Graham Evans Pty Ltd v Stencraft Pty Ltd - [1999] FCA 1670 - FCA 1999 case summary — Zoe

CTHFCA

Graham Evans Pty Ltd v Stencraft Pty Ltd

[1999] FCA 1670

Federal Court of Australia|1999-11-30|Before: Dowsett J, French J, Whitlam J, Dowsett JJ

View original source

At a glance

Source facts

Court

Federal Court of Australia

Decision date

1999-11-30

Before

Dowsett J, French J, Whitlam J, Dowsett JJ

Source

Original judgment source is linked above.

Judgment (70 paragraphs)

[1]

THE APPEAL 3 This is an appeal from a judgment dismissing a claim for damages for breach of contract. Other relief was claimed, but that is not presently relevant. The appellant is a building company. The respondent is a property developer. The appellant claims that the parties entered into a contract for the construction by the appellant of a block of home units on land owned by the respondent.

[2]

BACKGROUND 4 In the early part of 1994 the appellant was completing work on a building project described as "Goodwin Towers" which was in close proximity to land on the Brisbane river upon which the respondent proposed to erect a building unit complex described as "Dockside Stage III" or "Stradbroke Tower and Villas". The appellant believed that the performance by its key personnel on the Goodwin Towers project had acquired for it a particular reputation for competence in the eyes of potential customers. The appellant and its witnesses regularly referred to them as the "A Team". The respondent apparently also shared this view to some extent. At an early stage, Stephen Nicholas Girdis, a director of the respondent, made it clear that he wanted "your A Team" to build Dockside Stage III. At about the same time as the respondent was looking for an appropriate builder for that development, another developer (Seymour) was looking for a builder for a project known as "Admiralty Towers". Girdis knew that tenders for the Admiralty Towers project closed on 13 May (AB 131 ll 17-20). Presumably, the appellant also knew this. The appellant claims that because it reached a binding agreement with the respondent on 12 May, it submitted an uncompetitive tender for Admiralty Towers and did not win that project.

[3]

NEGOTIATIONS 5 In early 1994, Ian Harrington was the General Manager of the appellant. He and Girdis were neighbours. In about March 1994, in the course of a social conversation, Harrington and Girdis discussed informally the possibility of the appellant building Dockside Stage III. As a result Harrington and Murray Osbaldiston (another officer of the appellant), attended a meeting at the offices of F A Pidgeon and Sons Pty Ltd ("Pidgeon"), which was also attended by Girdis and Fred Brands, the General Manager of Pidgeon. The respondent is a joint-venture company, the shareholders of which are Pidgeon and Girdis Investments Pty Ltd, a company with which Girdis is presumably associated. Pidgeon is itself a builder. When relations between the appellant and the respondent ultimately broke down, it undertook the construction of Dockside Stage III. According to Harrington, at the meeting on 25 March 1994, Brands indicated that Pidgeon was too busy acting as a developer to become involved in building. Following the meeting, the appellant prepared a tender which was submitted on 22 April 1994. The tender price was $29,196,873. 6 On 26 April 1994 Harrington and Osbaldiston attended a further meeting with Girdis and Brands. They were told that the appellant's tender was not the lowest. Aspects of the tender were discussed. On 29 April 1994, the appellant submitted a revised tender, the price being $28,344,000, open for twenty-eight days. There was another meeting on 4 May 1994, attended by Girdis, Brands and Osbaldiston. As a result, the appellant submitted a further revised tender dated 6 May 1994. The contract price was $28,434,439, open for twenty-eight days. There was another meeting on 6 May 1994, attended by Harrington, Osbaldiston and Gregory McLean on behalf of the appellant, and Brands and Girdis on behalf of the respondent. Although the actual details of the conversation are to some extent in dispute, it is common ground that the respondent indicated that the price was to be $28,000,000. Either Girdis or Brands said that another builder, Watpac, was still being considered for the job. The appellant's witnesses said that Brands indicated that the respondent was concerned about "Watpac's tender load", a reference to an expectation that Watpac would be awarded the Admiralty Towers contract.

