151 County's submissions emphasised that the Transfer Agreement was made in circumstances where notwithstanding "[o]ffer and acceptance analysis [did] not work well" it was possible to find a contract "even though it [was] not easy to locate an offer or acceptance": Brambles Holdings Ltd v Bathurst City Council (at [71], [74]) per Heydon JA. Heydon JA's remarks in Brambles have some resonance in the reference in Toll (at [49]), to:
"…the cogency of the statement of H L A Hart that usually it is not possible to define a legal concept such as 'contract' merely by specifying certain necessary and sufficient conditions for its application because:
'any set of conditions may be adequate in some cases but not in others and such concepts can only be explained with the aid of a list of exceptions or negative examples showing where the concept may not be applied or may only be applied in a weakened form.' "
152 These observations are echoed in Giles JA's statement in Hendriks v McGeoch [2008] NSWCA 53 (at [10]) that "[a] contract need not be made by formal offer and acceptance, or by an overt course of negotiation [and] [e]ntry into a contract can be found in the conduct of the parties, in what they said and did towards each other." In the same case (at [39]) Basten JA eschewed an analysis which depended on a distinction between an express contract and an implied contract, preferring the approach that "[i]t is sufficient to ask whether the existence of a contract has been established on the evidence". In this case, as shall become apparent, I have concluded the no loss term for which County contended was an express term of the Transfer Agreement, so that it is unnecessary to consider the implications of Basten JA's observation.
153 In Brambles Heydon JA referred with approval to Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 as reflecting his approach. There McHugh JA (Hope and Mahoney JJA agreeing) said (at 11,117-11,118):
"… [A] contract may be inferred from the acts and conduct of parties as well as or in the absence of their words…The question in this class of case is whether the conduct of the parties, viewed in the light of the surrounding circumstances, shows a tacit understanding or agreement… The conduct of the parties, however, must be capable of proving all the essential elements of an express contract… Care must also be taken not to infer anterior promises from conduct which represents no more than an adjustment of their relationship in the light of changing circumstances..… Moreover, in an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. Agreements concerning terms and conditions which might be too uncertain or too illusory to enforce at a particular time in the relationship may by reason of the parties' subsequent conduct become sufficiently specific to give rise to legal rights and duties. In a dynamic commercial relationship new terms will be added or will supersede older terms. It is necessary therefore to look at the whole relationship and not only at what was said and done when the relationship was first formed." (emphasis added)
154 Allsop J (Drummond and Mansfield JJ agreeing) collected, and helpfully summarised, the authorities on this approach to contractual determination in Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424. In that case the parties had had lengthy commercial dealings involving a cattle station in the Northern Territory. In late 1993 their interests were re-arranged and on 23 December 1993 they executed and exchanged a number of documents. The primary judge held that the parties had intended certain matters, not entirely or adequately reduced to writing, to be legally binding. His conclusion was upheld on appeal.
155 Allsop J said:
[369] … [A] number of authorities discuss the need not to constrict one's thinking in the formation of contract to mechanical notions of offer and acceptance. Contracts often, and perhaps generally do, arise in that way. They can also arise when business people speak and act and order their affairs in a way without necessarily stopping for the formalities of dotting i's and crossing t's or where they think they have done so … Sometimes this failure occurs because, having discussed the commercial essentials and having put in place necessary structural matters, the parties go about their commercial business on the clear basis of some manifested mutual assent, without ensuring the exhaustive completeness of documentation. In such circumstances, even in the absence of clear offer and acceptance, and even without being able (as one can here) to identify precisely when a contract arose, if it can be stated with confidence that by a certain point the parties mutually assented to a sufficiently clear regime which must, in the circumstances, have been intended to be binding, the court will recognise the existence of a contract. Sometimes this is said to be a process of inference or implication . For my part, I would see it as the inferring of a real intention expressed through, or to be found in, a body of conduct, including, sometimes, communications, even if it be the case that the parties did not consciously advert to, or discuss, some aspect of the relationship and say: 'and we hereby agree to be bound/ in this or that respect. The essential question in such cases is whether the parties' conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract. The authority for the above can be found in, at least, the following: Meates v Attorney-General [1983] NZLR 308 at 377 per Cooke J (as his Lordship then was); Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,117-11,118 per McHugh JA (Hope and Mahoney JJA concurring); Vroon BV v Foster's Brewing Group [1994] 2 VR 32 at 81-83 per Ormiston J (as his Honour then was); Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 555 per McHugh JA (with whom Samuels JA concurred); Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601 at 611 per Bingham J (as his Lordship then was) affirmed on appeal at 615; Pobjie Agencies v Vinidex Tubemakers [2000] NSWCA 105 at [22]-[24] per Mason P (with whom Meagher and Handley JJA concurred); Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61 at [74]-[80] per Heydon JA; though see Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106 at 178 per Tadgell J (as his Honour then was); and in this context see also Electrical Enterprises Retail Pty Ltd v Rodgers (1988) 15 NSWLR 473 at 489 per Kearney J and Manzi v Smith (1975) 132 CLR 671 at 674.
