Meehan v Jones
149 CLR 57142 ALR 463
(Judgment by: MURPHY J)
Between: MEEHAN
And: JONES
Judges:
Gibbs C.J.
Mason J.
Murphy J.Wilson J.
Subject References:
Vendor and Purchaser
Judgment date: 17 September 1982
Canberra
Judgment by:
MURPHY J
The Supreme Court of Queensland at first instance and on appeal refused the appellant's claim for a decree of specific performance of a contract for the sale of land, on the ground that the "subject to finance" clause contained in special condition 1(b) of the contract was so vague that the contract was void for uncertainty. The appellant challenges that conclusion.
Special condition 1(b) of the contract provides:
- "1.
- This Contract is executed by the parties subject to the following: -
- (a)
- ...
- (b)
- The Purchaser or his nominee receiving approval for finance on satisfactory terms and conditions in an amount sufficient to complete the purchase hereunder;
- and should either of the above conditions not be satisfied on or before the Thirty-first day of July, 1979 (or such extended time as the parties may agree upon) then this Contract (other than for the provisions of this Clause) shall be null and void and at an end and all monies paid hereunder by the Purchaser shall be refunded in full."
"Subject to Finance"
Clauses in contracts of sale which provide that the contract is subject to the purchaser obtaining satisfactory finance, or adaptations such as "subject to satisfactory finance" or "subject to finance", do not render the contracts illusory. The transactions are conditional contracts in the nature of options to purchase. On classical concepts of consideration, the purchaser's consideration is the obligation to pay a deposit or other obligations (even if they are conditional). (See generally Treitel, Law of Contract, 5th ed. (1979), p. 64 et seq.) Such clauses are for the benefit of, and may be waived by, the purchaser. (See Weston v. Collins (1865) 34 (NS) LJ Ch 353, at pp 354-355; Gilbert J. McCaul (Aust.) Pty. Ltd. v. Pitt Club Ltd. (1959) SR (NSW) 122, at p 125.) If a purchaser erroneously believes that the finance is available, and so informs the vendor, the principles of estoppel apply.
Such clauses leave satisfaction with the finance to the purchaser's discretion. Implication of the word "honest" as qualifying the satisfaction adds nothing. Also there is no justification for implying that the purchaser must act reasonably. If the parties wish to limit the discretion, they may do so, for example, by providing that certain terms of finance shall be deemed satisfactory. Unless this is done, the discretion is unlimited. Such clauses may also be subjected to special time limites as was done here, the effect of which is that unless the finance is obtained within a certain time, or the purchaser waives, the condition is not fulfilled and the vendor is relieved from the obligation to transfer. It follows that the contract was not void because of special condition 1(b).
The respondents, in this Court, also contended that special condition 1(a) of the contract was void for uncertainty (or, if valid, had not been fulfilled). I accept the Chief Justice's analysis and conclusions on the application of special condition 1(a).
The purchaser is therefore entitled to specific performance. The appeal should be allowed.