[6]

8 The construction period was to be sixty-three weeks from possession of the site and relevant building approval. There is no apparent reason why the letter with enclosures should not be characterized as an offer capable of acceptance. 9 The respondent's representatives said that Watpac had rung three times that day and that the deal was "$28.1 million", apparently indicating that such sum was the price the respondent was willing to pay. Either Girdis or Brands said words to the effect of "The BA (building application) will be issued next week and we can start now. We (Pidgeon/Girdis) are an experienced group and we won't stuff you around". Brands said that Girdis had proposed the appellant for the job. Girdis said that the appellant was "a good honourable contractor". Brands said, "It's a good site as compared to Admiralty Towers". One of them said "We don't believe the joinery is a risk. We want it included. So let's split the difference and make it $28.2 million". This comment was made in relation to a possible additional cost for joinery. According to Girdis, Harrington said, after a private conference with the other representatives of the appellant, "Our best price is $28,323,174". The respondent's representatives said that $28,200,000 was their best price. At this stage the meeting broke up. 10 Notwithstanding this, on 10 May 1994 Harrington sent a memorandum to Brands and Girdis which is of considerable importance for present purposes. I will set it out in full. Subject: Dockside We have been considering how to overcome our impasse and the basic problem has been Graham Evans picking up risk. We suggest the following:- MONDAY PRICE AS SUBMITTED $28,218,574 Outstanding items as per the letter of 9 May 1994 Lump Sum for wet subgrade in accordance with Geotechnical Engineers recommendation $ 20,000 Exclusions - We are still finalising the take off but changes to fire doors on 108 doors is worth around $11,000. Our risk $ 30,000 Nominated subcontractors. As discussed the premiums have been reduced to the minimum by use; and we believe using these subcontractors considerably reduces Client risk by nullifying design claims IFS $ 22,000 SIGANTO STACY $ 19,000 ODG 60% x $56,000 $ 33,600 KONE $ NIL APP $ NIL We suggest on ODG that the premium is too high so we share the cost to mutually reduce our risks Boardwalk $ 20,000 OUR PRICE $28,323,174 Client offer $28,200,000. This is now close enough to do a split. Price - $28,261,000 NOTE: We have therefore reduced our price a further $22,400 + $61,000) $83,400 after dropping $215,865 between Friday and Monday. A total of $299,265. With the joinery you believe that the $99,000 for 50% of solid timber doors is too much. We have not been able to get prices out of the market to match. The problem is that the most efficient kitchen manufacture is set up to do two pack doors and does not believe timber doors are good because of warping problems. We will have to get alternate quotes/split the work etc. to achieve the number. We suggest that the contract be agreed at $28,261,000, based on all 2 pack doors and an extra over P.C. rate of $1,800 per unit where solid timber doors are required. This then cuts out our risk and allows you to enjoy the best buying we can achieve in letting up the job. We are very interested in doing this project and offer you an A-Team on site, backed up by good management.

[10]

