Jennifer McVeigh (LinkedIn profile) and Lachlan Jolly have concluded from their analysis of the following decision of the Queensland Court of Appeal that it is an example of facts fitting within the second category of case contemplated by Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72: the parties have completely agreed upon all the terms of their bargain but performance is conditional upon the execution of a formal contract; the parties are contractually bound to formalise and execute the terms of their bargain.

AJ Lucas Operations Pty Ltd v Gladstone Area Water Board & Anor [2015] QCA 287

Facts

The contract between AJ Lucas Operations Pty Ltd (appellant) and the Gladstone Area Water Board and Gladstone Regional Council (respondents) was terminated by agreement. There followed a series of frustrated negotiations between the parties. This culminated in a meeting of CEOs on 16 November 2012. At the end of that meeting the commercial negotiations over the amount to settle various items were concluded and the party's lawyers attended a second meeting to document the agreement. The respondents' solicitor sent a document entitled 'Deed of Settlement No. 1' (deed) to the appellant's CEO, who signed and returned it that day.

At first instance the appellant argued that in the absence of proper execution of the deed it was not bound by the deed. Jackson J declared that the parties had entered into a contract in the terms of the deed on 16 November 2012.

On appeal, the appellant argued that neither party had demonstrated an objective intention to be immediately bound by the terms of the deed upon signing and transmission of the document by the appellant's CEO.

Decision

The Queensland Court of Appeal dismissed the appeal.

The court observed that when considered objectively in light of surrounding circumstances the parties intended to be bound on 16 November, ie that the purpose of the meeting was to come to a concluded and legally binding agreement.

The court held that the facts were an example of a contract whereby the parties intended to be immediately bound prior to the execution and exchange of the deed.

The court found support for this conclusion on the following bases:

  • there was no evidence of a requirement that any agreement reached be subject to further documentation or explicit approval of each party's board;
  • though the parties did not reach a concluded agreement at the first meeting they did reach a consensus on the major issues in dispute and arranged the second meeting so the deed could be finalised for signing by the appellant's CEO that afternoon;
  • the terms of the final offer contained in the deed corresponded with the oral consensus reached at the first meeting; and
  • the history of frustrated dealings between the parties supported a finding of an intention to be bound prior to the execution and exchange of the deed.