In commercial, arms' length dealings, it is rare that an
implied agreement to negotiate will be found, particularly where
essential terms of the contract to be entered into are not settled.
Similarly, it is unlikely that estoppel will apply during
The defendants in these proceedings set about developing a new
hotel adjacent to the beach, which became Caves Beachside Hotel. In
around 2005, the defendants asked Mr Hopper, owner of the plaintiff
company (Cuisine), whether he would be interested
in running the catering operations of the Hotel. Mr Hopper was
subsequently involved in the design of the catering aspects of the
Hotel and diverted staff and resources away from other undertakings
in anticipation of operating at the Hotel. Cuisine began to provide
the catering for the Hotel when it opened in 2009 and did so until
July 2013, when the defendants terminated the arrangement with
Cuisine. No formal agreement was ever reached on the final terms
governing the parties' relationship.
Cuisine commenced proceedings. Its primary claim was for breach
of contract, being an implied agreement with the defendant that the
parties would use good faith and their best endeavours to enable a
lease or licence to be finalised granting Cuisine a lease term of
up to 15 years. In breach of such agreement, Cuisine argued, the
defendant did not negotiate in good faith or use its best
endeavours to enable a lease or licence to be finalised and as a
consequence Cuisine had suffered loss and damage. Cuisine also made
arguments based on estoppel and misleading conduct.
Kunc J concluded it was "difficult to conceive" of
circumstances giving rise to an implied agreement to negotiate in
good faith "because, in the absence of express words, all that
is left is the parties' conduct of negotiating" (at ).
His Honour concluded that the contract case failed because, to the
extent there was an agreement of a lease term of 15 years, all
other terms were indeterminate and it would otherwise be an
unenforceable agreement to agree (at –).
Kunc J followed the recent decision in Baldwin v Icon Energy
Ltd  QSC 12 in finding that an open-ended obligation to
negotiate in good faith is not enforceable (as opposed to an
obligation to negotiate about specific issues).
In relation to Cuisine's estoppel case, Kunc J extracted the
test from Walton Stores (Interstate) Ltd v Maher (1988)
164 CLR 397 that the assumption generated in the plaintiff must
include that the defendant would not be free to withdraw from the
expected legal relationship (at ). Kunc J noted:
"at least in the
context of commercial parties dealing at arms' length, that the
"not free to withdraw" aspect of the test will rarely, if
ever, be satisfied', because that is 'part and parcel of
commercial negotiations' " (at ).
For the same reasons, the misleading conduct case failed (at
There is also a judicial finding that "Caves Beach is an
attractive seaside spot south of Newcastle" (at ).
Do not depart from the contract terms, or encourage the other party to do so, unless you plan to alter the contract.
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