A recent case involving Jordan Latham, an aspiring rugby league player and his employer, the Manly Warringah Sea Eagles, demonstrated that courts may look at the intentions in correspondence between the parties to determine if an agreement has been formed.
Facts
Mr Latham was contracted to play for Manly in 2014 and 2015. Before the commencement of the 2016 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 in 2016.
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.
In May 2016, Mr Latham commenced proceedings against Manly seeking to enforce what he believed was a binding agreement reached in the emails.
Arguments
Mr Latham contended that:
· The email chain constituted a binding contract as it contained an offer which was accepted.
· The fact that the contract did not comply with the NRL rules did not change the fact that there was a binding contract as between the parties.
Manly defended its position with two central arguments:
· 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. In this regard, Manly relied on the High Court’s decision in Masters v Cameron in which the court held 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.
· The NRL rules required a contract to be registered in a specified form before a player could play for any NRL club. Therefore, there could in fact be no valid contract save and until an agreement which complied with the NRL rules was properly registered with the NRL.
The Court’s findings
The Court found in favour of Mr Latham’s and held that a binding agreement had been formed between the parties. In this regard, 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 found that while the categories of contract laid out in the Masters case are an important guide, what is more important in these types of disputes is the issue of the intention of the parties that can be objectively determined based on the chain of correspondence which must be read taking into account the relevant circumstances of a particular matter.
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 a compliant contract.
Lesson
This case is an important reminder that it is essential that parties clearly express when they intend to be bound by an agreement.
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.