Courts examine your intentions when entering into “agreement”

A case involving Jordan Latham, an aspiring rugby league player and his employer, the Manly Warringah Sea Eagles (“Manly”), may seem like an odd place to start when discussing whether Australian Courts will go behind the written terms of an agreement or chain of correspondence to consider the intentions of the parties, but it is in fact a very good example of exactly when Australian courts will be prepared to act in this way.

The background facts

Mr Latham was contracted to play for Manly in 2014 and 2015. After completing two years with Manly and before the commencement of the 2016 National Rugby League (NRL) season, Mr Latham’s manager received an email which in relatively straight forward terms offered a specified sum if Mr Latham would agree to continue to play for Manly for the 2016 season.

Mr Latham’s manager accepted the offer by way of the following response:

We would like to agree on the below. Could you draw up a contract and I will get it signed ASAP.”

Some months after this email was sent Mr Latham was advised by Manly that they no longer required his services and they did not intend to continue with his contract for the 2016 season. This position was adopted by Manly despite the email communications discussed above.

In May 2016, Mr Latham commenced proceedings against Manly seeking to enforce what he believed was the contractual agreement reached in the emails.

Manly’s Defence

Manly focused its defence around two main grounds. Firstly, it argued that the email chain was not in fact a contract or concluded agreement but rather simply set out negotiations that would require a formal contract to be executed before any agreement or terms came into effect.

Manly relied on a previous decision of Masters v Cameron where the Court had identified a number of different categories that communications of this nature could be said to fall into. Importantly, Manly relied upon the finding of the Court in the Masters case that in certain circumstances communications between parties may not amount to a contract if the intention of the parties was always that a formal contract would need to be executed before a contractual arrangement would exist.

Manly also argued that as the NRL Rules required a contract to be registered in a specified form before a player could play for any NRL club then there could in fact be no valid contract save and until an NRL Rules compliant agreement was properly registered with the NRL.

Not surprisingly Mr Latham took a different view of the email chain and argued that an offer had been made and accepted and that a contract, regardless of whether it was registered with the NRL or not, already existed.

The Court’s findings

The Court found in Mr Latham’s favour and held that the email response sent by Mr Latham’s manager, wherein he explicitly accepted the sum offered on behalf of his client, was of critical importance. The actual wording of the acceptance and the fact that Mr Latham’s manager asked for a formal contract to be drawn up in accordance with the agreed terms was not held to be important.

The Court also found that while the categories of contract laid out in the Masters case are an important guide, in these types of disputes what is more important is the issue of what was the intention of the parties that can be objectively determined based on the chain of correspondence and which is read taking into account the relevant circumstances of a particular matter.

The Court held that it was clear from the email chain that an offer had been made by Manly and accepted, on its terms, by Mr Latham.

Finally, while the NRL Rules required contracts to be registered in a certain format no prohibition existed that would prevent a player and a club from entering into a non NRL compliant contract. An essential term had been agreed upon (namely Mr Latham’s salary) and it was clear from the emails that it was the intention of the parties that having agreed on a price for Mr Latham’s services the parties would then take all necessary steps to execute an NRL Rules compliant contract.

What does this decision mean for you?

There are several important take home points we can glean from this decision.

Firstly, Australian Courts will not be bound by any internal rules that a private organisation may have and will interpret contractual negotiations strictly in terms of settled law and after taking into account the demonstrated objective intentions as to whether an agreement has been reached.

Secondly, the case is also an important reminder that it is essential that parties clearly express when they intend to be bound by an agreement. Fortunately, for Mr Latham his agent’s response was clear and unequivocal otherwise the decision might well have been quite different.

If a party is of the view that negotiations are not finalised until a formal contract is signed then they should clearly state so in any correspondence. Conversely if a party considers an agreement has been reached it is equally important that any acceptance of the terms of an agreement, in this case, acceptance of the offered salary amount, is clearly and unambiguously accepted.

If you or someone you know wants more information or needs help or advice, please contact us on 08 9422 8111 or email buslaw@taitlegal.com.au.