PRA Electrical Pty Ltd v Perseverance Exploration Pty Ltd

PRA Electrical Pty Ltd took legal action against Perseverance Exploration Pty Ltd in the Supreme Court of New South Wales. The dispute centred on whether a binding contract had been formed between the parties, despite the absence of a formal instrument of agreement. The crux of the matter was whether a term in the agreement, stipulating that the contract would not come into effect until a formal document was executed by both parties, acted as a condition precedent to the formation of the contract or if it was instead a condition that allowed PRA to suspend its performance of the contract if the condition was not met.

The court had to determine the precise nature of the term concerning the formal instrument and whether the contract should be implied in terms other than this condition. Additionally, the court examined whether PRA was estopped from asserting that the formal document was not required and that a binding contract had been formed between the parties. The court evaluated the conduct of both parties and the surrounding circumstances to discern the true intention of the parties as expressed in their agreement.

The court concluded that the term in question was a condition precedent to the formation of the contract, rather than a condition that entitled PRA to suspend its performance. This meant that without the execution of the formal instrument, no binding contract existed between the parties. The court also found that PRA was not estopped from denying that the executed formal document was not required for the contract to be binding. Consequently, the court dismissed the claim, ruling that no contract had been formed between the parties due to the failure to execute the formal instrument.