He: 'I want to talk to you about your price. Have you definitely included for any wet sub-grade?' Me: 'Yes we have.' He: 'What about the fire doors?' Me: 'We would put it in our price and we'll take the risk on it.' A general discussion followed concerning 'preferred subcontractors', which related to certain subcontractors that the respondent wished the applicant to use on the project. Our conversation then continued with words to the effect: Me: 'We will use IFS, Siganto and Stacey and ODG (O'Donnell Griffin) - with ODG there is a big premium and we will share that premium and we will use Kone and APP.' He: 'Stencraft will talk to those subcontractors and a design meeting will start on Monday.' A general discussion on doors followed with words to the effect: Me: 'We will agree a prototype for the doors.' He: 'OK. Because you've got timber doors as a PC (provisional cost) sum, please ensure that you will make your best buying effort.' Me: 'We will do that.' He: 'Will you put the 'A' Team on the job?' Me: 'Yes, if you will give us the job I will commit to you that we will use the 'A' team which is Jeff Palmer, Trevor Fletcher, Greg Davis and Bill Halpin.' He: 'Will you confirm that the joinery doors are oak?' Me: 'Yes that is correct' (after conferring with Murray Osbaldiston). He: 'You can do the site establishment straight away - the BA (Building Application) will be approved in two weeks. Can you meet your program?' Me: 'Yes we can.' He: 'We would not like you to take on our job and Admiralty Towers and we are looking to award this job today to you, so you know that you've got the job before the Admiralty Towers tender goes in. We would like assurance that you won't win Admiralty Towers.' Me: 'If you award us Dockside I am prepared to assure you that we won't win Admiralty Towers.' Steve Girdis repeated the question and I re-assured him so that there was no misunderstanding at all. The conversation then continued with words to the effect: Me: 'If this is going to happen I want conformation (sic) from you that the award is based on our offer of AS2124 and that it does include our terms of payment.' He: 'Yes it does. Please confirm that your office is at 129 Logan Road, Woolloongabba.' Me: 'That's correct.' He: 'That's good - I should be over about five o'clock and I'll bring the letter with me.' Me: 'That's great Steve.' We then discussed the customising of AS2124. At the meeting referred to in paragraph 10 of this my affidavit we had only discussed terms of payment and retention. The conversation continued: He: 'We're still getting a few changes.' Me: 'Our offer is based on AS2124, but if there are a few bits and pieces we will look into it.'

[18]

Dockside Stage III "Stradbroke Tower and Villas" We have pleasure in accepting your price of $28,261,000 (Twenty Eight Million Two Hundred and Sixty One Thousand Dollars) to undertake the construction of Stage III Dockside "Stradbroke Tower and Villas". It is our understanding that your price is based on the details included in the attached Schedule and as amended by your correspondence and various offers which have been detailed in Appendix 1. We confirm that you may commence site establishment and undertake any other preliminary items you believe are necessary (as permitted by the Local Authorities) and confirm that the construction period of 63 weeks will only commence on the date that the Building Approval is received from the Brisbane City Council. We also confirm that you intend to provide the same "team" which recently completed the Goodwin Towers Development and include, but are not limited to: Trevor Fletcher - Site Manager Greg Davis - Structure Foreman Bill Haplton - Finishes Foreman We also understand that your Mr. Greg McLean - Operations Manager, will be your nominated point of contact. As your price includes design responsibility for certain trades, we would like to recommence Design Meetings in the week commencing Monday, May 16, 1994 and we will advise you of the nominated time and place for these meetings. We understand that your Mr. John Kirkwood - Design and Construct Manager will attend these meetings on your behalf. Also enclosed is the Draft Building Agreement which has been based on AS 2124 - 1992 as amended by our Solicitors, Corrs Chambers Westgarth. Please understand that this Contract is a "Draft" as we are still reviewing it and should we request any changes we will naturally discuss them with you. Could you also advise us of any concerns you may have. Please also find enclosed a formal Instrument of Agreement which our Solicitors recommend be executed without delay to supplement our acceptance of your Offer, as confirmed by this letter. Our Financier, Westpac Banking Corporation, also require you to sign a Building Assumption Deed, a copy of which is enclosed herewith. Messrs. Steve Girdis and Fred Brands are available to meet with you or your nominated representatives to discuss any of the above items on Friday, May 13, 1994. Our acceptance is on the clear understanding that your company will complete the project to a high quality of finish and within the nominated time. We look forward to a mutually rewarding relationship on this project and to its satisfactory conclusion.

