In Skilled Group Ltd v CSR Viridian Pty Ltd & Anor [2012] VSC 290 (4 July 2012), Vickery J was considering a claim by Skilled Group for  monies due by way of a restitutionary quantum meruit for engineering work it performed , under a subcontract that was never executed between Skilled and Pilkington, at a glass manufacturing plant in Dandenong owned by CSR. Skilled said that no concluded subcontract had been made between Skilled and Pilkington because, the parties had never agreed on two essential terms of the proposed subcontracts, namely the dates for practical completion and the proposed milestone dates for the purposes of calculation of liquidated damages.

His Honour noted previous cases where, though no contract had been executed, by the parties proceeding to perform  the work, a contract had been formed. In relation to the formation of a contract, His Honour said:

94 In any determination as to whether a binding contract exists, it is the objective intent of the parties, as revealed in the factual context, that is the paramount consideration. The fact of agreement and its content is to be determined by the communications between the parties considered objectively. It is also legitimate to consider the factual context in which the communications took place. Regard may also be had to communications between the parties subsequent to the date of the alleged contract, at least to the extent to which those communications may inform the meaning of the language used by the parties in earlier exchanges between them which evidenced the fact of agreement and its content and defined the commercial context.

95 The subjective intention of the parties, as it may be expressed, for example in internal memoranda, or statements made by individuals as to as to subjective intention in the course of giving evidence, is generally inadmissible. However, in some circumstances such expressions of intention may amount to admissions and be admissible on that basis. However, care needs to be exercised in determining the content of any such admission.

His Honour considered the so-called “fourth class” of cases discussed in Masters v Cameron, where parties are content to be bound immediately and exclusively by the terms which they had agreed upon while at the same time expecting to make a further contract in substitution for the first contract, containing, additional negotiated terms, referring to Lord Loreburn, in Love & Stewart v S Instone & Co:


It was quite lawful to make a bargain containing certain terms which one was content with, dealing with what one regarded as essentials, and at the same time to say that one would have a formal document drawn up with he full expectation that one would by consent insert in it a number of further terms. If that were the intention of the parties, then a bargain had been made, none the less that both parties felt quite sure that the formal document could comprise more than was contained in the preliminary bargain.



His Honour concluded:


In my opinion, the parties reached agreement in this case in conformity with the fourth limb of Masters v Cameron as described by the High Court in Sinclair Scott. Their conduct clearly manifested an intention to elevate their commercial relationship beyond the clutches of the third class. …. By early May 2008 the parties reached finality in arranging all the terms of their bargain and intended to be immediately bound to the performance of those terms. At the same time the parties proposed to make a further contract in substitution for the first contract, containing negotiated additional terms relating to dates for practical completion of the three Sub-contracts and agreed milestone dates, upon which it was intended that the Sub-contracts would be formally executed……. 117 The factual analysis I have described, involving as it does the application of the fourth limb of Masters v Cameron, also goes to explain the negotiations between the parties which continued from early May 2008 as to dates for practical completion and milestone dates. What the parties were not about during this period was negotiating towards a set of original binding Sub-contracts, for by early May 2008 they were already bound to a concluded, but limited suite of bargains. What they were about was the negotiation of a new set of Sub-contracts in substitution for the already binding ones. The fact that the parties continued to negotiate for an alternative regime of dates, and this continued beyond early May 2008, had no bearing on the concluded bargains which were already in place. ……


In the light of the conduct described, I find it irresistible to conclude otherwise than implied contracts on the terms of the three Sub-contracts are to be inferred from the evidence and that these implied contracts operated to govern the Skilled works on the Project from the outset of their engagement.


His Honour concluded, therefore, that concluded subcontracts had been formed. Though no longer required, His Honour further concluded that, were it not possible to imply the existence of binding agreements, Skilled would have been estopped from denying the existence of the agreements as reflected in the three subcontracts.