LORD JUSTICE GOFF: This is an appeal from an order dated 31st March 1977 of Mr. Justice Brightman made on a Notion under 0.18 r.19 whereby he directed that as against the first defendants the statement of claim should be struck out and the action dismissed with costs.
The appellant plaintiffs were keen to buy certain commercial and residential properties from the first defendants who were in a position to sell those properties as mortgagees.
The appellants never in fact succeeded in obtaining an exchange of contracts or any other written agreement for sale and purchase, but they claim they did obtain a unilateral contract by the first defendants that they would enter into a written contract of sale on certain agreed terms and the appellants claim damages for breach of that unilateral contract.
The facts on which they base that claim are extensively set forth in the re-amended statement of claim but I need only refer to them quite briefly.
I take them from the following paragraphs of the re-amended statement of claim:
"7. On Tuesday, 21st December, 1976 the terms of the proposed sale between the plaintiffs and the first defendants were finally agreed between one Shebson acting on behalf of the plaintiffs and the said Langley"
– who was a partner in the second defendants and acting on behalf of the first defendants -
"whereby the plaintiffs were to purchase the said properties from the first defendants for a price of £823,000 payable by a deposit of £41,250 which said deposit was to be payable by a Bankers Draft and the balance of £783,750 was to be payable on completion. The said terms were partly oral and partly in writing. Insofar as they were in writing they were contained in the draft contracts which the plaintiffs and the first defendants already had. Insofar as they were oral, they had been agreed on the telephone between the said Shebson and the said Langley, and the said oral terms were evidenced by riders to the said contract sent by the said Shebson to the said Langley on Tuesday, 21st December, 1976".
"8. On the afternoon of Tuesday, 21st December, 1976 one Osgoodby acting on behalf of the first defendants promised the said Shebson acting on behalf of the plaintiffs that the first defendants would enter into a contract for the sale of the said properties with the plaintiffs if the plaintiffs procured a Bankers Draft for the said deposit, attended at the first defendants offices before 10.00 a.m. on Wednesday, 22nd December 1976, at 4, Millbank and tendered to the first defendants the plaintiffs' part of the contract in the terms already agreed and the said Bankers Draft".
"In reliance on the said promise the plaintiffs procured the Bankers Draft for the said deposit, executed and signed their part of the said contract for sale in the terms already agreed".
"9. The plaintiffs duly attended at the first defendants' said offices before 10.00 a.m. on Wednesday, 22nd December, 1976 with their said deposit and their said part of the contract for sale ready for tender to the first defendants. But the first defendants refused to exchange their part of the said contract for sale with the plaintiffs".
Mr. Justice Brightman held that those facts disclosed no cause of action, and the appellants now appeal to this court.
Under this procedure the facts so pleaded must be taken as admitted, and they give rise to three questions of law: (a) Do they establish a valid unilateral contract? If they do, then there is no question but that they disclose a breach, (b) If the answer to (a) is Yes then is that contract unenforceable for want of a written note or memorandum to satisfy Section 40 of the Law of Property Act 1925, unless there be sufficient acts of part performance to take the case out of the statute? (c) If Section 40 applies are there such acts?
It is well settled that it is only in plain and obvious cases that the court should exercise its powers under the summary process provided by 0.18 r.19 and it was suggested that these questions should not be resolved by us but should, in any event go to trial.
I am satisfied, however, that so far as the facts are concerned the appellants' position cannot be improved by evidence beyond that in which they stand on the facts pleaded which for the purposes of this motion and appeal are taken to be admitted. Further the points of law have been very fully argued before us, and I have no doubt that we ought to determine them now.
I therefore turn to the first question. Was there a concluded unilateral contract by the first defendants to enter into a contract for sale on the agreed terms?
The concept of a unilateral or "if contract" is somewhat anomalous, because it is clear that, at all events until the offeree starts to perform the condition, there is no contract at all, but merely an offer which the offeror is free to revoke.
Doubts have been expressed whether the offeror becomes bound so soon as the offeree starts to perform or satisfy the condition,-or only when he has fully done so.
In my judgment, however, we are not concerned in this case with any such problem, because in my view the appellants had fully performed or satisfied the condition when they presented themselves at the time and place appointed with a banker's draft for the deposit, and their part of the written contract for sale duly engrossed and signed and there tendered the same, which I understand to mean proferred it for exchange. Actual exchange, which never took place, would not in my view have been part of the satisfaction of the condition but something additional which was inherently necessary to be done by the appellants to enable, not to bind, the first defendants to perform the unilateral contract.
