Presumption that no agreement intended until formal contract signed

Please note for members of the public or practitioners in the legal profession where English is your second language a translation key in all languages of the world is available on this blog to assist you. The plain English blog without translation facilities is located at http://roberthaypropertybarrister.wordpress.com

Where an agreement concerns real estate there is a presumption that no binding contract was intended until "contracts" are exchanged.

If the agreement for sale refers to the execution of a more formal agreement, then the inference ordinarily to be drawn is that no binding contract is intended until execution of the formal agreement.

See: Elgas Ltd v A.J.Young Industries Pty Ltd (1986) 4 BPR 9,329 at 9,335 per McHugh JA.  In Encino Plaza Pty Ltd v Wilson International Pty Ltd (1988) V ConvR 63,908 Ormiston J at 63,914-5 referred to a number of cases that supported the proposition that:

where the evidence shows that involved in the negotiations is the preparation of an important commercial agreement, then the normal or prima facie inference is that the parties do not intend to be bound before the precise terms of that agreement have been finalised and executed and, if necessary, exchanged.

 My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Author: Robert Hays Barrister subject to copyright under DMCA.