Applying these principles, for there to have been an immediate accord and satisfaction, AWB must have offered a promise in place of Soufflet USA's cause of action. In AWB's submission, its fax cannot be construed as an offer of a promise because it merely discusses calculations under a pre-existing contract.
53 During argument, AWB elucidated this point with the following example. Suppose a barrister agrees to charge $100 per hour. Subsequently, the barrister sends her instructing solicitor a $1,500 account stating that she worked for 14 hours. The solicitor might reply "I calculate that 14 hours should be $1,400". At that point, suppose the barrister says "I accept your offer of $1,400". In AWB's submission, no contract would have been formed. The solicitor's communication was simply an inquiry about what was properly owed under the contract. If the solicitor were to later discover that the barrister had not worked 14 hours as claimed, but 10, he could hardly be bound by an earlier 'offer' to pay $1,400.
54 In summary, the solicitor was not offering to accept the barrister's claim in exchange for a $100 reduction in the account; rather the solicitor was trying to establish what his true obligation was under the pre-existing contract. Similarly, in AWB's submission, AWB was not offering to accept Soufflet USA's damages claim in exchange for a reduction in the freight balance. Rather, AWB was simply disagreeing with Soufflet Négoce's calculation of the freight balance. There was no offer of compromise regarding the freight balance because AWB was only offering to pay what it claimed was the correct amount. AWB submitted that these considerations undermine any claim that AWB was requesting a reduction in the freight balance as consideration for it accepting the damages claim.
55 In AWB's submission, once it is accepted that it was not asking for a reduction in the freight balance as consideration, its fax cannot be construed as an offer because it does not ask for any other consideration. The only other candidate for consideration is forbearance from suing. AWB rejected the possibility that the fax requests forbearance as consideration. On this interpretation, the fax would, so it submitted, effectively say no more than "AWB accepts Soufflet USA's damages claims and will pay it". That would not be an offer. AWB observed that, if upon receiving an account, someone says "I have received the account and I'll pay it", that person can hardly be thought to have made an offer to enter into a new contract compromising the claim in the account.
56 Finally, AWB contended that, even if its fax was an offer seeking accord and satisfaction, Soufflet Négoce's reply was not an acceptance of such an offer. This was because, so AWB submitted, the reply is expressed as being conditional on AWB ordering payment of the balance of Soufflet USA's claim. AWB submitted that the use of the future tense in the expression "so that we can settle this file" is consistent only with the view that no agreement had been reached.
DISCUSSION
57 This dispute is akin to a problem constructed for law students' final exam in contracts. In essence, the Court is called upon to determine whether two written documents are, respectively, an offer and an acceptance. And, as one sometimes finds in the hypotheticals constructed for examination purposes, the purported 'offer' in this case is not an offer because there is no consideration.
58 Before analysing the key documents, it will be helpful to review the distinction between accord and satisfaction and accord executory. Phillips JA (with whom Winneke P and Charles JA agreed) provides an excellent outline of the relevant principles in Osborn v McDermott [1998] 3 VR 1 ("Osborn"). As Phillips JA explains, the fundamental distinction between accord executory and accord and satisfaction is that "the former does not operate to discharge existing rights and duties unless and until the accord is performed, whereas the latter operates as a discharge immediately the accord (or agreement) is achieved": Osborn at 7-8. Accord and satisfaction is the compromise of an existing cause of action in return for a promise while accord executory requires that something be done before the cause of action is compromised.
59 Somewhere between accord and satisfaction and accord executory "is the accord and conditional satisfaction, which exists where the compromise amounts to an existing and enforceable agreement between the parties for performance according to its tenor but which does not operate to discharge any existing cause of action unless and until there has been performance": Osborn at 10. Accord and conditional satisfaction would be reached if a creditor agreed to forebear from suit for 30 days and to discharge the cause of action if the debtor paid a compromise amount within that time: see Bartlett v Mouncey [1998] FCA 418.
Absence of Consideration
60 The applicant contended that the consideration, from Soufflet USA, was the relinquishment of its full claim ($439,557.83 for both the damages claim and the freight balance) in exchange for a lower amount ($421,380.22 for the damages claim and a reduced freight balance). In the applicant's submission, the contract was a paradigmatic example of accord and satisfaction.
61 The problem with this view is that AWB was not asking Soufflet USA to make a concession when it submitted a different load port calculation. Rather, AWB was merely claiming that, under the pre-existing Charter Party, it owed a different amount than that claimed by Soufflet USA. As AWB correctly submitted (see [52]-[55] above), this was not a request for a new agreement supported by new consideration.
62 This can be further illustrated with the following example. Suppose that on 5 August 1999, AWB had written to Soufflet USA claiming that it had discovered that the demurrage had also been miscalculated. Presumably, Soufflet USA would have replied that, as a new contract had been formed on 3 August 1999, the issue of demurrage was closed. In my view, that response would be untenable as AWB's fax of 3 August 1999 demonstrates no intention to depart from or supplant the original Charter Party.
63 The situation would be different if AWB had accepted that Soufflet USA's calculations were correct but had nonetheless requested a reduction in the freight balance. In that case, it would have been seeking a new agreement. Similarly, suppose the solicitor from AWB's hypothetical (at [53] above) asked the barrister to accept a reduced fee because the client was of limited means, in return for payment on an earlier date that that originally agreed. This request would be an offer because it goes outside the terms of the original contract and it would specify consideration capable of supporting the new agreement. In contrast, AWB's claim about load port despatch did not go outside the terms of the Charter Party.
64 For these reasons, I find that AWB's statement about the freight balance calculation was not an 'offer' for a new agreement with new consideration. The issue of the freight balance calculation must be considered as independent from any agreement by AWB to pay the damages claim. This means that the only other candidate for consideration is forbearance by Soufflet USA from suing on its damages claim. Although forbearance can be consideration in some cases, it is a very poor candidate here.
65 Forbearance is sometimes exchanged for security: see, e.g., Murphy v Timms [1987] 2 Qd R 550 at 551 per Kneipp J (with whom Vasta J agreed) and 556 per Connolly J (holding that forbearance to sue by a creditor at the express or implied request of a guarantor is sufficient consideration to support a guarantee). Also, forbearance might be consideration where quantum is uncertain. For example, a claimant might forbear to sue in exchange for an insurer accepting liability: see Newton v State Government Insurance Office (Qld) [1986] 1 Qd R 431 at 444-5 per McPherson J. In that situation, the insurer benefits by avoiding costly litigation while quantum is investigated and negotiated. This case is different. The applicant claims that AWB acknowledged both liability and quantum with respect to the damages claim. According to the applicant, AWB bound itself, without more, to pay the damages claim in full. If the applicant were correct, then, Soufflet USA would have exchanged its damages claim for AWB's unqualified promise to pay the exact same claim. This is inherently unlikely.
66 At best, the exchange of 3 August 1999 could be construed as an accord executory. Assuming that AWB's fax did admit liability on the damages claim on AWB's behalf, then the reply from Soufflet Négoce states that the claim will be discharged if AWB pays it. This is scarcely sufficient to constitute a new agreement. For one thing, AWB's supposed 'acceptance' does not vary the terms or effect of Soufflet USA's damages claim. There is thus no consideration to support a new agreement: there could only be a statement of intent on AWB's part to pay the claim.
67 Overall, I find that, even if AWB's fax of 3 August 1999 were taken as admitting liability on the damages claim, there would be no consideration to support a binding agreement. Accordingly, no contract was formed and Soufflet USA's contact claim must be dismissed.
AWB Did Not Admit Liability
68 For the reasons given above, I find that AWB's fax cannot be construed as an 'offer', which, if accepted, could give rise to contractual obligations. This is sufficient to defeat the applicant's claim. I would also reject the applicant's claim on the basis that the reasonable reader would not have concluded that, by the fax, AWB was accepting the damages claim.
69 I reach this conclusion mostly on the basis of the text of the fax and the circumstances known to the parties. The key sentence of AWB's fax - "We have checked the figures in Souffle USA Claim and would only disagree with the Load Port Despatch calculation" (emphasis added) - addresses only whether the figures in the claim have been correctly calculated. At best from the applicant's perspective, the fax was ambiguous as to whether it was accepting the damages claim. It does not expressly state that AWB accepts all the claims made against it, including the damages claim. The statement "confirm your concurrance [sic] for us to proceed with the balance settlements" indicates that the author is only asking for a reply concerning the calculations and anticipates further dialogue. It tends against the proposition that the fax should be construed as an offer to conclude a deal by accepting a substantial damages claim.
70 The fax (like many of the communications in this case) was written very sloppily. It would have been patently clear to any reasonable reader that the fax was not composed with much care. In this circumstance, a reasonable reader should have hesitated to conclude that the fax made a major concession merely by indirect implication.
71 As AWB emphasised, its fax of 3 August 1999 does not refer directly to the damages claim. If AWB were accepting the damages claim in this fax, it was unusual that it did not refer to the claim directly, given its size and nature. If AWB was accepting the damages claim, it would reasonably be expected that it would do so distinctly and that the fax would refer to the claim expressly. Bearing in mind that the damages claim was the far bigger, and potentially more contentious, of the claims for payment outlined in the letter of 28 June 1999, it was unlikely that AWB would accept the damages claim without expressly and directly referring to it.
72 The parties disagreed about whether the damages claim would have faced significant hurdles under the Charter Party. I need not consider this dispute in detail. It is sufficient to say that a reasonable reader familiar with the circumstances known to the parties (such as the terms of the Charter Party) would be aware that the damages claim was more likely to be contested by AWB than matters affecting the freight balance. This is because the damages claim was very much larger than any other item that AWB was being called on to pay and was less straightforwardly related to the Charter Party. This consideration provides further support for the conclusion that a communication accepting the damages claim would be expected to refer specifically to that claim.
73 When all of these factors are considered, I find that a reasonable reader would not conclude that, by its fax of 3 August 1999, AWB was accepting liability on the damages claim (as well as its quantum). I accept that some factors (such as those outlined by the applicant at [42] above) militate in the other direction. The other considerations to which I have just referred outweigh these factors and lead me to conclude that AWB's fax of 3 August 1999 said nothing about the damages claim against AWB. This provides an alternative ground for dismissing the applicant's contract claim.
Acceptance
74 AWB contended that, if its fax were construed as an offer, then Soufflet Négoce's reply was not an acceptance. Having found that no offer was made on 3 August 1999, it is unnecessary to consider this issue.
Disposition
75 The applicant's claim for breach of contract should be dismissed with costs.
I certify that the preceding seventy five (75) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny.