appeal allowed

Justice Fullagar

To be certain a contract for the sale of land requires three essential elements: parties, subject matter and price. A 'reasonable price' is not sufficient and if parties are silent as to price there is not implication for payment of a reasonable price.

[para 3] The argument for the appellant is not, I think, that the deed as a whole, or cl. 5 in particular, is void for uncertainty. If that were the argument, I should be unable to accept it. The word "value" in cl. 5 is not meaningless, nor is the expression "a reasonable sum to cover depreciation." It is true that the word "value" is capable of different meanings. It may bear one meaning in one statute or contract, and another meaning in another statute or contract. The value referred to may be "market value," or "replacement value," or it may be that the purpose of the statute or contract will be best achieved by taking the value as cost less depreciation. But, however difficult the task may be, the task of giving a meaning to the word "value" is such a task as courts daily undertake. ... But, when all is said and done, a question of the value of land or a chattel is an intelligible question of objective fact, to be decided on evidence like any other question of fact, and courts cannot, when such a question arises, refuse to decide it on the ground that it is too difficult.

[para 7] So far as contracts for the sale of goods are concerned, there may or may not be a general rule, applicable in respect of executory, as distinct from executed, contracts, that, where the price is not otherwise determined, a promise to pay a reasonable price is to be implied: ... But such a rule, if it exists, is anomalous. The contract contemplated here is not a contract for the sale of goods: it is a contract for the sale of "land and improvements." In such a case there cannot, I think, be held to be a binding contract unless the three essential elements are the subjects of concluded agreement. The three essential elements are the parties, the subject matter and the price. If, but only if, these are fixed with certainty, the law will supply the rest. When it is said that the price must be fixed with certainty, it is not, of course, meant that it must be fixed at a specified figure. It will be sufficient if the sale is expressed to be for a price or value to be fixed by a named or described person. In such a case, if the named or described person dies or cannot or will not fix the price or value, the contract cannot, as a general rule, be enforced, but, if and when he does fix the price or value, there is a concluded contract. If, however, the parties are silent as to price, there can be no implication of a term that a reasonable price is to be paid. And it is not, in my opinion, sufficient if the sale is expressed to be "for the value of the land" or "for the fair value of the land" or "for a reasonable price." For, in such a case, the actual price payable can only be arrived at in one of two ways - either by further agreement between the parties or by the court in an action or suit. If the price is fixed by further agreement, cadit quaestio. If it is not so fixed, the party who brings an action or suit comes into court without a complete cause of action. He is saying to judge or jury: "Complete our contract for us, and then enforce it." It is the same as if the "contract" had said: "for a price to be fixed by a judge or a jury." ...

[emphasis added]

Appeal allowed

Justice Kitto (dissenting)

Did not believe the provision was uncertain:

[para 2] The provisions thus made for additions to and subtractions from the 3,157 pounds 4s.0d. may well prove to be difficult of application, but their meaning does not seem to me to be uncertain, and that is what matters. If one asks what was the value, as at the relevant date, of the additions and improvements referred to, or what was a reasonable sum to cover depreciation to buildings and other property on the land, one is only asking questions such as the courts are answering with certainty and finality every day of the week. 

[para 3] The additions and improvements, and equally the deficiencies of chattel property, are capable of being ascertained when the time arrives; and their value is then to be ascertained in the light of all the facts and circumstances. There is in the books substantial authority to support the proposition that a contract of sale is not incomplete for want of certainty as to price because its only provision on the subject is a stipulation for a "fair price": ... If the property is not of a kind for which there is a current and readily ascertainable market price, the task of stating its value may not be easy, and it may have to be performed in the face of widely differing opinions. But anyone who is called upon to state the value, even of property such as we are here considering, which no doubt possesses "some unusual and, it may be, unique features," knows what it is that he is required to do. In the language of the Privy Council, he is to say what a willing vendor might reasonably expect to obtain for the property from a willing purchaser: ... The standard he is to apply is therefore the standard of reasonableness; and the law has never, so far as I am aware, found that standard too vague to apply as a criterion of rights, duties and liabilities.

