Chapter 8: "Subject To" Contracts

Question 1

define condition precedent to formation (CPF)

Answer 1

eg. “I’ll buy your car if I like the colour of it”

no contract yet in case of CPF

Question 2

define condition precedent to performance (CPP)

Answer 2

contract exists as soon as signed and ceases when deed performed

contract precedes performance

performance held in abeyance until condition met; if condition fails to be met, contract is defeasible

Question 3

Masters v Cameron ratios

Answer 3

1. When express language such as “subject to contract” is used, the words will prima facie create an overriding condition that there is no binding agreement unless and until the formal document is executed

3 possible meanings of “subject to contract”
* restatement: intent to be bound immediately, but plan to draw up formal contract later (results in binding contract)
* performance upon signing: intent to be bound immediately with only performance of the agreement subject to drawing up of formal contract (results in binding contract; obligated to create the formal document)
* no contract unless and until execution of a formal contract: no intention to be bound until formal contractual document made (if lawyers involved, negotiation not complete)

Question 4

Megill-Stevenson Co v Woo ratios

Answer 4

1. When solicitor’s review or approval means more than a review of wording to ensure everything is proper, no concluded contract wtihout review and approval of the lawyer
2. A contract can be binding and enforceable even though it is not in writing. However courts should be cautious when considering finding a binding contract based on verbal conversations where the usual practice for that particular type of contract is to reduce it to writing