Case: Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234
Outcome: applied
case law on this matter has recently been essayed by Campbell JA (Allsop P and Bastin J concurring) in Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234 at [90] . I gratefully adopt what his Honour there said (omitting the quite exhaustive case citation): The principles that are applicable in deciding whether an agreement that parties have entered is one that is wholly in writing, or partly written and partly oral, include the following: (1) When there is a document that on its face appears to be a complete contract, that provides an evidentiary basis for inferring that the document contains the whole of the express contractual terms that bind the parties: (2) It is open to a party to prove that, even though there is a document that on its face appears to be a complete contract, the parties have agreed orally on terms additional to those contained in the writing: ... Conversely, it is open to a party to prove that the parties have orally agreed that a document should contain the whole of the terms agreed between them: (3) The parol evidence rule applies only to contracts that are wholly in writing, and thus has no scope to operate until it has first been ascertained that the contract is wholly in writing: (4) Where a contract is partly written and partly oral, the terms of the contract are to be ascertained from the whole of the circumstances as a matter of fact: (5) In determining what are the terms of a contract that is partly written and partly oral, surrounding circumstances may be used as an aid to finding what the terms of the contract are: ... If it is possible to make a finding about what were the words the parties said to each other, the meaning of those words is ascertained in the light of the surrounding circumstances: ... If it is not possible to make a finding about the particular words that were used (as sometimes happens when a contract is partly written, partly oral and partly inferred from conduct) the surrounding circumstances can be looked at to find what in substance the parties agreed: (6) A quite separate type of contractual arrangement to a contract that is partly written and partly oral is where there is a contract wholly in writing and an oral collateral contract. (ii) Interpretation First, it has for some time now been indicated "with tolerable clarity" ( Masterton Homes , at [1]) that, in interpreting a contract, one is entitled to consider context, background and surrounding circumstances without the need first to find some textual ambiguity: see Pacific Carriers Ltd v BNP Paribas [2004] HCA 35 ; (2004) 218 CLR 451 ; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 ; (2004) 219 CLR 165 at [40] ; Synergy Protection Agency Pty Ltd v North Sydney Leagues Club [2009] NSWCA 140 at [22] ; Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2005] FCA 1812 ; (2005) 223 ALR 560 at 573-547; Douglas, "Modern Approaches to the Construction and Interpretation of Contracts" (2009) 32 Aust Bar Rev 158. Fourthly, although the present state of the law in this country is not yet settled on whether it is possible to use post-contractual conduct as an aid to construction of a written contract, the more favoured view is that it is not: see Masterton Homes, at [114]; FAI Traders Insurance Co Pty Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343. The criticisms of this view are, in the main, directed at its inflexibility particularly in relational contract settings: see eg GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50 ; (2003) 128 FCR 1 at [351] ; see also Unidroit Principles of International Commercial Contracts: 2004 , Art 4.3.