[para 4] Similarly, the provision as to "a reasonable sum to cover depreciation" appears to me to be definite in meaning and capable of being rendered certain in application: ... There seems to me to be no more uncertainty in a stipulation for a reasonable allowance for depreciation than there is in a provision (express or implied) as to a reasonable time, or in a provision for a reasonable price such as may be implied under the Sale of Goods Act ...

[para 5] ... Is ... an agreement to be considered too uncertain for enforcement as a contract, simply because some matter with which it deals is provided for by explicit instead of implicit reference to the standard of reason? In my opinion, it is not. I have not found in the books any case in which an agreement for the sale of property at its value, or an agreement a term of which has been expressed by reference to reasonableness, has been held on that account to be too uncertain to constitute a binding contract. 

[para 6] I do not regard as correct the suggestion that stipulations such as those here in question reserve their subject-matter for future agreement, with the result that a concluded contract has not been made. The parties have agreed upon every matter which they intend their contract to cover. ... the fact that there is room for such a subsequent agreement, and even a business need for such an agreement as an alternative to litigation, does not argue that the description is uncertain in meaning, or that there is no concluded contract. ...

Appeal dismissed

Justice Menzies

Held the clause to be too uncertain to be enforced:

[para 5] ...The task of valuing additions at the date of the exercise of the option and of valuing deficiencies at some unspecified time without some further agreement would, I am disposed to think, be impracticable, but however that may be, the ascertainment of "a reasonable sum to cover depreciation of all buildings and other property on the land", which presumably covers buildings and other property upon the land both on 15th July 1949 and at the date of the exercise of the option, whether or not they had been improved, would seem to me quite impossible without further agreement. ...  No means of authoritative determination is provided by the agreement, and the necessity for further agreement reveals that there is no binding contract. It has been argued that a court will always itself determine what is reasonable between the parties. That a court could do this in a proper case is not in doubt, but here the parties were both concerned and obliged to fix their price before there could be any resort to a court, and they cannot agree upon a figure subject to a deduction to be fixed by the court. Moreover, I do not think that an agreement to be reasonable would always result in a binding contract even where the contract is one for the sale of goods at a reasonable price.

[para 6] The starting point in considering this must be that there can be no binding contract of sale without agreement as to price. ... Where, however, property has been delivered or work accepted, a person who has taken what he requested is bound to pay a reasonable price for what he has received, and the various indebitatus counts lie for the recovery of such sums because the consideration has been executed.  ...

[para 9] This review of the authorities most favourable to the contention that where no price is fixed the law implies that the price will be what the goods are reasonably worth, does not justify the proposition that in all cases a promise to pay a reasonable price or a reasonable sum is sufficiently certain to give an agreement for sale legal efficacy: .... Where there is an established market for the commodity the subject of a bargain, a promise to pay the fair value would probably be sufficiently certain: ... Where, however, the property is of a special character, different considerations may apply, and I am not satisfied, for instance, that there could be either specific performance or damages in the event of a failure to deliver a picture disputedly attributed to Vermeer which was the subject of an agreement to sell at a reasonable price. If it had to, a court could, of course, decide the value of such a picture, but to do so it would have to hear and weigh the evidence for and against authenticity as well as to take into consideration evidence of value. The very process that such a determination would involve would seem to indicate that an agreement to buy the picture for a reasonable price would be no more than an agreement to pay what the court should fix as its value. I am inclined to think such a bargain would be no contract and that before delivery a court would not undertake its enforcement.

[para10] The rule, so far as it exists, that a contract for the sale of goods at a reasonable price is not so uncertain as to be unenforceable is not, however, applicable to the sale of a particular piece of land, and on this point I desire to do no more than express my agreement with what has been written by the Chief Justice and Fullagar J.

[emphasis added]

Justice Windeyer (dissenting)

Thought a

[para 1] ... An offer to sell at a fair value might, of course, be no more than an offer to negotiate as to a price. But, if parties, intending to make a concluded contract of sale, agree that the sale shall be at a fair valuation of the property sold, they have fixed the price by reference to an ascertainable fact - the fair value. The value of any property, except commodities commonly bought and sold and having a current market price, may, in one sense, be always a matter of opinion unless there be some fixed or standard price; so that subjective considerations necessarily intrude into questions of value. Yet the law regards value as an ascertainable fact, and land no less than other forms of property as susceptible of valuation. The valuation of land and improvements upon land is, in fact, commonly undertaken for a variety of purposes, for example, for rating, or to determine compensation on a compulsory acquisition, or for trustees proposing to invest funds upon mortgage. I do not find any logical difficulty in the idea of a reasonable price for land in a system of law that by statute asserts that there is a reasonable price for goods of all kinds - for a picture, a race-horse, or an ancient vase, for examples, just as much as for a loaf of bread or a pound of tea. Rare chattels are, I suppose, seldom bought and sold without the price being first fixed. But if such a sale does occur the difficulty of ascertaining a reasonable price cannot affect the validity of the contract ... In the present case the subject matter of the contract is eighty-six acres of land in Queensland. It is, in fact, an island close off the shore. I do not think that, for that reason, it is incapable of valuation. ... I do not base my conclusion here solely upon that; but upon the broader ground that an agreement for the sale of any property at its fair value, or reasonable price, is to-day a valid contract. If it be conceded that the fair value, in terms of money, of any property is an ascertainable objective fact, it seems to me to follow that the price in a contract of sale may be so expressed. ...

[para 3] Coming now to the main problem, the scope of the notion of reasonable price. The concepts of a reasonable price for goods sold, and of reasonable remuneration for services rendered, and indeed of contractual stipulations, express or implied, for reasonable time and reasonable notice, and also the right to a reasonable compensation for the use and occupation of land are all the products of similar developments. And all originally met with the same objections. In the argument before us an attempt was made to found something upon one distinction between sales of goods and sales of land. In a contract for the sale of goods, if there be no price fixed, the law provides that the buyer must pay a reasonable price. It is said that it is to be inferred that this was the intention of the parties. There is no similar rule in the case of a sale of land. If nothing be expressly stipulated as to the price there can be no concluded contract for the sale of land. The distinction is important. The rule in relation to goods was, as will appear later, developed by the common law courts to ensure that those who supplied consumable goods got payment. But in the Court of Chancery, where so much of the law of vendor and purchaser was made, civil law doctrines had a longer and a later influence. And Roman law insisted on a certum pretium as a necessary ingredient of a sale of anything, land or chattels. It knew nothing of the idea of a reasonable price... And the requirements of the Statute of Frauds tended to emphasize the need for a precise statement of the price in sales of land. But once admit, as English law does but the Civil law does not, that there is such a thing as a reasonable price then it seems to me that in our law the distinction between sales of lands and of chattels is not that an effective agreement can be made to sell a chattel for a reasonable price but an effective agreement to sell land cannot. It is, rather, that if persons would contract to sell land for a reasonable price they must do so expressly; whereas on a sale of chattels an obligation to pay a reasonable price is imposed by law when the parties are silent as to price. But surely the parties to a transaction concerning land can make an express agreement in the terms that in a sale of goods the law can infer that they made? And it is by such an inference or implication of what the parties intended should be the terms of their arrangement that the common law arrived at its rule in the case of chattels. The conclusion that seems to be warranted by logic is, I think, confirmed by history.

[His Honour went on to consider developments relating to payment of reasonable price for goods and services]

[para 7] To sum up my opinion: The parties executed the deed intending it to be legally binding. They changed their positions in the belief that it was. They expressed their intention in language that was sufficiently certain to create legal obligations. For these reasons I agree with Philp J. and other members of the Supreme Court of Queensland that the provisions of cl. 5 of the deed for ascertaining the price payable if the option were exercised are valid.

[emphasis added]

Appeal dismissed