[23]

22 Whether the parties had agreed on price and scope as at 12 May, it is clear that Girdis thought that they had. It is also clear that the parties contemplated execution of a formal agreement based on AS 2124. 23 The enclosures which accompanied the letter of 12 May appear to have been a little difficult to identify. The letter refers to "the attached Schedule and as amended by your correspondence and various offers which have been detailed in Appendix 1". Where the letter appears in the appeal book, it is followed by an "Appendix" rather than "Appendix 1" and a "Schedule". This matter was ventilated at the trial (AB 136-7). It seems that the documents headed "Appendix" and "Schedule" are the relevant documents. As appears from the letter of 12 May, also attached was a draft building agreement based on AS 2124, said to be subject to further amendment. The appellant was invited to comment on it. There were also a "Formal Instrument of Agreement" and a "Building Assumption Deed". As I have demonstrated, it was alleged in the defence that these documents had been mentioned in the earlier conversation, but Girdis's evidence did not support that allegation. 24 Setting aside any possible ambiguity as to the scope of the work and the significance of the attached documentation, the letter of 12 May is only consistent with a belief that a binding contract had been formed. The appellant is invited to commence site establishment and other preliminary work. It is said that the construction period of sixty-three weeks will commence upon the issue of the building approval. Other evidence indicates that this was expected within two weeks. It must have been anticipated by both parties that the appellant would immediately commence preparing so as to enable itself to commence the necessary work upon the issue of the relevant building approval, thus facilitating completion of the project within the prescribed period. In addition, there is the reference to "our acceptance of your offer" being "confirmed". The letter also refers to design responsibility, asking that design meetings begin in the week commencing Monday 16 May. It also stipulates that the A Team is to be dedicated to the project. The respondent is, in effect, calling upon the appellant to commence performance of its obligations. A party may perform acts in discharge of obligations which it expects to incur pursuant to a contract which has not yet been made, but it is a different thing for one party to call on the other to do so in advance of contract. 25 The documents forwarded with the letter of 12 May are also worthy of careful consideration in this context. The Appendix refers to various aspects of the work involved in the building project. It is said that it differs in some respects from the final offer documents. A schedule of the alleged differences appears in the respondent's outline of argument. It is a little difficult to understand the differences in the absence of expert explanation, but it may not matter for present purposes. Also included with the letter of 12 May were numerous letters from the respondent to the appellant relating to the project. The Schedule refers to "All drawings, specifications, file details and quotations as detailed in Stencraft Pty Ltd correspondence are (sic) included in your offer, but not necessarily limited to the following: …". There then follows a list of dates and letters. I will say more about these documents at a later stage.

[33]

33 I am not sure that I understand the distinction between the "draft Formal Instrument of Agreement" and the "Formal Instrument of Agreement". A perusal of the exhibits to the affidavit does not assist. The matter is unlikely to be of any significance. It seems that the appellant was not, at the time, aware of the content of the draft contract as it was not until 19 May 1994 that it wrote to the respondent, complaining about the proposed variations to AS 2124 contained in it. On the same day, in another letter, the appellant suggested amendments to the Appendix and Schedule which had also accompanied the letter. On 23 May the respondent wrote to the appellant saying: We are in receipt of your letter of May 13, 1994 and two letters of May 19. It is apparent some misunderstanding has arisen regarding the basis of this contract. We do not accept your interpretation of our award. Specifically, our letter of award on May 12, 1994 details the conditions on which our acceptance of your price was made. We cannot accept your inclusion of past correspondence which may contradict items negotiated during our meeting. If you believe that certain items of clarification are required to be made to our letter of May 12, then you should raise these items for discussion with us on an item for item basis. For similar reasons we cannot accept your drafted Appendix sent to us on May 19 as it contradicts the Appendix we forwarded to you on May 12. As far as we are concerned, there were no items inadvertently missed from our Appendix. We are also at a loss to understand your letter of May 19 dismissing 'out of hand' the draft of the general conditions of contract forwarded for your review and comment. We advised you during the course of negotiations that the contract would be based on AS 2124 with amendments. More particularly, our acceptance of your price was not on the basis that Standard AS 2124 would be adopted. As part of your responsibility includes the design, it is obvious that amendments must be made. If you are genuinely interested in proceeding with the project, would you please advise your concerns with those clauses which have been redrafted on an item by item basis. On receipt of your concerns, we will discuss these with you to see if we can resolve the issue. Contrary to our verbal advice to your Mr Jeff Palmer on Thursday May 19 no site establishment is to occur including the positioning of sheds on site until all of the above matters are resolved. We look forward to meeting you at 2 pm today as scheduled at the offices of F A Pidgeon & Son Pty Ltd.

[45]

FORMATION OF THE CONTRACT 42 After the meeting on 9 May, the offer made by the appellant on that date had either been rejected or had lapsed. Thus the memorandum of 10 May constituted a new offer based upon its own terms and those of the offer made on 9 May. Some of the documents attached to the offer of 9 May refer back to earlier documents in the tender process. They may also be part of the offer. That is a matter of construction. The offer was still open on 12 May when Girdis rang Harrington. As the appellant's case asserts a contract made in the course of that telephone conversation, the next question is whether or not what was said by Girdis constituted an acceptance of the offer. That problem must be considered in light of the fact that the parties expected eventually to enter into a contract based on AS 2124 as amended. The question is whether or not, in anticipation of that final agreement, they chose to enter into an agreement to regulate their relationship in the meantime. 43 Before considering the effect of the conversation of 12 May, it is appropriate to look briefly at relevant authorities. In Masters v Cameron (1954) 91 CLR 355 at 360-361, the High Court said: Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiations shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract. In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. Of these two cases the first is the more common. Throughout the decisions on this branch of the law the proposition is insisted upon which Lord Blackburn expressed in Rossiter v Miller [(1878) 3 App Cas 1124] when he said that the mere fact that the parties have expressly stipulated that there shall afterwards be a formal agreement prepared, embodying the terms, which shall be signed by the parties does not, by itself, show that they continue merely in negotiation. His Lordship proceeded: '… as soon as the fact is established of the final mutual assent of the parties so that those who draw up the formal agreement have not the power to vary the terms already settled, I think the contract is completed.'… A case of the second class came before this Court in Niesmann v Collingridge [(1921) 29 CLR 177] where all the essential terms of a contract had been agreed upon, and the only reference to the execution of a further document was in the term as to price, which stipulated that payment should be made 'on the signing of the contract'. Rich and Starke JJ observed that this did not make the signing of a contract a condition of agreement, but made it a condition of the obligation to pay, and carried a necessary implication that each party would sign a contract in accordance with the terms of the agreement. Their Honours, agreeing with Knox CJ, held that there was no difficulty in decreeing specific performance of the agreement, 'and so compelling the performance of a stipulation of the agreement necessary to its carrying out and due completion …' Cases of the third class are fundamentally different. They are cases in which the terms of the agreement are not intended to have, and therefore do not have, any binding effect of their own. The parties may have so provided either because they have dealt only with major matters and contemplate that others will or may be regulated by provisions to be introduced into the formal document, … or simply because they wish to reserve to themselves a right to withdraw at any time until the formal document is signed.

[60]

