CONTRACTS – Express term of written agreement – Guarantee by director who is not a party to contract – Whether director who executes agreement for company is personally bound by guarantee
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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Details
AGLC
Li v Tang [2021] NSWSC 1011
Case
[2021] NSWSC 1011
Decision Date
CaseChat Overview and Summary
In the case of Li v Tang, the dispute involved the formation of an oral agreement between the parties, the enforceability of a written agreement containing a guarantee, and the validity of a charge. The case was heard in the Supreme Court of New South Wales. The primary issue was whether the oral agreement between Li and Tang was valid and enforceable, given that the terms were not documented. The court also had to determine if the written agreement, which included a guarantee by a director who was not a party to the contract, bound the director personally. Another central issue was whether the interest rate in the contract constituted a penalty, making the contract unjust under the Contracts Review Act 1980 (NSW).
The court examined the evidence presented to ascertain if the oral agreement had been properly formed and if it was for a commercial purpose. It was established that an oral agreement can be valid if the parties intended to create legal relations, and the terms were sufficiently certain. The court then considered whether the director who signed the written agreement on behalf of the company was personally liable for the guarantee. The court concluded that the director was not personally bound by the guarantee unless it was expressly stated that they were entering into the agreement in a personal capacity. The court also evaluated the interest rate in the contract, determining that it did not amount to a penalty if it was a genuine pre-estimate of loss resulting from a breach.
The court found that the oral agreement was valid, and the written agreement did not personally bind the director to the guarantee. The court ruled that the interest rate in the contract was not a penalty and was a valid pre-estimate of loss. The court further held that the charge was valid and enforceable, even if the contract was terminated. The court also determined that the acceptance of a repudiation of the contract did not affect the party's rights, and the charge survived the termination of the contract. The court's decision provided clarity on the enforceability of oral agreements, the binding nature of guarantees in written contracts, and the validity of charges in terminated agreements.