In this practice area
Disputes about what a commercial contract means, whether it has been breached or validly terminated, and what the innocent party can recover.
What contract disputes involve
Most commercial relationships rest on a contract, whether it is a signed master services agreement, a supply arrangement pieced together from emails and purchase orders, or a heads of agreement that the parties treated as binding. Disputes arise when one side fails to perform, performs late or defectively, refuses to pay, or ends the arrangement in a way the other side says it was not entitled to.
Common flashpoints include unpaid invoices, variations, defective performance, limitation of liability and indemnity clauses, liquidated damages and termination.
The legal framework
Australian courts construe a commercial contract objectively, by reference to what a reasonable business person would have understood the words to mean, read in light of the contract as a whole, its surrounding circumstances and its commercial purpose. The High Court has confirmed this approach in cases such as Electricity Generation Corporation v Woodside Energy Ltd and Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd.
Whether a party can terminate depends on the contract's express termination rights and the general law. At common law, termination is available for breach of an essential term, for a sufficiently serious breach of an intermediate term, or for repudiation, meaning conduct showing that the other party no longer intends to be bound. A party that terminates without a proper basis may itself be found to have repudiated.
The usual remedy is damages, aimed at putting the innocent party in the position it would have been in had the contract been performed, subject to rules on remoteness and mitigation. Other remedies include recovery of a debt, specific performance, injunctions and rectification. Under section 14 of the Limitation Act 1969 (NSW), an action on a simple contract generally must be brought within six years of the date the cause of action accrued. For a contract made by deed, section 16 allows twelve years.
How these matters typically run
The first task is to assemble the contract documents and correspondence. That will often show whether notices were properly given, whether a dispute resolution clause must be followed before proceedings start, and whether a limitation period is close.
Most matters then move through a letter of demand or response, an exchange of positions and, if the dispute does not settle, proceedings in the court suited to the amount in dispute. In NSW, the District Court hears claims up to $1.25 million and the Supreme Court hears larger or more complex cases, with its Commercial List set up for commercial matters that need active case management. Mediation is common, and well-timed offers of compromise can carry significant costs consequences.
How we act
We start with the contract and the evidence, then give a view on liability, quantum and the likely cost of getting there. Where the contract has a dispute resolution clause, we use it deliberately rather than as a box to tick. We act for claimants and defendants, and we look for the point at which a negotiated outcome makes more commercial sense than a hearing.