Accordingly in my judgment, the answer to the first question must be in the affirmative.
Even if my reasoning so far be wrong the conclusion in my view is still the same for the following reasons.
Whilst I think the true view of a unilateral contract must in general be that the offeror is entitled to require full performance of the condition which he has imposed and short of that he is not bound, that must be subject to one important qualification, which stems from the fact that there must be an implied obligation on the part of the offeror not to prevent the condition becoming satisfied, which obligation it seems to me must arise as soon as the offeree starts to perform. Until then the offeror can revoke the whole thing, but once the offeree has embarked on performance it is too late for the offeror to revoke his offer.
This brings me to the second question.
There are certain English cases touching this matter, but none precisely in point.
The appellants rely strongly on Warlow v. Harrison 1 Ellis & Ellis 295 and Johnson v. Boyes (1899) 2 Chancery, 73.
In the former an auctioneer knocked down as sold for 61 guineas, which was bid by the owner, a pony which according to the particulars was to be sold without reserve, and the auctioneer, not the vendor, was sued for damages by the plaintiff who was the highest independent bidder at 60 guineas.
In the Court of Queen's Bench, see page 308, Lord Campbell held that there was no contract because the vendor had revoked the auctioneer's authority to accept the plaintiff's bid, and therefore no question of the impact of Section 17 of the Statute of Frauds arose.
The Exchequer Chamber agreed with this conclusion on the pleadings as they stood, but allowed an amendment, and held the defendant liable; per Baron Martin as upon a contract that the sale should be without reserve, and per Mr. Justice Willes and Mr. Justice Bramwell upon a breach of warranty of authority to sell without reserve, and at page 316 Baron Martin said:
"Upon the same principle, it seems to us that the highest bona fide bidder at an auction may sue the auctioneer as upon a contract that the sale shall be without reserve. We think the auctioneer who puts the property up for sale upon such a condition pledges himself that the sale shall be without reserve; or, in other words, contracts that it shall be so; and that this contract is made with the highest bona fide bidder; and in case of breach of it, that he has a right of action against the auctioneer. The case is not at all affected by the l7th Section of the Statute of Frauds, which relates only to direct sales, and not to contracts relating to or connected with them".
This case affords support for the appellants' contention as far as it goes, but it is distinguishable, since there the action was against the auctioneer, not the vendor, and it was not upon a contract by the auctioneer that he himself would sell to the highest bidder but that his principal would do so.
Warlow v. Harrison was approved by Mr. Justice Cozens Hardy in Johnson v. Boyes (1899) 2 Chancery at page 77, where he related it to the vendor himself, saying
"A vendor who offers property for sale by auction on the terms of printed conditions can be made liable to a member of the public who accepts the offer if those conditions be violated: see Warlow v. Harrison 1 Ellis & Ellis,295, and the recent case of Carlill v. Carbolic Smoke Ball Co. (1893) 1 Queen's Bench, 256. Nor do I think that the Statute of Frauds would afford any defence to such an action. The plaintiff is not suing on a contract to purchase land: she is suing simply because her agent, in breach of the first and second conditions of sale, was not allowed to sign a contract which would have resulted in her becoming the purchaser of the land. I think this conclusion results from the decision of the Exchequer Chamber in Warlow v. Harrison".
This however, was merely obiter because not only was the action once again not against the vendor but against the auctioneer, but also the court held that there could be no liability anyway, quite apart from the effect of the statute, because the plaintiff's agent had not tendered cash, but only a cheque, wnich the auctioneer was not bound to accept. The case is in any event unsatisfactory because the complaint made was that the auctioneer had refused to allow the plaintiff's agent to sign a memorandum on her behalf, but that would not have been of any use to her. What was required was a note or memorandum signed by or on behalf of the vendor.
On the other hand the case of Rainbow v. Howkins (1904) 2 King's Bench, 322, so far as it goes tells against the appellants but again it is distinguishable, because the action was brought on the ground that the auctioneer was personally liable as if he were vendor under a contract of sale not upon a collateral contract, and alternatively for breach of warranty of authority, but it was held that he could not be sued on the first ground because of the statute, and could not be sued for breach of warranty of authority, because there was none since, apart from the statute, he had effectively bound the vendor.
Mr. Hoffman also relied on Wood v. Midgley reported at first instance in 2 Smale & Gifford, page 115, and on appeal 5 de Gex Macnaughten & Gordon, 41. That, however, was not a case of an agreement to enter into a written agreement but of a concluded oral agreement for sale with a concurrent or collateral agreement to reduce it to writing, so that again is distinguishable.
