MEEHAN VS JONES, 1982 

CITATION	MEEHAN VS JONES (1982) 149 CLR 571
DATE OF JUDGMENT	17 SEP 1982
COURT	HIGH COURT OF AUSTRALIA
APPELLANT	MEEHAN
RESPONDENT	JONES
BENCH	HON’BLE BENCH OF JUSTICE GIBBS CJ, MASON, MURPHY, AICKIN AND WILSON.

INTRODUCTION

The case of “Meehan V Jones, 1982 is a landmark case on contract law and solves one of the complicated issues related to voidability of a contract related to purchase of land on the ground “uncertainty” because the purchase was subject to suitable finance being available. Issue came into light when Meehan(appellant) made an agreement with Jones(Respondent) for the purchase of a land with a clause of “subject to availability of suitable finance”. Earlier Meehan could not get the suitable finance and deal got delayed later on when appellant arranged the finance, Respondent denied the sale of land. Respondent attempted to avoid the contract on the basis of ground of uncertainty. Case went to the court of Queensland where the contract was declared void and then case was taken to high court of Australia.

FACTS OF THE CASE

1. Meehan made a written agreement to buy certain land at Roma in Queensland from Jones on 14 March 1979 and Jones agreed to sell the same for $800,000 on which oil refinery had been built 
2. Respondents had received $80,000 as part payment by way of deposit and for the rest of the payment a condition was inserted in the contract that agreement is subject to availability of suitable finance.
3. Earlier the buyer could not arrange the funds and the deal got delayed as it had to be completed by 31^st July 1979 and later on when finance was available it was communicated to the respondent.
4. Respondent tried to avoid the contract by making a claim that contract was uncertain because appellant had full discretion in deciding whether the financing terms are satisfactory to him or not.   

ISSUES RAISED

1. Whether Meehan’s discretion regarding the acceptability of financing terms rendered the contract unenforceable.
2. Whether the clause “subject to finance” is a ground of uncertainty in a contract.

CONTENTIONS OF APPELLANT

1. Appellant submitted that respondent was in agreement to purchase the land with the clause of “subject to finance” as the respondent itself was interested in that clause because respondent was indebted with the financing company itself.
2. Appellant submitted that finance was secured before the expiration of the contract and it was reported to respondent well before the expiration of time.
3. Appellant submitted they acted honestly to secure finance and respondent was well aware of the conditions of finance and thus it does not amount to uncertainty.    

CONTENTIONS OF RESPONDENT 

1. Respondents accepted that they were interested in selling the land to the appellant subject to terms and conditions of the agreement.
2. Respondent contended that appellant deliberately delayed the contract by not acting honestly to secure finance
3. Respondent citing the “subject to suitable finance” clause said it was under the complete discretion of the purchaser to decide whether the financing conditions were satisfactory to them or not. 
4. Respondent stated since it was under complete discretion of purchaser, it was very uncertain and thus made the contract void on the grounds of uncertainty.    

JUDGEMENT

The High court accepted that the finance clause was ambiguous in nature because it could not define the domain of buyer’s obligation with respect to search for finance. Court was of view that this clause does not clearly states the efforts of the buyers to secure a finance and also does not provide for what will be the satisfactory conditions for the buyer.

Court ultimately held that the contract was not void on the grounds of uncertainty. It can be void if the court itself was “unable to put any definite meaning on the contract that it could be said to be uncertain” secondly “courts should be astute to adopt a construction which would preserve the validity of the contract.” Hon’ble court finally held that appellant was entitled to specific performance of the contract.

ANALYSIS

1. “Subject to Finance” clause. – The case provides the insight that though subject to finance is an ambiguous word yet unanimously held that this clause will not render any contract void for the grounds of uncertainty.
2. Liability of Seller – case reaffirmed that for the sake of performance of the contract, seller can not avoid it claiming it to be uncertain as the condition of finance was not in his control and the seller is liable to perform the contract.
3. Duty of the Courts: Pronouncement of the case clearly states that courts shall be very careful in deciding the commercial transaction and shall try to ascertain the intention of the parties by giving due consideration to the clauses and deducing their interpretation.
4. Duty of the Purchaser: Court opined that though securing the finance and considering the terms of finance as satisfactory are in sole discretion of the purchaser yet purchaser shall act honestly and reasonably to secure finance rather than avoiding it.
5. Court’s Final Verdict – The case ultimately set aside that decision of the Supreme court of Queensland and held that purchaser was entitled for the specific performance of the contract.

CONCLUSION

The case of Meehan v Jones been a torch bearer in cases of specific performance of the contracts where the condition has been “subject to finance”. It established that courts will give effect to the commercial transactions. Merely a condition of subject to finance will not render the contract void for uncertainty. Also this case puts duty on the person securing the finance to act honestly in order to secure the finance. This case tried to maintain balance between the interest of the seller as well as of the purchaser.

REFERENCES

1. https.justuslaw.com
2. WordPress.com

This Article is written by Dhirendra Singh student of PES Modern Law College, Pune; Intern at Legal Vidhiya.

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