Significantly, none of that was contradicted or sought to be impeached.
Other relevant evidence
46 Other evidence, which was not controversial and therefore to which it is unnecessary to go in detail, established that the need for six months' holdings of leathers and accessories was worked out on the basis that the leathers had to be ordered and purchased from America, took 90 days to arrive in India, and, after that, had to be treated in India, which took another 21 days. One had therefore to allow 110 days between placement of order and packing of final tanned products, and thereafter it took another 90 days to manufacture the uppers and deliver them to Oliver Footwear in Australia.
The existence of the contract is established
47 It is possible now to draw some conclusions about the nature of the arrangement between Oliver Footwear and Zazman.
48 As has been seen, Mr Oliver accepted that he had been privy to discussions with Mr Husain between January 1999 and April 1999 about the manufacture of stitched leather uppers for the production of the 20 series rubber range. He admitted that he said to Mr Husain that Oliver Footwear wanted Zazman to agree to an arrangement for an indefinite period of time into the future that Zazman manufacture stitched leather uppers in much larger quantities than Zazman had manufactured previously. He agreed that Mr Husain said that he wanted to avoid a repeat of the situation which occurred in 1996 when Zazman was left with a substantial quantity of leather and accessories purchased for use in the manufacture of another range of footwear. He agreed that he said to Mr Husain that every three or six months or thereabouts Oliver Footwear would notify Zazman by telephone or by fax indicating the quantity of leather and accessories which Oliver Footwear anticipated selling, thereby enabling Zazman to gauge the amount of stock which Zazman required in order to meet Oliver Footwear's orders over a particular period of time. He agreed that he told Mr Husain that it was critical for there to be no delay between the date on which Oliver Footwear submitted an order and the date on which Zazman commenced manufacturing the uppers to fill the order. He did not deny that he said to Mr Husain that having a stock of leather and accessories on hand at all times to meet six months' orders would enable Zazman Exports to respond immediately to Oliver Footwear's orders. He agreed that he gave "a commitment", which he acknowledged was a promise, of indefinite duration to purchase uppers from Mr Husain, by monthly orders, along the guidelines of the six monthly forecasts as adjusted each month to accord to sales, and he did not dispute that the arrangement was to be an exclusive arrangement. He did not deny that he told Mr Husain that the safety footwear industry involved fewer styles than the fashion footwear industry and that, consequently, it would become apparent shortly after April 1999 which styles of Oliver Footwear's footwear were selling in any given quantity, and he did not deny that Oliver Footwear required Zazman to apply its own judgment in regularly purchasing in advance sufficient quantity of stock to ensure that Zazman was able to fill six months' orders at all times over an indefinite duration into the future. He agreed that after the forecasts had been exhausted, which I take to mean no longer provided, he continued to require Zazman to supply in a timely manner. He agreed that as Zazman was Oliver Footwear's biggest supplier it was very much in Oliver Footwear's interests to be aware of Zazman's ability to supply. In effect he agreed that it was up to Zazman to put itself in a position where it could comply with the obligation to deliver orders within three months of receipt.
49 In my judgment that evidence makes tolerably clear that in or about April 1999 Zazman and Oliver Footwear did enter into an agreement of indefinite duration for Oliver to place orders each month with Zazman on an exclusive basis for the purchase of Oliver Footwear's requirements of stitched leather uppers for the 20 series style boot and for Zazman to manufacture and supply those leather uppers to Oliver Footwear so as to reach Oliver Footwear within three months of order.
50 In my opinion the evidence also makes it more likely than not that it was an express term of the agreement that Zazman would at all times keep on hand not less than six months' stocks of leathers and accessories in order to ensure that Zazman was able to fill Oliver Footwear orders for leather uppers within three months of receipt of order. The existence of that term is not as clearly established as the existence of the agreement itself; not least for the reason that Mr Oliver strove so much in cross examination to resist suggestions that he made it a term of the agreement that Zazman hold six months' stocks. It will be recalled that he preferred instead to say that it was up to Zazman as to how it went about meeting the contractual obligation to deliver uppers within three months of order. But as has been seen, Mr Oliver was not prepared to deny Mr Husain's evidence that he (Mr Oliver) required Zazman to apply its own judgment in regularly purchasing in advance sufficient quantity of stock to ensure Zazman was able to fill six months' of orders at all times over an indefinite duration into the future, and it is significant that at another point in the cross examination Mr Oliver acceded to the proposition that he had required Zazman Exports to maintain a quantity of stock at all times.
51 As will appear, it is unnecessary in the end to reach a concluded view on the point but, if it did matter, I should be inclined to think that the facts to which I have referred open the door to the line of authority which recognises that parties may drift into a contractual relationship.[13] As Ormiston, J. put it in Vroon BV v Foster's Brewing Group Ltd[14], a manifestation of mutual assent may be made even though neither offer or acceptance can be identified and even though the moment of formation cannot be determined. In point of principle I see no reason why that sort of analysis should not apply as much to an aspect or term of a contractual relationship as to the existence of the relationship itself. Furthermore, to the extent that it is permissible to look to the parties' conduct after entering into the contract,[15] the uncontested evidence of Mr Angelovski, which I have set out above, would tend to put the matter beyond doubt.
52 In any event, on Mr Oliver's evidence alone there can be no doubt that Mr Husain was wary of carrying large stocks of leathers (because of his previous bad experience with another line of footwear), and that Mr Oliver knew that Mr Husain would not have been inclined to carry six months' stocks except for the existence of the contractual obligation imposed by Mr Oliver that Zazman fill Oliver Footwear orders for stitched leather uppers within 90 days of receipt of order.
