Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd

Mushroom Composters Pty Ltd (appellant) appealed to the New South Wales Court of Appeal against a decision of McDougall J in the Supreme Court of New South Wales. The dispute concerned a supply and purchase arrangement between the appellant and IS & DE Robertson Pty Ltd (respondent) for the supply of compost. The central issue was whether the parties had reached a binding agreement on the essential term of price for the duration of the arrangement, or if the price remained unfixed, subject to a price review mechanism and an obligation to negotiate in good faith.

The Court of Appeal was required to determine whether the agreement, as evidenced by a series of communications and conduct, contained a concluded agreement on price. This involved considering whether the purported price review mechanism, which included an obligation to negotiate in good faith, was sufficiently certain to constitute a binding term of the contract, or whether it left the essential term of price too indefinite. The court also considered the weight to be given to admissions of law made by a party in determining the existence of a contract.

The Court of Appeal found that the parties had not reached a concluded agreement on the essential term of price. It held that the price review mechanism, which involved an obligation to negotiate in good faith, did not provide sufficient certainty to fix the price for the duration of the arrangement. The court reasoned that an agreement to negotiate in good faith regarding price, without more, does not constitute a concluded agreement on that essential term. Consequently, the court allowed the appeal in part, setting aside the primary judge's order that a binding agreement on price existed.

The Court of Appeal ordered that the appeal be allowed in part and that the order of McDougall J on 12 May 2014 be set aside. The parties were directed to bring in agreed short minutes of order giving effect to the judgment within 14 days, with provisions for the parties to submit their own proposed minutes and submissions if agreement could not be reached.