Existence of a binding agreement – intention of parties to be bound
In Wayne Danckert v Ralph Erwin Tonkin  NSWSC 1570 the court reaffirmed that, with respect to contract formation, whilst the parties' intention to be bound must be determined objectively, inferences can be drawn from what the parties said or did, tempered by what it may be inferred a reasonable businessperson would have understood the parties intended.
A number of disputes had arisen between Wayne Danckert, Philip John Weldon and Carlisle Plaza Pty Limited (plaintiffs) and Ralph Erwin Tonkin, SRD Tonkin Pty Ltd and Tonkin Pty Ltd (defendants) in relation to the lease and renovation of the Bidwall Shopping Centre. The terms of the parties' agreements in relation to the lease and renovation of the shopping centre and the resolution of prior disputes were documented in a loan agreement, guarantee and indemnity documents, and a deed of release and variation.
The plaintiffs submit that they had a binding agreement for the settlement of the current disputes on two different bases: the parties had reached an immediately binding agreement but proposed to have the terms stated in a form fuller or more precise but to the same effect; or the parties were immediately bound but expected to make a further contract in substitution for the first contract.
The defendants submit that the parties were engaged in negotiations which had not, and did not, lead to executed documents or a binding agreement. It is one thing to say that the parties had reached a negotiated consensus on the matters between them, but quite another to say that they objectively intended to be bound prior to signature.
Sackar J rejected the plaintiff's claim that the parties had a binding agreement. His Honour held that whether parties intend to be bound must be determined objectively, but inferences can be drawn from what the parties said or did, tempered by what it may be inferred a reasonable businessperson would have understood the parties intended. His Honour found that there was no evidence to suggest that the parties intended to bind themselves in any other way than upon execution and exchange of formal documentation. This was consistent with the practice and history of dealings between the parties, and with the frequent references for the need to execute formal documentation which had been prepared for that purpose.