Masters v Cameron [1954]
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Masters v Cameron [1954] 91 CLR 353 is an Australian contract law case concerning whether 'subject to contract' clauses create a presumption that the agreed-upon terms are intended as the basis for a future contract, not an immediate contract. Such clauses suggest that what has been agreed upon is subject to the preparation of a formal contract and is not to be regarded as constituting a contract itself.
On December 6, 1951, Masters and Cameron signed a written memorandum for the sale of Cameron's farm. The memorandum stated that the agreement was "made subject to the preparation of a formal contract, which shall be acceptable to Cameron’s solicitors on the terms and conditions". On the same day, Masters paid a deposit to Cameron's real estate agent. Subsequently, Masters faced financial difficulties and sought to withdraw from the purchase, claiming entitlement to a refund. Cameron argued that the memorandum created a binding and enforceable contract, even without a formal written contract.
The central question was whether the written memorandum created a binding and enforceable contract for the sale of the farm. The High Court of Australia, in a unanimous decision, ruled in favour of Masters. The court held that the memorandum did not create a binding and enforceable contract.
The court acknowledged that parties might finalise all terms of their agreement and intend to be immediately bound, even if they plan to restate the terms more precisely in a formal document. In such cases, the parties are bound regardless of whether a formal document is ever signed. The court recognised that parties might have completely agreed upon all terms and not intend to vary them, but have made performance conditional upon the execution of a formal document. In such cases, the parties are bound to bring the formal document into existence. The court distinguished cases where parties do not intend to be bound unless and until a formal contract is executed. In such instances, the parties are not bound unless the formal document is signed.
The decision emphasised that the nature of the agreement and the parties' intentions play a crucial role in determining whether a contract is binding and enforceable. In this case, the court concluded that the memorandum did not create a legally enforceable and binding contract for the sale of the farm. The ruling reflects the nuanced approach of the court in analysing the specific circumstances and intentions of the parties involved in informal agreements, particularly in the context of the sale of land.
On December 6, 1951, Masters and Cameron signed a written memorandum for the sale of Cameron's farm. The memorandum stated that the agreement was "made subject to the preparation of a formal contract, which shall be acceptable to Cameron’s solicitors on the terms and conditions". On the same day, Masters paid a deposit to Cameron's real estate agent. Subsequently, Masters faced financial difficulties and sought to withdraw from the purchase, claiming entitlement to a refund. Cameron argued that the memorandum created a binding and enforceable contract, even without a formal written contract.
The central question was whether the written memorandum created a binding and enforceable contract for the sale of the farm. The High Court of Australia, in a unanimous decision, ruled in favour of Masters. The court held that the memorandum did not create a binding and enforceable contract.
The court acknowledged that parties might finalise all terms of their agreement and intend to be immediately bound, even if they plan to restate the terms more precisely in a formal document. In such cases, the parties are bound regardless of whether a formal document is ever signed. The court recognised that parties might have completely agreed upon all terms and not intend to vary them, but have made performance conditional upon the execution of a formal document. In such cases, the parties are bound to bring the formal document into existence. The court distinguished cases where parties do not intend to be bound unless and until a formal contract is executed. In such instances, the parties are not bound unless the formal document is signed.
The decision emphasised that the nature of the agreement and the parties' intentions play a crucial role in determining whether a contract is binding and enforceable. In this case, the court concluded that the memorandum did not create a legally enforceable and binding contract for the sale of the farm. The ruling reflects the nuanced approach of the court in analysing the specific circumstances and intentions of the parties involved in informal agreements, particularly in the context of the sale of land.