In these circumstances in my judgment it is necessary to consider how the matter stands in principle. As I see it the question is whether the unilateral contract is - and I quote these words from Section 40 –
"a contract for the sale or other disposition of land or any interest in land".
It is clear to me that ex hypothesi it is not a contract for the sale of land or any interest in land because it is a separate and independent contract to enter into such a contract.
In my judgment, however, it is equally clearly a contract for some other disposition of an interest in land.
It is not necessary in my view that the interest in land to be disposed of should actually exist at the time of the contract. I cannot doubt that a contract for valuable consideration to grant an easement over Blackacre would be a contract for the disposition of an interest in land within the meaning of the section.
Now, in the present case we have a contract to enter into a proper written contract for the sale of land because a contract if entered into would be specifically enforceable and would therefore give the appellants a right to the land in equity and so would create and give them an equitable interest in the land. It follows in my judgment that the unilateral contract was a contract to dispose of an interest in land, because it was a contract to do something which would have that effect in law.
The appellants say "But we are not claiming specific performance; only damages". That, however, in my view is an irrelevant consideration for two reasons. The first, which is I think conclusive, is that we are not concerned with whether the "unilateral contract" could be specifically enforced so as actually to create an interest in land, but whether it is a contract to do that which, if done, would create such an interest. The words of the section look only to the contract.
The second is that the appellants cannot escape the impact of the section by limiting the nature of the relief they seek, and moreover, the damages for breach of the unilateral contract must, as I see it, be exactly the same as damages for breach of the contract of sale would have been if contracts had been exchanged and then broken by the appellants.
If, however, contrary to my view it be necessary that the unilateral contract should be one capable of specific performance, in my judgment it is so notwithstanding the decision of Mr. Justice Stirling on motion in Johnson v. Boyes Volume 42 Solicitors' Journal page 610, which with all respect to that learned judge is in my view incorrect.
For this purpose one must regard the matter apart from Section 40, for if one postulates that the section applies one begs the whole question. So regarded, I cannot see how a vendor can escape an order for specific performance by agreeing (with sufficient particularity to be effective in law) to agree to soil rather than by a direct agreement to sell.
The dictum of Lord Wright in Hillas v. Arcos 147 Law Journal at page 515 "a contract de praesenti to enter into what, in law, is an enforceable contract, is simply that enforceable contract, and no more and no less", with which I respectfully agree, does not directly apply, because prior to exchange of contracts which never took place the appellants were not themselves bound to purchase or to enter into a contract to purchase. They could have resiled at the very last moment, even after tender, so that this was not a contract between A and B to make a contract between A and B, but a unilateral contract by A to enter into a particular contract with B, but in my view the principle must be the same.
I am fortified in this conclusion by the American case of Union Car Advertising Co. v. Boston Elevated Railway Co. a decision of the Circuit Court of Appeals, First Circuit, reported in 26 Federal Reports 2nd Series, page 755.
Mr. Gregory pointed out that the court said (at page 759) that ". . . it was virtually conceded by the plaintiff at the argument that under the law of Massachusetts an oral contract to execute a written contract for the sale or transfer of an interest in land is within the statute of frauds and invalid" but the case before the court was not such a case but one of a contract not to be performed within the year. Therefore, he said this American decision does not help because the position with regard to a contract for the sale or other disposition of an interest in land was not before the court, and anyway the court was dealing only with the law of Massachusetts.
So far as the second point is concerned the case is none the less persuasive authority, and as to the first, the citations in the judgment from other cases show that the concession was in truth in accordance with the law of that State, and show that law to be founded upon reasoning which commends itself to me and entirely accords with my own.
Thus in Sarkisian v. Teele where the subject matter was an oral contract to execute an unsigned written contract to sell stock in trade and to let the business premises, tne court said (see page 758):
"If the bill is considered as seeking to enforce an oral promise by the defendant to enter into the formal writing, as containing all the essential elements of the contract, it cannot be maintained",
and again
"By the statute of Frauds such an agreement was required to be in writing, and an oral promise to execute a contract embodying these terms also comes within the statute".
