Australia: Are your conditions precedent to the agreement clear enough?

Clearly-drafted conditions precedent are important to ensure there is no dispute in the first place as to whether the conditions have been satisfied and the contract has come into force.

Any ambiguity in a condition precedent to an agreement can create uncertainty around whether or not the condition precedent is satisfied.

As illustrated in a recent Queensland Supreme Court decision, such uncertainty can lead to a dispute and the non-performance of an agreement which may be crucial to your business. The case of Armour Energy Limited v AEGP Australia Pty Ltd [2016] QSC 153 is a reminder that conditions precedent to an agreement should be result-focused and should not be left incomplete.

Armour Energy Limited and AEGP Australia Pty Ltd entered into a Farm-Out Agreement for the purpose of joint exploration and development of Armour's McArthur Basin Project in the Northern Territory.

The Agreement included a condition precedent requiring:

"execution by the NLC [Northern Land Council] in respect of each Native Title Agreement [being the Co-Existence and Exploration Deed (CEED) and the Tripartite Deed attached to the application for each exploration permit for the project] and the other parties thereto of a deed, subject to satisfactory due diligence by the Buyer [AEGP], substantially in the form attached hereto as Annexure 6, or otherwise approved by Buyer [AEGP]."

Annexure 6 of the Farm-Out Agreement contained a draft Deed of Assumption and Assignment (DOAA). The parties to the DOAA were said to be Armour as assignor, AEGP as assignee, the Northern Land Council and the Native Title Parties. No Native Title Parties were listed, however in the CEEDs, "Native Title Parties" was defined to mean those Aboriginal people who have or claim Native Title in the application area.

The DOAA was never executed. However, Armour procured the Northern Land Council's execution of a Deed of Covenant for each CEED. The Deeds of Covenant were not signed by any Native Title Parties.

What was the issue?

The primary issue was whether the condition precedent was satisfied by the execution by the Northern Land Council of the Deed of Covenant in relation to each CEDD.

Justice Atkinson was required to consider the following questions:

  • did the CEEDs authorise the Northern Land Council to consent to the novation of the CEEDs and the assignment of Armour's interests in a way which bound the Native Title Parties such that their signing the Deeds of Covenant was not required?
  • regardless of the authorisation in the CEEDs, did the condition precedent in the Farm-Out Agreement unambiguously require the Native Title Parties to sign the Deeds of Covenant?

Did the CEEDs authorise the Northern Land Council to consent on the Native Title Parties' behalf?

The CEEDs contained a provision dealing with assignment, which provided that Armour may only assign its interest in the exploration permits with the prior consent of the Northern Land Council.

Armour submitted that under the CEEDs, the Native Title Parties had agreed in advance to a mechanism for novation of the CEEDs by the assignment of part of Armour's interest in the exploration permits and the assumption by the assignee of obligations under the CEEDs. Armour submitted that the Northern Land Council was therefore authorised to consent to an assignment and novation in a way that bound the Native Title Parties.

Justice Atkinson reviewed various authorities and concluded that a party to a contract can agree to a later novation of the rights given and the obligations imposed by the contract in advance of any proposed novation. In other words, the original contract may, on its proper construction, authorise a party to substitute a contracting party in its place without need for a further tri-partite agreement.

Justice Atkinson therefore concluded that the CEEDs did not require the execution by the Native Title Parties of any further form of consent in order for there to be an effective novation, and therefore an effective assignment of a part of Armour's interest in the exploration permits.

Did the condition precedent require the signature of the Native Title Parties?

AEGP contended that, regardless of the interpretation of the CEEDs, the condition precedent in the Farm-Out Agreement objectively required execution by the Native Title Parties as well as execution by the Northern Land Council.

Justice Atkinson rejected that argument. She noted that the grammatical construction of the condition precedent was awkward. The clause was ambiguous as to whether the execution of the deed is to be by the Northern Land Council for the parties to each Native Title Agreement, or whether execution is to be by the Northern Land Council and the parties to each Native Title Agreement.

Justice Atkinson said that the ambiguity should be resolved by reference to the CEEDs, which had been incorporated by reference into the Farm-Out Agreement. As discussed above, the CEEDs did not require any further form of consent from the Native Title Parties for there to be an effective novation. Under the CEEDs, the signature of the Northern Land Council in the Deed of Covenant was sufficient to bind the assignee (AEGP) to the rights and obligations owed to the Native Title Parties under the exploration permits.

On that basis, the signature of the Native Title Parties was not required under the condition precedent. The Deed of Covenant for each CEED was substantially in the form of Annexure 6 of the Farm-Out Agreement.

Key lesson: conditions precedent should focus on results

Armour was successful in showing that the condition precedent had been satisfied and that the contract should be specifically performed. However, the case highlights the importance of clearly-drafted conditions precedent to ensure there is no dispute in the first place as to whether the conditions have been satisfied and the contract has come into force.

In addition to being drafted clearly and unambiguously, conditions precedent should be result focused and set out the clear intentions of the parties. In this case, for example, it would have been preferable for the condition precedent to specify the outcome that the parties sought to be achieved (ie. the novation of the CEEDs and the assignment and assumption of Armour's obligations under them) rather than the means by which that outcome was to be brought about.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions