Uncertainty leaves oral agreement incomplete

Cases

Uncertainty leaves oral agreement incomplete

Source: Australian Business Ltd Oral agreements must be mutually clear on all essential points to be legally binding, according to the NSW Industrial Relations Commission.

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Source: Australian Business Ltd

 

Oral agreements must be mutually clear on all essential points to be legally binding, according to the NSW Industrial Relations Commission. An employee claimed that his employer had no right to withdraw from terms both parties had agreed to pending the employee getting further advice on one point. Justice Peterson said that uncertainty about the parameters of this point - which was vital to the essence of the agreement - meant the parties did not have a 'complete' agreement. The employee's claim was dismissed.

Background

The employee, under s106 of the Industrial Relations Act 1996, asked the Commission to declare that his conciliation proceedings had been settled on terms orally agreed to and later summarised in a letter from his solicitor to his employer's solicitor. His employer disputed that there was an agreement reached at the date alleged or at any other time.

When the matter initially came up for conciliation, the Commission ordered the parties to discuss the matter privately. A number of offers and counter offers were made. While they reached agreement on many points, the employee's solicitor said she could not agree to a non-solicitation clause without further advice. She said the parties agreed to drawing up a draft deed, subject to advice on the non-solicitation clause.

A few days later the employer's solicitor advised the employee's solicitor that the employer would not be pursuing the agreement. The employee's counsel argued the agreement was legally binding although not enforceable pending the satisfaction of the non-solicitation condition. He said the circumstances gave the employee an opportunity to withdraw, but not the employer. He said that on the satisfaction of the condition, the employee would have become entitled to the benefit of the completed agreement.

Findings

Justice Peterson said the critical question was whether or not the agreement reached was one which the employer was free to withdraw from, or whether it was bound by the agreement as it stood until slightly modified by the non-solicitation clause.

Justice Peterson said there was a 'real aspect of uncertainty' between the parties regarding the parameters of the non-solicitation clause. This meant there was no complete agreement subject to the employee's acceptance. As such, the Commission was unable to find the parties had agreed to terms that were acceptable only at the employee's command. The condition in dispute was 'an essential term of the proposed agreement and a term which had not been formulated. It could not be a matter affecting only performance; it went to the very existence of an agreement,' Justice Peterson said. Consequently the Commission dismissed the claim.

See: Diver v Object Oriented Pty Ltd and Anor [2002] NSWIRComm 138, 20 June 2002.

 

 

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