Language capable of constituting acceptance 53 Girdis believed that both scope and price were agreed, although he now suggests that the parties were at cross-purposes as to scope. There can be little doubt, however, that on 12 May, he was speaking in the context of the final offer documents. It is clear from his and Brands' evidence that they were aware of those documents at the time of the telephone call. From the appellant's point of view, Girdis could only have been responding to the memorandum of 10 May. It is not clear to me how or why he now asserts otherwise, but even if he was mistaken at the time of the conversation, his words did not disclose that. It is his objective meaning which is relevant. This is not a case of unilateral mistake. 54 In the course of argument some attempt was made to distinguish between agreeing on price and agreeing on scope. It was suggested that it was possible to agree on one and not the other. In a sense this may be so. As occurred at an early stage in these negotiations, one party may say that a particular figure is the price to be paid. The parties may then negotiate scope to reflect that price. However it is clear that the parties were not engaged in such an exercise on 12 May. Girdis was either accepting all of the proposed terms, but intending that there be no concluded bargain "unless and until they execute(d) a formal contract", adopting the language of Masters v Cameron (at 360), or he was accepting the offer made in the memorandum of 10 May with the intention that the parties thereafter be legally bound, with the expectation that a further contract would supersede the informal contract at a later stage. 55 If their intention on 12 May was to be bound only upon execution of an agreement based on AS 2124, then there was no immediate prospect of their being so bound. As I have said, the draft delivered later that day had not been approved by either party. Thus it is unlikely that the parties then expected execution of a written agreement in the immediate future. There were, however, reasons why the parties may have wanted immediate agreement. Girdis knew that tenders for Admiralty Towers were closing on 13 May, and Harrington must also have known this. Girdis was eager to have the A Team on his project and was correspondingly anxious to ensure that the appellant did not assign it to Admiralty Towers. The building approval for Dockside Stage III was expected in the next week or two. It is reasonable to infer that the respondent wished to commence work as soon as possible thereafter. During negotiations, the building period had been discussed in a way which suggested an element of urgency about getting on with the project. These matters were known to both parties. In those circumstances, Girdis's introductory statement on 12 May, that the respondent wanted the appellant to build its project, subject to the resolution of certain matters, followed by the discussion of those matters, indicated a clear intention to reach some degree of finality. The price was also accepted. Nothing remained for further resolution except the terms of a contract to be based on AS 2124.

[61]

The proposed contract based on AS 2124 56 The only possible reason for doubting that an immediate contract was intended on 12 May is the reference to a contract to be based on AS 2124. However it is relatively clear that the parties thought that they had done something more than indicate an intention to enter into an agreement in the future. Girdis knew that by insisting upon the use of the A Team, he had effectively deprived the appellant of a bargaining tool in its tender for the Admiralty Towers project. He denies having asked the appellant to submit an uncompetitive tender for that project, but he accepts that he asked for the A Team to be reserved for his project. There is no evidence that Seymour was seeking the A Team specifically, nor is there any basis for inferring that such was the case. Nonetheless, the fact remains that both Girdis and the appellant considered it to be a valuable asset. Girdis was asking the appellant to earmark that asset for his use at a time when the appellant may well have wished to deploy it elsewhere, if it were not to be gainfully employed on the respondent's project. 57 The letter of 12 May gives a clear indication of Girdis's state of mind at the time of the earlier conversation. He was hoping, or expecting that the appellant would commence work on the project virtually immediately, having regard to the likely date of issue of the building approval. This is inconsistent with an expectation that there would be no contractual relationship until completion of the possibly lengthy process of agreeing to an amended version of AS 2124. If, as is indicated by the letter, the respondent was expecting that the appellant would start work virtually immediately, then it seems more likely than not that it anticipated entering into contractual relations before execution of the contract based on AS 2124. Harrington's request for written confirmation is also relevant in this context. He did not ask for written acceptance, but for confirmation, and that is what Girdis gave him. In this context, "confirmation" implies subsequent acknowledgment of a prior fact.

[66]

