In determining whether a binding agreement has arisen, the Court will consider the entirety of the correspondence between the parties.  If a party wishes to avoid entering an agreement, clear language to that effect and careful consideration of all correspondence are required.

The Pensinis applied for the permanent closure of a road on their land under the Lands Act 1994 (Qld). On 23 April 2007, the Department of Natural Resources (Department) responded that the closure would be granted only if the Pensinis made “satisfactory arrangements” with the Atherton Shire Council (Council) within 4 months. The Council required the Pensinis to amalgamate their 7 parcels of land into 3 lots.

The Council subsequently alleged that the following correspondence evidenced a binding contract under which the Pensinis agreed to amalgamate their land:

  • a letter dated 27 June 2007 from the Council rejecting the Pensinis’ proposal to amalgamate their land into 4, not 3, lots and indicating that it would be advising the Minister that “satisfactory arrangements” had not been made. The Court considered that this was part of the “factual matrix” in which the parties reached agreement rather than part of the contract itself;
  • a letter dated 2 July 2007 from the Pensinis accepting the Council’s requirement that their land be amalgamated into 3 lots, providing details of the proposed amalgamation and seeking written acceptance from the Council. The Court considered that this was an offer;
  • a letter dated 5 July 2007 from the Council informing the Pensinis that their proposed amalgamation was acceptable, on the proviso that the area of road to be closed must be amalgamated with new lots on the southern side of the road. The Court considered that this was a counter-offer; and
  • a letter dated 27 July 2007 from the Pensinis agreeing to the Council’s proviso. The Court considered that this was an acceptance of the Council’s counter-offer.

Affirming the decision at first instance that there was a binding contract in place, the Court held that the Pensinis were not entitled to default on the contract by amalgamating the area of the road with land to its north, not south. The Court also agreed that the Council provided consideration for the Pensinis’ promise to proceed with the amalgamations, through its promise to inform the Department that “satisfactory arrangements” had been made in relation to the road closure.

Further, it was irrelevant that the Department’s earlier letter of 23 April 2007 may have lapsed before the binding contract was made. The Court characterised the parties’ correspondence as a simple exchange of unconditional, unqualified promises, which were made on the assumption that the Department’s concurrence would ultimately be forthcoming and with an implied obligation to cooperate to bring about that outcome.

Finally, the Court was not satisfied that there were any discretionary reasons as to why specific performance should not be ordered. There was no evidence that the amalgamation would cause financial detriment to the mortgagee of the property, nor was there any inordinate delay in the Council’s responses causing detriment to the Pensinis.

See case.