The case Summergreene v Parker [1950] HCA 13; (1950) 80 CLR 304 is a landmark decision by the High Court of Australia that explores critical principles of contract law, particularly in the context of agency, the formation of contracts, and the issue of incomplete agreements. Given below is a summary of the case.
Court: High Court of Australia
Date of Decision: 1 June 1950
Judges: Latham C.J., Williams, Webb, and Fullagar JJ.
Legal Principles Discussed: Principal and Agent, Formation of Contracts, Certainty in Agreements, and Trustees for Non-Existent Companies.
Key Facts (Summergreene v Parker)
Mrs. Summergreene (defendant) owned a business, “The Dyeing King.” Parker (plaintiff) was employed as an agent to sell the business and was promised £500 commission if he successfully “effected a sale.” Messrs. Anderson and Jones, acting as trustees for a proposed company to be formed, offered to purchase the business. A letter detailing the terms of the sale was sent on 20 December 1946, and Mrs. Summergreene accepted this offer on 21 December 1946. Clause 6 of the offer required a “usual agreement” to be entered into between Mrs. Summergreene and the proposed company, with terms satisfactory to both parties. The company was never formed, and Mrs. Summergreene refused to proceed with the sale, citing family objections.
Legal Issues that arose
Did the letters exchanged constitute a binding contract for the sale of the business?
Was Parker entitled to the commission, or was the transaction incomplete?
What is the effect of agreements involving non-existent companies on contractual liability?
Decision (Summergreene v Parker)
The High Court unanimously allowed the appeal and ruled in favor of Mrs. Summergreene, restoring the original judgment by Maxwell J.
Reasoning
1. No Binding Contract Formed
The Court held that the letters did not constitute a concluded contract due to the uncertainty in Clause 6, which left critical terms to future negotiation. A binding contract requires that all essential terms be settled, leaving nothing uncertain or dependent on further agreement (citing Sinclair, Scott & Co. Ltd. v. Naughton and May & Butcher v. The King). Clause 6 explicitly referred to a “usual agreement” and left terms “to be in a form satisfactory” to both Mrs. Summergreene and the proposed company, indicating that the contract was incomplete.
2. Non-Existence of the Company
“The only ‘purchasing party’ was a non-existent company: in other words, there was no true purchasing party. The only parties to the contract other than the defendant were not purchasing parties. They did not promise to purchase. They promised only to form a company which would purchase. No ‘sale’ was ‘effected’ by the contract.” (By Fullagar J. at p325)
Anderson and Jones acted as trustees for a company that was yet to be formed. Under Kelner v. Baxter (1866), agents contracting for a non-existent principal may incur personal liability if there is a clear intention to bind themselves. However, the Court found that the intention here was for the company, once formed, to be the purchaser. Anderson and Jones were not intended to be personally liable for the purchase.
3. Commission for “Effecting a Sale”
For Parker to earn his commission, he needed to effect a binding sale of the business. Since no binding contract was formed, no sale was effected, and Parker did not fulfill the condition for earning his commission.
Outcome
The High Court allowed the appeal, setting aside the decision of the Full Court of the Supreme Court of New South Wales.
The judgment for the plaintiff (Parker) was set aside, and the original decision in favor of the defendant (Mrs. Summergreene) was restored.
Significance
This case illustrates the importance of a “concluded bargain” in contract law and underscores the principle that a sale is not “effected” unless a binding and enforceable agreement is secured. It also highlights the challenges in dealing with agreements involving non-existent principals.
References:
https://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/HCA/1950/13.html
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