Certainty of terms 62 Although there appears to have been an agreement, it is still technically possible, as the respondent asserts, that the parties may have failed to agree upon some essential term. The basis for such assertion is not entirely clear. As I have said, in the respondent's outline of argument there is a schedule identifying "differences between communications of 9, 10 and 12 May and letter of 12 May". On the view which I have taken of the contract, such differences are of no relevance because a contract had been made on the basis of the first three "communications" before the letter of 12 May was written or delivered 63 The learned trial Judge appears to have concluded that there was no concluded agreement, largely because there was no agreement as to the variations to be made to AS 2124, including the completion of blank spaces. In my view that was also irrelevant because the parties had agreed to be immediately bound, subject to the expectation that such agreement would be superseded by the written agreement when executed. There was always the possibility that such an agreement would not be executed, but that would not have affected the agreement already made. It is of the nature of a contract of the "fourth class" that terms of the proposed ultimate agreement remain to be negotiated. Similarly, it does not matter that, as his Honour observed, the parties "each proposed their own version of the contract." This was merely an element of the negotiation process. 64 His Honour also concluded that there had been no agreement as to the scope of the work. As I have pointed out, and as appears from his Honour's reasons, both parties thought to the contrary on 12 May. His Honour refers to three particular examples of this absence of agreement. The first concerns display units. It seems that in negotiations prior to 9 May, the respondent had suggested that display units should be available by week forty-five of the building period. His Honour observed that the offer of 9 May was silent on this question, but the respondent's Appendix to the letter of 12 May again required access in week forty-five. His Honour concluded that this meant that the parties were not agreed on this issue. The mere fact that the parties had raised this issue prior to the offer of 9 May did not mean that any contract into which they might subsequently enter would necessarily deal with it. No doubt, if the respondent had been sufficiently determined on the point, it would have continued to press it. In that case, it would not have been willing to accept the offer contained in the final offer documents. The parties may not have agreed upon this issue, but there was no reason why they should have done so. It was not in any sense a condition which was essential to the contract. It is convenient to refer to the decision of the English Court of Appeal in Pagnan SpA v Feed Products Ltd [1987] 2 Lloyds Rep 601 at 619: It is sometimes said that the parties must agree on the essential terms and that it is only matters of detail which can be left over. This may be misleading, since the word 'essential' in that context is ambiguous. If by 'essential' one means a term without which the contract cannot be enforced then the statement is true; the law cannot enforce an incomplete contract. If by 'essential' one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by 'essential' one means only a term which the Court regards as important as opposed to a term which the Court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and, if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the Judge 'the masters of their contractual fate'. Of course the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so-called 'Heads of Agreement'.

[67]

65 The fact that subsequently, the parties again discussed this question is also irrelevant. 66 A second issue concerned formwork. There had been discussion prior to 9 May in connection with this subject, resulting in an amendment to the tender of 29 April. It seems that the provisions concerning formwork in the offer of 9 May differed from those in the Appendix to the letter of 12 May. It is asserted that because the parties may have previously discussed some other approach to formwork, the offer of 10 May (including the offer of 9 May), to the extent that it did not reflect the outcome of that discussion, was not capable of acceptance by the respondent. This is clearly incorrect. The respondent had an opportunity to consider the offer made on 10 May and to decide whether or not to accept it. It is irrelevant that its content may have differed from anything which had been previously agreed between the parties. The word "agreed" in this context has no contractual significance. The content of the Appendix is equally irrelevant as it followed formation of the contract. Finally, his Honour considered that the question of paving and landscaping had not been agreed. This had been discussed prior to 9 May and was also discussed on that day, but no agreement was reached. Once again, whatever happened at the meeting of 9 May was superseded by the memorandum of 10 May. 67 In the circumstances, I am satisfied that on 12 May 1994 the parties entered into an agreement upon the terms contained in the offer of 9 May, the memorandum of 10 May and the discussion as to specific matters which occurred in the course of the telephone conversation on 12 May. The appeal must be allowed and the judgment below set aside. His Honour fixed damages for breach of contract in the amount of $800,000 with interest at 8 per cent from 1 January 1995. I do not understand there to be any challenge to that quantification. I would enter judgment for the appellant against the respondent in the sum of $800,000 with interest at 8 per cent per annum from 1 January 1995 to the date of judgment herein. 68 It would seem to follow that the respondent should pay the appellant's costs of the proceedings at first instance and on appeal. However, as we have not heard submissions on this point, the parties should have leave to make such submissions in writing. If either party wishes to make submissions, it should forward them to the other side within seven days of the publication of these reasons for judgment. Any response thereto should be forwarded within a further period of seven days. Such documents should then be filed with the District Registrar at Brisbane for transmission to the members of the Court. I certify that the preceding sixty-six (66) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett.