Providing guidance and clarification
Courts in 2025 provided guidance and clarification on several essential elements of contract formation and variation: agreement, intention to create legal relations and consideration.
It is a foundational principle of contract law that a contract can only be formed if the parties reach an agreement or 'meeting of the minds', typically demonstrated through offer and acceptance. In Kairouz v Jasper Nominees Limited [2025] VSCA 16, one of the issues faced by the court was whether an agreement is reached where minor amendments to an offer are communicated along with acceptance. The court found that an immaterial amendment to a written offer, or an amendment to codify something previously agreed, will not prevent a finding that agreement has been reached.
The requirement for agreement applies equally to contractual variations. But in a multi-party agreement, does agreement to a variation need to be reached by all parties? That was the question faced by the Western Australian Court of Appeal in Mirabela Nickel Ltd (In Liquidation) (Receivers and Managers Appointed) v Mining Standards International Pty Ltd [2025] WASCA 82, where two parties to a multi-party asset sales agreement agreed to vary the date to satisfy a condition precedent that only affected those two parties. The court held the variation was binding, as it did not alter the rights and obligations of the other parties.
Another essential element of contract formation is that the parties must have intended to create legal relations. The Full Federal Court in Cirrus Real Time Processing Systems Pty Ltd v Jet Aviation Australia Pty Ltd [2025] FCAFC 85 was called upon to determine whether commercial negotiations and provisional agreements between parties over a period of four years evinced an intention to be legally bound. The court, emphasising the need for an objective assessment, found that there was no such intention, as the parties failed to agree on essential terms or address critical matters, and used passive or ambiguous language. This indicated that the parties were seeking to create parameters for commercial negotiations while remaining free of contractual obligations.
Readers of the contract law update (2023, 2022) may recall that a frequent issue in contract law cases is the application of the principles in Masters v Cameron1 to determine whether communications, which result in a commercial agreement but contemplate the execution of a more formal agreement, give rise to a binding contract. Masters v Cameron described three categories of circumstances that might arise, and courts subsequently recognised a fourth category, where parties are content to be bound immediately by agreed terms, but expect to make a further contract in substitution containing additional terms. In Rose v Manno Kingsway Pty Ltd [2025] NSWCA 23, the New South Wales Court of Appeal considered whether certain pre-contractual emails could fall into this fourth category and form a binding contract. The court found that in the circumstances of the case, the emails did not, as they contained underdeveloped provisions and used qualifying expressions, and the parties' subsequent conduct was inconsistent with the terms of the email without drawing complaint from the counterparty.
The court in Rose also provided guidance on the principle that past consideration is not good consideration. Ordinarily, consideration must come into existence either at the same time or after the promise is made. The court in Rose held that where the payment and agreement in substance form part of a single transaction, the payment is not 'past consideration'.
Cirrus Real Time Processing Systems Pty Ltd v Jet Aviation Australia Pty Ltd (formerly Hawker Pacific Pty Ltd) [2025] FCAFC 85
Objective intention to create legal relations—post-contractual conduct
The Full Federal Court of Australia considered whether the primary judge was right to hold that commercial negotiations and provisional agreements between the parties did not evince an objective intention to create legal relations. In this case, Hawker Pacific Pty Ltd and Hawker Pacific NZ Limited (HP), with support from Cirrus, tendered for a contract with the New Zealand Defence Force (the NZDF). The Full Court held that the parties did not evince an objective intention to create legal relations and therefore dismissed the appeal.
This case demonstrates that commercial parties seeking the protection of a binding commercial agreement should insist on clearly documenting their agreement on key terms. Courts will conduct an objective assessment of whether the parties intended to create legal relations, rather than consider the subjective understandings of the parties.
HP tendered for a contract with the NZDF to supply certain equipment and software. HP sought Cirrus' support to provide the digital software necessary for the tender. Negotiations between HP and Cirrus in respect of the tender lasted approximately four years. Both HP and Cirrus expressed—at the least—a general ambition that Cirrus would provide software support if HP was successful in obtaining the tender. Cirrus claimed that HP expressed a greater commitment than a general ambition, and entered into a binding legal agreement with HP in or about late 2016.
On 21 December 2016, Cirrus provided HP with a revised quotation titled the Version 4 Quotation (V4Q). Cirrus claimed that it created a contract with HP by virtue of entering into a written agreement, termed the teaming agreement, on 21 December 2016. Cirrus said the teaming agreement incorporated the terms of V4Q 'by reference'. Cirrus further claimed the contract was formed on the basis that it exchanged its authorisation to disclose information from V4Q in the tender for HP's promise that Cirrus would be contracted according to the terms of V4Q if HP entered into a contract with NZDF.
The primary judge held that the circumstances of HP and Cirrus did not evince an intention to be legally bound, and therefore no contractual obligations had been created. The Full Court agreed with this aspect of the primary judge's reasoning and dismissed the appeal.
The critical issue in this case was whether HP and Cirrus, by virtue of their conduct and communication, expressed an objective intention to create legal relations.
A related but tangential issue was whether V4Q was an agreement to agree that retained sufficient contractual certainty. The 'agreement to agree' issue was largely inconsequential for the Full Court, which upheld the primary judge's finding that V4Q was capable of being sufficiently certain to constitute a binding agreement.
The primary judge held that the teaming agreement did not evince an objective intention to create legal relations for three reasons:
- First, the terms of V4Q were incomplete, and the parties had not agreed on objectively 'essential terms' such as milestone penalties on delivery.
- Second, the language used by the parties before and during the exchange of letters on 21 December 2016 did not indicate an objective intention to create legal relations.
- Third, the conduct of the parties after 21 December 2016 did not suggest that they intended to contractually bind themselves.
The primary judge further held that the teaming agreement did not incorporate the terms of V4Q. This was due to the disconformity in Cirrus' case between the teaming agreement requiring HP to enter into an agreement 'on the basis of' V4Q, and the terms of V4Q being 'incorporated by reference' into the teaming agreement.
The Full Court held that the primary judge was right to conclude there was no objective intention to be legally bound. Justice Derrington noted that parties' self-interest means they are often desirous to establish a strong foundation to pursue commercial opportunities, while remaining free of binding legal obligation. The position of an entity seeking to tender for a contract is a prime example of this. Justice Derrington held that the bare fact the parties in the present case had reached sufficient certainty upon terms capable of forming a binding agreement did not necessarily evince an intention to create legal relations. The circumstances of the parties' conduct demonstrated that they did not intend to create a binding contract without the provision of other terms. If the parties had agreed upon all the essential contractual terms, then the intention to be legally bound could more readily have been discerned.
Justice Derrington also held that the primary judge went 'too far' in considering HP's internal risk assessment of Cirrus 'walking away' from the tender process as a relevant consideration bearing upon intention to create legal relations. His Honour held that such an approach would undermine the objective theory of contract by creating endless hypothetical speculation on the parties' motivations for contracting.
Although there were a number of indicia suggestive of objective intention to create legal relations, such as the parties engaging in commercial discussions and anticipating entering into a future agreement, Justice Derrington held that the following factors militated against such a conclusion:
- First, the general aim of the teaming agreement was to put HP in the best position to lodge a compliant tender with the NZDF, not to create a suite of binding legal obligations. The effect of the agreement was also inequitable insofar as its terms lacked reciprocity, which undermined the conclusion that HP intended to bind itself to those terms.
- Second, there was the absence of any express statement by Cirrus that it required from HP an express contractual commitment, especially in circumstances where Cirrus was aware that HP was considering another company as an alternate subcontractor to Cirrus. In antecedent commercial discussions, Cirrus avoided using language connoting contractual certainty.
- Third, the language in the teaming agreement lacked clarity in relation to the fundamental rights of the parties and set out broad parameters for commercial negotiation.
- Fourth, the passive or ambiguous language in V4Q suggested that it was to remain executory to the extent to which it was incorporated into HP's tender, and was attempting to establish parameters within which the parties would negotiate, rather than bind them to specific terms.
- Fifth, the terms of V4Q did not address matters identified by HP as 'critical', such as 'Milestone Penalties', service availability key performance indicators, and insurance responsibilities and warranties of Cirrus, which were objectively significant.
Justice Jackman largely agreed with the reasons of Justice Derrington but maintained two points of divergence:
- First, having expressed doubt that 'reliance theory' constitutes the dominant philosophical foundation of an objective intention to create legal relations, his Honour expressed the view that the requirement of an intention to create legal relations does not equate to an intention that the parties objectively intend that their agreement be subject to judicial oversight. Justice Jackman further emphasised that in certain exceptional cases the subjective intention to enter into legal relations is relevant. These exceptional cases include: (a) where one of the parties is joking or does not intend what they are saying to be taken at face value; (b) instances of mistake, misrepresentation, duress or undue influence; and (c) special cases of unilateral contract.
