United Group Rail Services Ltd v Rail Corporation New South Wales

United Group Rail Services Ltd (United Group) appealed to the Court of Appeal of New South Wales against a decision concerning a dispute resolution clause within a contract with Rail Corporation New South Wales (RailCorp). The core of the dispute revolved around whether a contractual obligation to engage in "genuine and good faith negotiations" constituted a sufficiently certain term to be legally enforceable.

The Court of Appeal was required to determine two primary legal issues. Firstly, whether an agreement to negotiate in good faith is sufficiently certain to be valid and enforceable as a contract. Secondly, if the dispute resolution clause was found to be uncertain, whether the arbitration clause within that clause was capable of being severed from the remainder of the clause, thereby remaining valid and enforceable.

The Court held that an agreement to negotiate in good faith, in a commercial context, is sufficiently certain to be valid and enforceable. The judges reasoned that such an obligation implies a standard of conduct that is not illusory and can be assessed by reference to objective criteria, even if the precise outcome of the negotiations is not predetermined. Furthermore, the Court found that the arbitration clause was severable from the broader negotiation clause. This meant that even if the negotiation aspect of the clause were found to be void for uncertainty (which it was not), the arbitration provision would still stand.

The appeal was dismissed, and United Group was ordered to pay RailCorp's costs.