Further in McLachlin v. Village of Whitehall (see again page 758):
". . . the trustees of the defendant village entered into an oral contract wherein it was agreed that if the plaintiff would increase his plant, so that he could furnish incandescent lights for private houses in the village, the trustees would renew . . ".
the written contract he then had for lighting its street, which would otherwise expire in 1897- In that case the court said:
"The question is therefore presented whether damages can be recovered for the broach of an oral agreement to enter into a contract which, under the statute of frauds, is required to be in writing. It is true that the oral agreement to enter into the written contract might be fully performed within a year or within a day. The action is not in form one to recover damages for a breach of contract for lighting the streets and public places for a term of five years, but for damages consequent upon a breach of the verbal agreement to award such a contract to the plaintiff. The damages, however, claimed as consequent upon such breach are none other than the same damages as would have been recoverable for a breach of the contract for lighting if it had been awarded to the plaintiff. It is conceded that a contract for lighting for a term of five years would be void if not in writing, but if an oral agreement to enter into such a written contract is not also void, where the damages claimed for the breach of the oral agreement are not independent of it, but necessarily are the same as those which would arise from the breach of the written contract, the door would be open for the practical nullification of the statute of frauds in a large class of cases".
The law is similarly stated in 72 American Jurist, 2nd Edition, Section 4.
"The general rule is that an oral agreement to reduce to writing a contract which is within the scope of the operation of the Statute of Frauds or to sign an agreement which the Statute of Frauds requires to be in writing is invalid and unenforceable".
In my judgment, therefore, the unilateral contract in this case is prima facie unenforceable, and I turn to the third question.
The appellants rely on all and every of the acts done by them to satisfy the conditions of the "unilateral contract", as being also sufficient acts of part performance.
The first defendants say that cannot be so because nothing can be part performance if done before there is any binding contract Mr. Hoffman puts his case as high as saying that by definition there can never be part performance of a unilateral contract.
I doubt whether that is right as a general principle, since in most cases the performance of the condition by the offeree is also the discharge of all his obligations and is certainly done pursuant to the inchoate contract. I think in many cases the offeree's acts may amount to part performance, though I doubt whether in this case they caused sufficient prejudice to the appellants to raise an equity on which the first defendants could be charged.
In my view, however, it is unnecessary to decide these questions since in my judgment the case fails because none of the alleged acts of part performance of themselves suggest that there was any contract between the parties. Indeed they point to the exact opposite and suggest that the parties were about to make or contemplated making a contract. It is only if one first looks to see what the oral contract is, and finds that it is a unilateral contract, such as pleaded in this case, that the acts can begin to be regarded as part performance, but that is an inquiry which one is not permitted to make: see per Lord Reid in Steadman v. Steadman [1976] AC at page 541, just above E, where he said:
"I think that there has been some confusion between this supposed rule and another perfectly good rule. You must not first look at the oral contract and then see whether the alleged acts of part performance are consistent with it. You must first look at the alleged acts of part performance to see whether they prove that there must have been a contract and it is only if they do so prove that you can bring in the oral contract",
and again at H:
"In my view, unless the law is to be divorced from reason and principle, the rule must be that you take the whole circumstances, leaving aside evidence about the oral contract, to see whether it is proved that the acts relied on were done in reliance on a contract: that will be proved if it is shown to be more probable than not".
Lord Salmon appears to have taken a contrary view: see page 571 where he said at G:
"In the present case the payment of £100 by the husband to his wife who had divorced him - looked at without regard to its surrounding circumstances - would not be any evidence of any contract, let alone of a contract concerning land".
The other members of the court did not state the position so specifically one way or the other, but both Viscount Bilhorne at page 553 at F and Lord Simon at page 561 at G accepted, the statement in Pry on Specific Performance 6th Edition, page 278, Section 582:
"The true principle however of the operation of acts of part performance seems only to require that the acts in question be such as must be referred to some contract, and may be referred to the alleged one; that they prove the existence of some contract and are consistent with the contract alleged",
approved by Lord Justice Upjohn in Kingswood Estate Co. Ltd. v. Anderson (1963) 2 Queen's Bench at 189. Here, of course, the acts do not prove any contract.
The appellants argue that whilst one may not look to see what oral contract is alleged, one may look at the promise made as part of the surrounding circumstances and then the alleged acts of part performance are explained and shown to be referable to the existence of a contract; but that, with all respect, I reject as too subtle, and in reality looking to and examining the alleged acts of part performance in the light of the alleged contract.
For these reasons in my judgment the appellants fail on the third question also, and I would dismiss this appeal, although I do so with considerable regret as the respondents' conduct appears to me to be unmeritorious.
LORD JUSTICL BUCLLEY: I agree.
The plaintiff and the first defendant were in negotiation for the purchase by the former from the latter of a considerable number of properties in London described as the Gill Portfolio. It is common ground, however, that at no time was there a contract between them in this respect. It was the intention of the parties that the formation of a contract of sale should await the exchange of formal written agreements. The plaintiff sues on an alleged contract, partly oral and partly by conduct, arising out of the promise alleged in paragraph 8 of the re-amended statement of claim and the plaintiff's conduct alleged in paragraphs 9 and 10 thereof. It is claimed that the first defendant thus became bound to enter into a formal written agreement of sale in terms which had already been agreed (though not contractually) between the parties when the contract sued upon was made. The issues consequently are (1) whether the facts pleaded in paragraphs 8, 9 and 10 of the re-amended statement of claim are such as would give rise to a contract; (2) whether a plea under the Law of Property Act 1925 section 40 could afford a good defence to an action on such contract; and (3) if so, whether in the present case there was any sufficient part performance to take the case out of the Section.
Mr. Justice Brightman seems to have accepted that the answer to the first question should be affirmative. In this court it has been suggested that the plaintiff's conduct alleged in paragraphs 9 and 10 did not fully satisfy the conditions upon which the defendant's alleged promise was conditional, because it is not in terms alleged that the plaintiff in fact tendered the plaintiff's part of the written agreement. I would not regard this as an adequate ground for striking out the statement of claim; for if, as seems probable, the first defendant's declaration on 22nd December 1976 of an intention not to exchange agreements stultified the plaintiff's intention then to tender its part for exchange, the first defendant could not, in my judgment, rely on any failure of the plaintiff to make actual tender as a defence to a claim of breach of contract. The defendant's offer to exchange contracts must have been subject to an implied obligation that the defendant would not render the performance by the plaintiff of the acts necessary for acceptance impossible, and I agree with Lord Justice Goff that the defendant could not withdraw his offer once the plaintiff had embarked upon those acts.
In my opinion, the re-amended statement of claim is capable of supporting a conclusion that a contract was made on the 22nd December 1976 under which the first defendant became bound to enter into a written agreement of sale of the properties to the plaintiff upon the terns which, as alleged in paragraph 7 of the re-amended statement of claim, had been finally agreed on the previous day.
The learned judge, in an interesting analysis of the position in the present case, reached the conclusion that, on the basis that a contract to exchange agreements existed, that contract was itself a contract for the sale of land, and that no distinction could be drawn between the contract to exchange agreements and the contract which would result from such exchange. If the judge was right, it must follow that he was also right in concluding that the contract to exchange agreements must fall within the operation of Lection 40 and be unenforceable for lack of writing unless there was sufficient part performance to take the case out of the Section.
As I said, however, at the beginning of this judgment, it was, and I think still is, common ground between the parties that there never has been any contract of sale in the present case. If this is the case, any contract there may have been was merely a contract to do something - viz. exchange of agreements - the doing of which would bring a contract of sale into existence. As I read the learned judge's judgment, he held that the contract to exchange agreements should be treated as, and indeed was in truth, a contract for the sale of land.
The plaintiff contends that this is not good law and that the contract to exchange agreements is a contract to do a particular act which is distinct from the contract of sale which would result from the doing of that act.
If it be accepted that the intention of the parties was at all relevant times that there should be no contract of sale until formal agreements had been exchanged, there can have been no contract of sale on 22nd December 1976, for no agreements were then exchanged. In those circumstances, either no contract was made on that day or it was a contract which was not a contract of sale. If no contract was made, this can, I think, on the pleaded facts only have been because the promise alleged in paragraph 8 of the re-amended statement of claim was not in truth a promise at all by reason of the subject-to-contract character of the dealings between the parties in relation to the sale negotiations. The learned judge expressed the view that the exhibited correspondence showed clearly that the negotiations for the sale were intended to be subject to contract, and this has not been questioned in this court. The judge went on to say that it was theoretically possible that on 21st December 1976 - that is, on the occasion to which paragraph 8 of the re-amended statement of claim refers - Mr. Osgoodby on behalf of the first defendant made an offer in the terms pleaded in paragraph 8 which was not subject to contract. If the case were to turn on the question of fact whether the so-called promise was a part of subject-to-contract negotiations or was an offer capable of acceptance having contractual effect, that question ought, I think, to go to trial. If the promise was subject to contract, no contract would have arisen from the plaintiff's acts pleaded in paragraphs 9 and 10 of the re-amended statement of claim; if, on the other hand, it was not subject to contract, is any contract which may have arisen by reason of the plaintiff's acceptance by conduct an enforceable contract? In other words, would Section 40 apply to it?
As I have already said, if the learned judge was right in his view of the effect of the contract, Section 40 must apply: but let me assume that, for whatever reason, that view is incorrect and the contract was no more than a contract to exchange agreements. In my view such a contract would be one which the court could order to be specifically performed; for, although not a contract of sale of land, it would undoubtedly be a contract relating to a sale of land. At the risk of drawing too fine a distinction, one might say that, though not a contract of sale, it would be a contract for sale. Such a contract, it seems to me, would be specifically enforceable, for the common law remedy of damages would be inadequate. The injury suffered by the plaintiff in consequence of the failure to implement the contract to exchange agreements and the damages recoverable in respect of it would, I think, be precisely the same as the injury resulting from, and the damages recoverable in consequence of, a breach of the contract which would arise from the exchange of agreements. The performance of the contract for an exchange of agreements would bring a contract of sale into existence. The latter contract would confer an equitable interest in the land on the purchaser. So I agree with Lord Justice Goff that the contract to exchange agreements is a contract for the creation of, and consequently for the disposition of, an interest in land within Section 40 of the Law of Property Act 1925. Moreover, if specifically enforceable, the contract to exchange agreements must have itself given rise to an equitable interest in land.
We were referred to a number of American cases which will be found collected and discussed in Union Car Advertising Co.Inc. v. Boston Elevated Railway Co. 26 Federal Reporter 2nd Series 755) a decision of the Circuit Court of Appeals, 1st Circuit, dated 13th June 1928. In one of these, Boyd v. Greene, 162 Mass. 566, 568, 39 N.E. 277 278, it was said that an oral contract to execute a valid written agreement to convey land is as much within the Statute of Frauds as an oral contract to execute and deliver a conveyance of land. In another, Sarkisian v. Teele, 201 Mass. 596 88 N.E. 333, it was held that an oral promise to execute a contract to sell stock in trade and to lease a store to the plaintiff came within the statute. Yet another, McLachlin v. Village of Whitehall 95 N.Y.3. 721, 114 App.Div. 315) was concerned with an oral promise made on behalf of the defendants to renew an expiring contract for lighting the streets of the village for a further period of five years. The appellate court decided in favour of the defendants saying:
"It is conceded that a contract for lighting for a term of five years would be void if not in writing, but if an oral agreement to enter into such a written contract is not also void, where the damages claimed for the breach of the oral agreement are not independent of, but necessarily are the same as, those which would arise from the breach of the written contract, the door would be open for the practical nullification of the Statute of Frauds in a large class of cases".
The first and third of these three cases appear to have been cases relating to agreements to enter into a written contract where no contract already existed. Sarkisian v. Teele, on the other hand, seems to have been a case of an agreement to render an existing unenforceable agreement enforceable by reducing it to writing signed by the parties. It seems to me, however, that there can be no valid distinction for the relevant purpose between cases of these two classes. In each case the oral agreement, if performed, will result in there being an enforceable contract where formerly there was none. In 72 American Jurist (2nd Series) 568, the matter is stated in these terms:
"The general rule is that an oral agreement to reduce to writing a contract which is within the scope of the operation of the Statute of Frauds, or to sign an agreement which the Statute of Frauds requires to be in writing, is invalid and unenforceable. Neither promise is enforceable unless the statute is satisfied. In other words a parol agreement invalid under the statute is not aided by a further parol agreement to reduce the principal agreement to writing. To allow the enforcement of such an agreement would be tantamount to taking the main contract out of the statute, and as has been said, it is absurd to say that an oral promise in relation to certain subject matter is invalid, but that a promise that the party will thereafter bind himself with respect to the subject matter is valid. Such a construction would be a palpable evasion of the statute and let in all of the evils against which it is directed".
This appears to deal with the matter on the basis of the general policy of the Statute of Frauds. I prefer, however, to base my decision in the present case upon the view that the unwritten contract comes within the terns of Section 40 of the Law of Property Act 1925 as a contract for a disposition of an interest in land.
We were referred, among other English authorities, to the case of Wood v. Midgley, reported on appeal in 5 De Gex MacNaughton & Gordon, 41, where a purchaser, having promised to sign a written agreement on the following day, then refused to sign. A written receipt for a deposit paid by the purchaser was held to be an insufficient memorandum for the purposes of the Statute of Frauds. The plaintiff's bill contained no allegation to the effect that the purchaser's conduct was fraudulent. The defendants' demurrer to the plaintiff's bill was allowed. That case does not, in my judgment, assist us much in the present one. The plaintiff's action was for specific performance of the contract of sale, not for relief in respect of the oral promise to sign. In Johnston v. Boyes (1899) 2 Chancery, 73, the defendants offered freehold land for sale under conditions providing that the highest bidder should be the purchaser. The plaintiff's husband, Johnston, bid on her behalf and the property was knocked down to him as the highest bidder. He thereupon tendered his own cheque in payment of the deposit. One of the defendants recognised him as a man who was impecunious and entirely dependant financially upon his wife. Upon the vendor's instructions the auctioneer refused to accept the cheque or to permit Johnston to sign any agreement. The property was at once put up for resale and resold. The plaintiff sued for damages for breach of an alleged contract that the highest bidder at the auction should be the purchaser of the property. Mr. Justice Cozens-Hardy said (at page 77):
"A vendor who offers property for sale by auction on the terms of printed conditions can be made liable to a member of the public who accepts the offer if those conditions be violated: see Warlow v. Harrison and the recent case of Carlill v. Carbolic Smoke Ball Co. Nor do I think that the Statute of Frauds would afford any defence to such an action. The plaintiff is not suing on a contract to purchase: she is suing simply because her agent, in breach of the first and second conditions of sale, was not allowed to sign a contract which would have resulted in her becoming the purchaser of the land".
The reference to Johnston not being allowed to sign a contract was, as Lord Justice Goff has pointed out, inappropriate to anything which the learned judge had to decide. In my view his language must be read as referring elliptically to the refusal by the defendants through their agent, the auctioneer, to enter into a written contract of sale with Johnston as the agent of the plaintiff. It is true that the case was eventually decided upon the footing that the defendants could not be compelled to accept Johnston's cheque in payment of the deposit, but for my part I doubt whether it is correct to say that the passage which I have cited from the learned judge's judgment was obiter, having decided in the passage which I have cited that there was an enforceable contract, he went on to say:
"It is, therefore, necessary to consider whether the facts proved have established a breach of the contract alleged by the plaintiff".
He went on to hold that the vendors were not bound to accept Johnston's cheque or to wait for cash until the next day. They were accordingly under no obligation to sign the contract and were not in breach of the contract sued upon. Consequently I think that the passage which I have cited is authority which tends to support the plaintiff's contention in the present case; but it does not appear to have been suggested to Mr. Justice Cozens-Hardy in that case that the contract with which he was concerned might have come within the Statute of Frauds as a contract for the transfer of an equitable interest in land. He referred only to a contract to purchase land. Although he held that the statute was not applicable to the contract there in question, he did not do so upon the ground on which I would hold that the contract sued on in the present case does fall within Section 40.
In the course of the argument we were referred to a passage in the judgment of Lord Denning, Master of the Rolls, in Tiverton Estates Ltd. v. Wearwell Ltd.(1975)1 Chancery 147 at page 159 commenting on the earlier decision of this court in Law v. Jones, [1974] Ch 112. Although this is not an occasion for an extended discussion of the decisions in those two cases, Law v. Jones appears to have occasioned so much misunderstanding that perhaps I may be permitted to make certain explanatory observations about it. I would emphasise, however, that these remarks have no bearing upon the decision of the present case. Contrary to what some statements about Law v. Jones appear to suggest, it was not a decision on the effect of the words "subject to contract"; nor, apart possibly from what I said in that case at page 126 D to E which, as I expressly stated, did not arise for decision, I cannot discover any statement in the judgments in Law v. Jones on the topic of "subject to contract" which was novel. It is important to realise that there were two distinct sets of negotiations and two bargains in that case. The first was for a sale at £6,500, which never came to anything because the vendor resiled from it before it was put into writing. The second was for a sale at £7,000 and was the subject of the letter of 17th March 1972, the bargain having been made on 13th March 1972. The question for decision was whether that letter, read in conjunction with documents linked to it by reference, afforded a sufficient note or memorandum of the oral contract of 13th March to satisfy Section 40 of the Law of Property Act 1925. It would be most presumptuous of me to suppose, in the light of the judgments in Tiverton Estates Ltd. v. Wearwell Ltd., that I may not have been mistaken in the view upon this question which I expressed in Law v. Jones, but I have re-read my judgment in that case most carefully in the light of those observations and I can find no reason for modifying my opinion in any respect. The judgments in Tiverton Estates Ltd. rely strongly upon Buxton v. Rust, Law Reports 7 Exchequer, 279 and Thirkell v. Cambi,(1919) 2 King's Bench, 590. These were both cases in which a written document relied on to satisfy Section 17 of the Statute of Frauds denied liability but admitted the existence of a contract. Documents of this character give rise, in my opinion, as I explained in Law v. Jones, to special considerations and do not establish that in every case a note or memorandum to satisfy the statute must acknowledge the existence of a contract. I remain of the opinion that the "offer cases" can only be fitted into the pattern of authority if the statute does not require the written note or memorandum to acknowledge expressly or by implication the existence of a contract. I am unable to understand how, outside the private world of the Unite Queen, a document written at a time when ex hypothesi no contract exists can acknowledge the existence of a contract made at a later date. With deference to the view expressed by Lord Justice Russell (as he was then) in Law v.Jones at page 119 H to page 120 C, the fact that a written offer is a continuing offer until withdrawn or accepted does not meet this point. I may perhaps add that I see no reason to dissent from what the Master of the Rolls said in the Tiverton Estates case at page 160 F to H, but I do not regard that proposition as fitting the facts in Law v. Jones.
Law v. Jones did not decide that a letter written "subject to contract" or forming part of a correspondence conducted subject to a "subject to contract" stipulation can constitute a note or memorandum of an oral agreement to which it relates sufficient to satisfy the statute of Fraud, at any rate so long us the "subject to contract" stipulation remains operative. When it did decide was that, if the parties subsequently enter into a now and distinct oral agreement, the facts may be such that the earlier letter may form part of a sufficient note or memorandum of the later oral agreement notwithstanding that it was "subject to contract" in relation to the earlier bargain. It also, of course, decided the quite different point; that a written note or memorandum to satisfy the statute need not acknowledge the existence of the contract, although it must record all its essential terms. In that respect Law v. Jones and Tiverton Estates Ltd. v. Wearwell Ltd. are undoubtedly in conflict.
To revert to the present case, for reasons which I have given I am of the opinion that, whether the learned judge was right or mistaken in his view of the character and effect of the unwritten contract which is sued upon, it falls within the operation of the Law of Property Act 1925, Section 40. It is consequently necessary to consider the question of part performance.
The acts relied on as constituting part performance are those alleged in paragraph 9 of the re-amended statement of claim, having regard to the surrounding circumstances other than the unwritten contract, were these acts such as to suggest that it is more likely than not that they were done in pursuance of some contract? (Steadman v. Steadman (1976) AC 536). In my judgment they were not. I agree with Lord Justice Goff in thinking that, if one ignores the unwritten contract, the natural conclusion to draw from the acts must be that they were done not in pursuance of a contract but in contemplation of making a contract.
For these reasons I agree that this appeal must fail. I do so with some regret, for it seems to me that this is another case of a kind which has become all too common recently, when property values have been very volatile, in which a vendor has taken advantage of Section 40 in circumstances in which justice and probity should have induced the vendor to honour its bargain.
LORD JUSTICE ORR: I agree, also with some regrets, and for the reasons given by my Lords, that this appeal should be dismissed. I would only add that I entirely agree with the observations made by Lord Justice Buckley with reference to the case of Law v. Jones.
MR. HOFFMAN: Before I come to the question of costs, my Lords, I wonder whether, in view of the remarks which have been made on the merits, if your Lordships would allow me to say one or two things briefly about this case?
LORD JUSTICE BUCKLEY: Yes.
MR. HOFFMAN: As your Lordships probably know, the defendants are the alter ego of the Crown Agents, and for reasons which your Lordships will appreciate, they may be somewhat sensitive about this sort of remark.
In the first place, my Lords, the defendants were selling as mortgagees and they have, as your Lordships will have seen, entered into contract negotiations to sell at the price in the draft contract. On the evening before exchange was due to take place, the defendants were told by the mortgagors that the mortgagors had found a purchaser for a substantially increased price, and in fact had entered into a contract themselves to sell to that purchaser at the increased price. The defendants were told that if they proceeded with the sale to the plaintiffs at that price, they would be held liable for breach of their duty as mortgagees in accordance with the case of Cuckmere Estates, in failing to take proper care to secure the best price. In those circumstances, my Lords, the defendants felt that they could not go ahead with the transaction with the plaintiffs.
Of course, before your Lordships the allegations which were made in the statement of claim as to the promises which were made, etc. have had to be accepted; that is the hypothesis on which we have proceeded, and so we have taken the procedural step of seeking to strike out from the statement of claim that which may disclose a cause of action, thereby short-circuiting the trial. Your Lordships have found that step to be justified, but none of those allegations has been investigated.
I would ask your Lordships to dismiss the appeal.
LORD JUSTICE BUCKLEY: Yes, the appeal will be dismissed.
(Order: Appeal dismissed; no order as to costs in Court of Appeal; leave to appeal to House of Lords refused)