- Second, Justice Jackman differed from Justice Derrington in the treatment of post-contractual conduct. His Honour agreed with Justice Derrington that post-contractual conduct for the purposes of determining whether the parties had an objective intention to enter into legal relations cannot be confined to conduct and communications known to both parties. Justice Jackman differed from Justice Derrington insofar as he held that an admission by a party after a contract has been formed that it intended to create binding legal relations is of significant probative value. Such an admission should not be considered inadmissible opinion evidence, although it did not change the outcome in this case.
Justice Cheeseman agreed with the reasons of Justice Derrington, subject to concurring with the two points taken by Justice Jackman.
Rose v Manno Kingsway Pty Ltd [2025] NSWCA 23
'Fourth category' of Masters v Cameron—whether advance of loan money before execution of formal agreement is good consideration—estoppel where formal agreement exists
The New South Wales Court of Appeal considered whether an email exchange constituted a valid contract. The court held that it did not because the correspondence lacked critical details, included qualifying statements and was inconsistent with the parties' subsequent conduct. The court also considered whether payment of loan money was valid consideration even though it was advanced before a formal loan agreement was executed. The court held that it was valid consideration because the transfer and the execution of the agreement formed part of a single transaction, and the transfer could not be explained by any pre-existing obligation between the parties.
This case provides guidance on the factors to be considered when determining whether pre-contractual negotiations are binding, and serves as a reminder that parties should state explicitly whether they intend to be bound by draft terms. It also confirms that payment will be valid consideration for an agreement if it can be shown that the payment and the agreement are parts of a single transaction. The case demonstrates the potential hazards of performing contractual obligations before executing a formal agreement.
Mr Rose (the Appellant) and Mr Manassen were property developers who had worked together on various projects, including the Wavelength Project. Delays meant that only Manassen stood to profit from the Wavelength Project, and in November 2021, Manassen suggested that he could pay Rose or that Rose could propose loaning money from Manassen.
Following a meeting on 13 December 2021, Manassen sent Rose an email 'confirming' that he would lend Rose $1 million at 5% interest subject to several conditions. The email was prefaced with '[j]ust confirming our meeting' and concluded with '[p]lease confirm agreement'. Rose replied within two minutes, saying '[c]onfirmed Roy', but added the following day that Manassen had forgotten to include a payment of $315,000 that Rose had made personally in relation to the Wavelength Project. On 24 January 2022, a company related to Manassen's company, Manno Kingsway Pty Ltd (the Respondent), advanced Rose a sum of $1,300,000.
On 2 February 2022, the Respondent entered into a written loan agreement (the Loan Agreement) by which it agreed to loan Rose $1.3 million for a period of 12 months at an interest rate of 3.85% per annum, subject to deeds of release being executed in relation to the Wavelength Project.
Rose paid ten monthly instalments of interest, including for the nine days between the advancement of the money and the execution of the Loan Agreement. However, he refused to repay the balance when it became due, as he believed that the parties had agreed that the loan would only become due at the end of the Wavelength Project.
The Respondent commenced an action in debt, which the Appellant defended on the basis that:
- the emails did not constitute a valid agreement because they were subject to formulation of some of the conditions (the Email Ground); and
- the advance of the loan money was past consideration and therefore could not support the formation of the loan agreement (the Loan Agreement Ground); or
- there was a mutual understanding between the parties that the loan would not be repaid until the end of the Wavelength Project, which estopped Manassen from relying on any contract (the Estoppel Ground).
The primary judge found against the Appellant on all three grounds.
The Appellant appealed each of the primary judge's findings but was successful only on the first ground and therefore unsuccessful overall.
Email Ground
The Appellant succeeded on the Email Ground. For four reasons, Chief Justice Bell (Justices Mitchelmore and Adamson agreeing) held that the emails did not fit into the 'fourth category' in the Masters v Cameron framework, where parties are 'content to be bound immediately and exclusively' subject to a subsequent agreement with further terms being executed later.
- Several matters mentioned in the email were left outstanding or underdeveloped. For example, the email referred to some guarantees promised by Rose, and it was unclear what was meant by the entry 'no litigation against any Manassen entities from Manny/other'.
- The email used qualifying expressions such as 'just confirming our meeting' and 'please confirm'.
- The parties' subsequent conduct was inconsistent with the terms of the email. For example, the amount advanced was more than $1 million and the interest was less than 5%.
- Rose made no complaint about these deviations from the agreement.
These factors—the presence of underdeveloped provisions, the use of qualifying expressions, the parties' subsequent conduct, and whether any complaints were made—provide a useful framework for assessing whether an agreement subject to the execution of a formal document is immediately binding. The outcome serves as a reminder to state explicitly whether a party intends to become legally bound by pre-contractual correspondence.
Loan Agreement Ground
The court affirmed the principle established in lower courts that whether a payment is valid consideration, as opposed to past consideration, depends on whether the payment and the agreement in substance form part of a single transaction. The court accepted that cases where the issue of past consideration have arisen involve multiple agreements between the parties, whereby payment in the 'first' transaction could not sustain a second contract.
Rose was unable to point to any such earlier transaction, arguing that the advancement was not consideration for anything, but also conceding that it was not gratuitous. The court rejected this argument, holding that the advance and the Loan Agreement formed a single transaction and therefore that the advance was valid consideration.
The case illustrates the potential hazards of advancing loan money, or otherwise performing a contract, before a formal agreement has been executed.
Estoppel Ground
The Appellant also failed on the Estoppel Ground. The court held that the parties' entry into the Loan Agreement on terms inconsistent with the Appellant's proposed 'common intention' or 'representation' prevented the finding of an estoppel. Additionally, there was no evidence of a clear and unequivocal promise to ground a promissory estoppel.
The court's decision regarding the conventional estoppel ground demonstrates the well-known difficulties of establishing an estoppel where the assumed state of affairs conflicts with the terms of a written agreement. It demonstrates the risks associated with relying on oral promises, particularly where they conflict with written ones.
Mirabela Nickel Ltd (In Liquidation) (Receivers and Managers Appointed) v Mining Standards International Pty Ltd [2025] WASCA 82
Contract variation—multi-party agreement
The Western Australian Court of Appeal held that a variation to a multi-party asset sale agreement was legally effective between the appellants and respondent, despite not having been agreed by all parties to the agreement.
This case demonstrates that all parties to a multi-party formal written agreement do not need to agree to a variation of the original agreement, provided the variation does not alter the rights and obligations of the original parties that are not party to the variation agreement.
Mirabela Nickel Ltd and Mirabela Investments Pty Ltd, both in liquidation and under receivership (Mirabela), entered into an asset sale agreement with Mining Standards International Pty Ltd (Mining Standards) to sell their interests in a Brazilian company (Brazil Co) (Sale Agreement). Brazil Co was also a party to the Sale Agreement.
The Sale Agreement included a finance condition precedent that required Mining Standards to execute binding finance agreements within 14 days of the exchange of signed copies of the Sale Agreement.
A dispute arose about whether the 14 days commenced on 1 November 2017 (when Mirabela and Mining Standards signed the Sale Agreement), or 10 November 2017 (when Brazil Co also signed).
On 18 November 2017, Mirabela and Mining Standards agreed to vary the date to satisfy the finance conditions precedent (Variation Agreement).
Mining Standards did not satisfy the finance condition precedent and Mirabela issued a notice purporting to terminate the agreement.
Mirabela commenced proceedings, seeking (among other things) a declaration that the termination of the Sale Agreement was valid.
The primary judge held that, among other things, the Variation Agreement had no legal effect where one of the parties to the original agreement was not a party to the putative further agreement.
President Buss and Justices Mitchell and Vaughan allowed Mirabela's appeal and dismissed Mining Standard's appeal.
The Court of Appeal unanimously held that the primary judge had erred in finding that the Variation Agreement was not legally effective.
Their Honours considered Justice Le Miere's decision in GB Energy Ltd v Protean Power Pty Ltd [2009] WASC 333 and two UK decisions before accepting that:
- With some limitations, the parties to a multi-party agreement are able, by further agreement, to alter their rights and obligations under their contract as between themselves.
- Those limitations include that the variation cannot affect the rights or obligations of another party to the multi-party agreement in respect of that agreement if the person is not a party to the variation.
Whether the variation impacts the rights and obligations of the parties to the multi-party agreement is a matter of contractual construction.
Mining Standards contended that the Sale Agreement was a single agreement relating to a single transaction where all the parties had interdependent rights and obligations, meaning that consent from all the parties was required to vary the agreement.
The Court of Appeal did not accept that argument, finding that, despite the words of the Sale Agreement, only Mirabela and Mining Standards had the right to terminate it if the finance condition precedent was not satisfied. Further, even if Brazil Co had a right to terminate the Sale Agreement, Brazil Co's rights and obligations were not affected by the Variation Agreement. Consequently, it was open to Mirabela and Mining Standards to vary their rights without Brazil Co's agreement or consent.
Footnotes
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[1954] HCA 72; (1954) 91 CLR 353.