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Commercial Contract Clauses – Latest updates

Commercial Contract Clauses: Principles and Interpretation is a unique Australian work going beyond statement of general contractual principles to assist lawyers in practice – from the initial drafting of clauses to their interpretation in commercial life and by the courts.

The latest two updates contain important new additions to the publication. To conclude 2010, Leigh Warnick comprehensively updated the chapters on “Joint, several and proportionate liability” and “Good faith clauses”, covering topical areas of contract law not available in many other publications.

Warnick’s update to “Joint, several and proportionate liability” contains the important conclusion drawn from BHP Coal Pty Ltd v Orenstein & Koppel AG [2008] QSC 141 that although ordinarily all parties entitled to the benefit of the joint promise should be plaintiffs in the action, that was not the case here, where it was conceded that absence of one promisee as a plaintiff should not preclude recovery by the others.

Warnick’s update to the “Good Faith Clauses” chapter is just as extensive as his update to joint liability. He notes that “until recently there has been surprisingly little overlap between the way courts analyse express good faith obligations, and the way they deal with attempts to imply them. In the case of express obligations of good faith, the key issue is certainty. Is the content of the obligation sufficiently certain for a court to enforce it?” To answer this question, Warnick provides in depth analyses of AMCI (IO) Pty Ltd v Aquila Steel Pty Ltd [2010] 2 Qd R 101; [2009] QSC 139 and United Group Rail Services Ltd v Rail Corp NSW [2009] 74 NSWLR 618; [2009] NSWCA 177. Warnick also adds new material on negotiating a new contact that examines the distinction between a process contract and a substantive contract.

Although sound principles deduced from previous court decisions dealing with commercial contracts are vital to drafting legally binding clauses, when commercial parties conclude a bargain they often use language which can be applied to a variety of contingencies as they cannot predict every circumstance which might affect their future relationship. In the latest update, author Joshua Thomson cites cases where the courts have made it clear that the context in which the contracts were constructed is important for interpretation. In Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 the NSW Court of Appeal asserted that the interpretation of contracts is to be undertaken by examining the documents in the context of the surrounding circumstances known to the parties.

Justice Ken Martin has added new material to the “Operation of Deeds” chapter, looking at the recent case of 400 George St (Qld) Pty Ltd v BG International Ltd [2010] Q ConvR 54-731; [2010] QSC 66 where the disputed issue was whether an agreement for lease document was a deed. The key issue on appeal, however, was whether the deed had been delivered.

It is important not to underestimate the importance of statute law in relation to contract interpretation. The latest release of Commercial Contract Clauses updates Trade Practices Act 1974 (Cth) references to the Act that replaces it: the Competition and Consumer Act 2010, which commenced on 1 January 2011. All citations of the new Act also contain references to the superseded Act in parentheses.

By Daniel Wild

Daniel Wild is the Product Editor for Commercial Contract Clauses: Principles and Interpretation. He is also a legislation editor with responsibility for writing sidenotes and cross-references that aid subscribers' understanding of statute law.