53 Counsel for the respondent contended that apart from the particular orders which were placed and filled, any overarching arrangement between Oliver and Zazman for the supply and purchase of leather uppers for the 20 series boot was so lacking in certainty as to be unenforceable, and he pointed in particular to the absence of any agreement as to the price or prices at which the uppers would be sold and purchased and the absence of any mechanism by which the price might be set. I do not think that is a problem. As the arrangement worked in fact, the prices were quoted from time to time and either agreed or negotiated and then agreed. There was in effect a commitment from the outset to purchase at the prices established at the outset and as thereafter as they might be adjusted from time to time, and a long course of dealing which enabled each side to determine the elements which went to make up the prices in terms of costs and mark-up and when and to what extent changes would be acceptable.[16] While there was no detailed examination of the matter at trial - presumably because it really did not emerge as an issue until the hearing of the appeal - there is I think enough evidence to conclude that the parties understood the way in which prices would be worked out,[17] and what and when adjustments would be acceptable, and it is plain that they operated very satisfactorily on that basis for a number of years until the agreement was determined.[18] Perhaps if there had been a radical alteration in prices or a departure from what appears to be the understood basis of computing prices, one or other side might have refused to deal. But evidently no such thing occurred. All of the evidence and common sense points in the direction of a commercial arrangement under which Oliver was to purchase all of its requirements of 20 series uppers, at prices determined in accordance with that mechanism, for an indefinite term into the future.
54 I have referred already to the extent to which courts are prepared to go to uphold a commercial arrangement as a binding agreement.[19] Consistently with that sort of approach, I am persuaded that this arrangement was a binding agreement.
Implied term of reasonable notice
55 I am also persuaded that it was an implied term of the agreement that it would not be terminable without reasonable notice. In my judgment it is necessary to imply the existence of that term in order to serve the common purpose that the parties may be expected to have had at the time of entry into the contract.[20]
56 In Crawford Fitting Co v Sydney Valve & Fittings Pty Ltd[21] McHugh, J.A. observed that it is sometimes a common purpose of an agreement that the relationship of the parties will continue long enough after the giving of a notice of termination to enable one or other party to recoup extraordinary expenditure or effort. Otherwise that party would have no incentive to make that sort of outlay for the mutual benefit of the parties. In such cases, it is to be implied that the contract shall not be terminated until there has been sufficient time in operation under the contract for recoupment of the expenditure and effort. A distributorship agreement is an example of the sort of contract which his Honour had in view. But apart from cases of that kind, which are not of immediate relevance for present purposes, the chief purpose of reasonable notice of termination is to instil a degree of order into the process of ending a relationship which ex hypothesi has existed for a reasonable period: to afford the parties a reasonable opportunity to enter into alternative arrangements and to wind up matters which arise out of their relationship.[22] Another way of looking at the matter is to ask what two reasonable business people would have decided as between themselves at the time of entering into their contract should be the appropriate length of notice required for determining their relationship, given its nature and the work and expenditure it was envisaged it would entail.[23]
57 Either way, in my view, it is not realistic to suppose that the contract in this case was to be terminable without notice. Orderly termination of the relationship was bound to require some time to enable Oliver Footwear and Zazman to enter into alternative arrangements and otherwise to wind up matters likely to arise in the course of the contract, and it is naturally to be supposed that each party would have wished to cushion itself against the effects of sudden change and therefore to give itself reasonable time to make alternative arrangements and work out matters in the event of termination.
58 Looking first at the matter from the point of view of Oliver Footwear, and bearing in mind that the purpose of the contract at the time of entry into it was for Oliver Footwear to obtain all of its requirements of stitched leather uppers for the 20 series style boot, an orderly termination of the contract would be foreseen to necessitate sufficient time to find an alternative supplier of stitched leather uppers and for the new supplier to begin to fill orders. At the time of entry into the contract, it was known that it was critical to Oliver Footwear to obtain supplies of leathers as and when required. It was also known that it would be likely to take in the order of six months for an alternative supplier of leather uppers to obtain stocks of leathers from America, or some other source, and to treat and process the leathers into uppers. In those circumstances, I think that reasonable business people in Oliver Footwear's position would say that anything less than six months' notice of termination would be unreasonable to Oliver Footwear.
59 Looking then at the matter from Zazman's point of view, and bearing in mind that it knew at the time of entry into the contract that it would be required de facto or de jure to keep on hand at least six months' supplies of leathers and accessories, and that if Oliver Footwear terminated the contract it would take Zazman in the order of six months to redirect its labour and resources to the manufacture and supply of product to alternative purchasers, I think that reasonable business people would say of someone in Zazman's position that anything less than six months notice of termination would be unreasonable.
60 All things considered, therefore, it seems to me that in order to serve the common purpose of both parties, as assessed at the time that they entered into the contract, it is necessary to imply as a term of the contract that the contract would not be terminable on less than six months notice.
Breach of contract
61 In follows in my judgment that the appellants have succeeded in establishing their claim. Oliver Footwear acted in breach of an implied term of the contract by terminating the contract without reasonable notice, which, in the circumstances, was not less than six months notice.
Conclusion
62 I would therefore allow the appeal and set aside the judgment below. In lieu thereof I would declare that Oliver Footwear acted in breach of an implied term of the contract by terminating the contract without reasonable notice, which, in the circumstances, was not less than six months notice. There should be judgment for the appellants for damages to be assessed and, subject to hearing anything to the contrary that counsel may wish to say, the matter should be referred to the Master, pursuant to Order 51 of the Rules of Court, for the assessment of damages.