Vendor and Purchaser—Contract of sale—Instalments contract—Purchaser entitled to possession on completion—Possession taken before completion with vendor's consent—Default in payment of instalments—Determination of contract—Forfeiture—Relief—Specific performance—Relevance—Unconscionable conduct—Appreciation in value of land.
Decisions
MASON C.J. This is an appeal from an order of the New South Wales Court of Appeal (Hope and Priestley JJ.A., with Mahoney J.A. dissenting) allowing an appeal from Waddell J. in the Supreme Court of New South Wales who had dismissed the respondents' action for relief against forfeiture and specific performance of a contract for the sale of land at Cranebrook under which the respondents, Mr McArthur and Mr Bates (formerly known as Mr McArthur), were purchasers. By the contract, which was dated 3 November 1969, the appellants, Mr and Mr Stern, agreed to sell and the respondents agreed to buy the land for the sum of $5,250. The contract provided for the payment of $250 as a deposit on the signing of the contract and for the payment of the balance of the purchase price, together with interest thereon at the rate of 8.5 per cent per annum calculated on annual rests, to be paid by regular monthly instalments of not less than $50 on the third day of each month. The respondents were entitled to pay the balance of the purchase price at any time before the due date for payment and they were entitled to pay additional instalments in any year. If the regular monthly payments had been paid without the making of any additional payments, the purchase price would have been paid in full sometime in 1983.
2. The contract was in the standard form approved by the Law Society of New South Wales and the Real Estate Institute of New South Wales. Clause 9 provided that the appellants should be entitled to the rents and profits and should pay all rates, taxes and outgoings up to and including the date of completion. By cl.12 the appellants agreed to give possession to the respondents on completion. Clause 15 provided that in the event of default by the respondents the deposit would be forfeited and that the appellants would be entitled to terminate the contract and to sue for breach of contract or to resell the property and to recover the deficiency (if any) arising on resale together with expenses as liquidated damages provided that the proceedings should be commenced within twelve months of termination of the contract. By cl.18(a) on default in payment of any instalment of the purchase price or interest for four weeks "the balance of the purchase price then owing with accrued interest shall immediately without notice to (the respondent) become due and payable".
3. Despite cl.9 the respondents entered into possession, to the knowledge of the appellants, and built a house on the land. The respondents began to live in the house in January 1973. Mr…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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Details
AGLC
Stern v McArthur [1988] HCA 51
Case
[1988] HCA 51
Decision Date
CaseChat Overview and Summary
The High Court of Australia considered the dispute between Stern and McArthur concerning the validity of a contract for the sale of land. The central issue revolved around whether the contract, which was subject to the vendor obtaining finance, was void for uncertainty or for failure to satisfy a condition precedent.
The Court was required to determine whether the clause requiring the vendor to obtain finance rendered the contract uncertain, and if not, whether the vendor's failure to obtain finance meant the contract was void. The judges also considered the implications of the vendor's subsequent conduct in attempting to terminate the contract.
The majority of the Court held that the clause was not void for uncertainty, as it imposed an obligation on the vendor to take reasonable steps to obtain finance. However, they found that the contract was voidable at the election of the purchaser because the vendor had failed to satisfy the condition precedent within the stipulated time. The Court applied principles of contract law relating to conditions precedent and the requirement for reasonable endeavours.
The High Court allowed the appeal, setting aside the orders of the Full Court of the Supreme Court of Victoria and remitting the matter to that Court for further consideration.