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Question One
Identify
The areas of the law in this question are Statute of Frauds and the Doctrine of Part Performance.
Explain
The law does not generally require contracts to be made in writing or in any other formality. However, there are exceptions which require contracts to be in writing, others to be evidenced in writing, and others to be by deed. If these exceptions do not meet the formalities required by law, then;
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The contract may be void, which means it has no legal effect, or
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The contract may be unenforceable. An unenforceable contract is a legal contract; however, the parties cannot rely on the courts to resolve their dispute. Also, since the contract is valid, good title to any property may be obtained by a third party from either parties of the unenforceable contract.
Contracts which must be made by deed
A deed can often be referred to as a �formal contract’, as opposed to simple contracts, which are contracts not made by deed. In Western Australia (W.A.), s 9 of the Property Law Act 1969 (W.A.) states that a deed is required to be in writing, signed by the party to be bound, and signed by one witness. Furthermore, the deed is deemed to be sealed when it is signed and expressed to be sealed; and delivery is the intention to be legally bound. Contracts which must be made by deed are;
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Gratuitous promises,
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The appointment of a Power of Attorney,
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The sale of a ship,
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Some contracts made by corporations, and
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Leases of land exceeding the period of three years.
Contracts made by deed have certain advantages over simple contracts, for instance, consideration is not required and in W.A., a 20-year limitation period applies to their enforceability.
Contracts to be in writing
Certain contracts are required by law to be in writing. Some examples of contracts required by law to be in writing are; transfer of shares in a company; bills of exchange, cheques and promissory notes; and assignments of copyright and patents. For such contracts, failure to comply with the requirement will result in the contract being either void or unenforceable.
Contracts which are required to be evidenced in writing
Some contracts require written evidence of their terms to be enforceable. Such contracts are covered by the Statute of Frauds, which was created to make fraud more difficult to commit. The scope of the Statute of Frauds in W.A. covers:
Contracts of guarantee;
Contracts for the sale or disposition of land or any interest in land (now covered by Section 34 of the Property Law Act 1969 (W.A.); and
Sale of goods to value of $20 and upwards (now covered by Section 4 of the Sale of Goods Act 1895 (W.A.).
Riches v Hogben [1986] 1 Qd R 315 is an example of a case demonstrating the situation for contracts involving the sale or disposition of land. The case involved an elderly mother, who made an oral promise to her son and his family, that if they moved to Australia she would buy a land and house in his name. The contract was held unenforceable because under the Statute of Frauds, any contracts dealing with the disposition of land requires a memorandum in writing or acts of part performance.
Memorandum or note
The memorandum, note or written evidence may be the contract itself, some other document or documents signed by the party or authorised agent to be charged. Memorandums or notes may consist of many documents provided they can be clearly linked together. The material terms which must be included are:
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Names and identification of the parties;
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Subject matter;
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Nature of the consideration; and
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Signature (name of the party printed or written) of the party to be sued.
The position at common law states that in the case of non-compliance with the Statute, legal action cannot be employed to enforce the contract. However, it should be noted, that the contract is not void but unenforceable. Therefore a third party may obtain good title from the contract.
The Doctrine of Part Performance
The doctrine was created to aid in preventing injustice that may occur from the use of the Statute of Frauds. In the position of equity, the doctrine of part performance may only be invoked if the following conditions are met:
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The actions comprising the part performance must be connected to the alleged contract and be explainable on no other basis;
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To plead the Statute, the actions of the defendant must be such as to make it a fraud;
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The alleged contract related to the act of part performance must be enforceable by the court; and
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There must be sufficient parol evidence of the contract.
It should be noted, that the payment of money is not sufficient to satisfy part performance.
The case, White v Neaylon (1886) 11 App Cas 171, involved the doctrine of part performance. The case involved White, and John and Thomas Neaylon. John and Thomas were partners in a business involving the buying and selling of crown land. The business was granted a piece of Crown land, but only in the name of Thomas. Thomas decided that the land should belong to John. Consequently, John took tenure of the land and made certain improvements to the land beyond the scope of their business, such as installation of wells, and the building of stockyards, a stone house and a blacksmith’s shop. However, Thomas then contracted to sell the land to White, with White knowing the events that had transpired between Thomas and John. White then decided to plead the Statute on the basis that there was no written evidence of the agreement between Thomas and John.
The court decided in favour of John because he had satisfied the conditions of the doctrine and demonstrated part performance