[370] Some authorities, for example, Toyota Motor Corporation, citing Williston on Contracts, Vol 1, par 4:3, p 258, refer to the possibility of this class of contract, lacking manifested offer and acceptance, as rare. For my part, I think the use of such language of prediction of frequency tends to create an unwarranted presumptive barrier to the application of the approach referred to above." (emphasis added)
156 County submitted that the primary judge erred in considering whether the implied terms for which it contended satisfied the test for prescribed terms laid down in BP Refinery. It contended his Honour ought to have considered that question by reference to the principles for implied terms set out in Byrne v Australian Airlines Limited [1995] HCA 24; (1995) 185 CLR 410. As I have said I have concluded that the appeal can be disposed of on the basis of an express agreement, however it is useful to refer to one aspect of Byrne which, in my view, affords a useful model for the approach to determining the terms of a contract alleged to arise in the circumstances for which County contended.
157 Byrne concerned, relevantly, the question whether cl 11(a) of the Transport Workers (Airlines) Award 1988 was an implied term of the contracts of employment of two airline employees. The employees argued that such a term should be implied "…as a matter of business efficacy and the presumed intention of the parties in the circumstances of the case" (see 440). It is apparent the employees had not entered into written contracts of employment, although how their contracts of employment were formed is not readily apparent. As McHugh and Gummow JJ commented (at 431) "[i]n the Federal Court there were no findings as to any express terms of the relevant contracts of employment, save what is implicit in the general findings of fact [and] [t]he appeal was argued on the footing that, except for the term contended for by the appellants, the contracts had those incidents otherwise implied by the general law". To this I would add a reference to Beaumont and Heerey JJ's observation that "there was no evidence of any express agreement between employer and employee for the incorporation into the contract of employment of the provisions of the relevant award": Byrne & Frew v Australian Airlines Ltd (1994) 47 FCR 300 (at 333); see also Gray J (at 361).
158 All members of the Court emphasised the necessity for caution in applying BP Refinery in cases which did not involve a formal contract. Thus, after referring to the five BP Refinery criteria, Brennan CJ, Dawson and Toohey JJ said (at 422, footnotes omitted):
"In laying down those criteria, it was recognised that there was a degree of overlap. Further, as Deane J has observed, the cases in which the criteria in BP Refinery (Westernport) Pty Ltd v Shire of Hastings have been applied in this Court are cases in which there was a formal contract, complete on its face. He pointed out that a rigid approach should be avoided in cases, such as the present, where there is no formal contract. In those cases the actual terms of the contract must first be inferred before any question of implication arises. That is to say, it is necessary to arrive at some conclusion as to the actual intention of the parties before considering any presumed or imputed intention . And the test to be then applied was in a later case formulated by Deane J in these terms:
'The most that can be said consistently with the need for some degree of flexibility is that, in a case where it is apparent that the parties have not attempted to spell out the full terms of their contract, a court should imply a term by reference to the imputed intention of the parties if, but only if, it can be seen that the implication of the particular term is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case. That general statement of principle is subject to the qualification that a term may be implied in a contract by established mercantile usage or professional practice or by a past course of dealing between the parties.'
That is, we think, the appropriate test to apply in this case…" (emphasis added)
159 McHugh and Gummow JJ (at 442) emphasised that implication of a term of a contract on the basis for which the employees contended "is concerned with the circumstances of the particular case". They proceeded (at 442):
"Secondly, where the contract is not in writing and is oral or partly oral or it appears that the parties themselves did not reduce their agreement to a complete written form, caution is required against an automatic or rigid application of the cumulative criteria identified in BP . We should proceed on the footing that the present case is to be approached in this way.
In such situations, the first task is to consider the evidence and find the relevant express terms. Some terms may be inferred from the evidence of a course of dealing between the parties. It may be apparent that the parties have not spelled out all the terms of their contract, but have left some or most of them to be inferred or implied. Some terms may be implied by established custom or usage, as described above. Other terms may satisfy the criterion of being so obvious that they go without saying, in the sense that if the subject had been raised the parties to the contract would have replied 'of course'. If the contract has not been reduced to complete written form, the question is whether the implication of the particular term is necessary for the reasonable or effective operation of the contract in the circumstances of the case; only where this can be seen to be true will the term be implied." (emphasis added)
160 The utility of the Byrne model in my view lies in its emphasis, where there is no formal contract, on determining the parties' intention as to the terms of the contract rather than forming an a priori view as to what the contract is. Here, as I shall explain, the primary judge in my view fell into error in characterising the 23-26 June 2003 documents as representing the entire agreement, without first considering the whole course of the parties' conduct to determine their intention.