Case: McDermott v Black [1940] HCA 4 ; (1940) 63 CLR 161
Outcome: cited
As already indicated, AWB argued that the applicant's submissions suffered from a fundamental flaw. This flaw is that its fax of 3 August 1999 presents no consideration that could underlie an offer of accord and satisfaction. AWB cited McDermott v Black [1940] HCA 4 ; (1940) 63 CLR 161 at 183-185 per Dixon J, with whom Rich and McTiernan JJ agreed, for a classic statement of the law concerning accord and satisfaction: " The essence of accord and satisfaction is the acceptance by the plaintiff of something in place of his cause of action. What he takes is a matter depending on his own consent or agreement. It may be a promise or contract or it may be the act or thing promised. But, whatever it is, until it is provided and accepted the cause of action remains alive and unimpaired. The accord is the agreement or consent to accept the satisfaction. Until the satisfaction is given the accord remains executory and cannot bar the claim. The distinction between an accord executory and an accord and satisfaction remains as valid and as important as ever. An accord executory neither extinguishes the old cause of action nor affords a new one. ... An executory promise or series of promises given in consideration of the abandonment of the claim may be accepted in substitution or satisfaction of the existing liability. Or, on the other hand, promises may be given by the party liable that he will satisfy the claim by doing an act, making over a thing or paying an ascertained sum of money and the other party may agree to accept, not the promise, but the act, thing or money in satisfaction of his claim. If the agreement is to accept the promise in satisfaction, the discharge of the liability is immediate; if the performance, then there is no discharge unless and until the promise is performed. " Applying these principles, for there to have been an immediate accord and satisfaction, AWB must have offered a promise in place of Soufflet USA's cause of action. In AWB's submission, its fax cannot be construed as an offer of a promise because it merely discusses calculations under a pre-existing contract. 53 During argument, AWB elucidated this point with the following example. Suppose a barrister agrees to charge $100 per hour. Subsequently, the barrister sends her instructing solicitor a $1,500 account stating that she worked for 14 hours. The solicitor might reply "I calculate that 14 hours should be $1,400". At that point, suppose the barrister says "I accept your offer of $1,400". In AWB's submission, no contract would have been formed. The solicitor's communication was simply an inquiry about what was properly owed under the contract. If the solicitor were to later discover that the barrister had not worked 14 hours as claimed, but 10, he could hardly be bound by an earlier 'offer' to pay $1,400. 54 In summary, the solicitor was not offering to accept the barrister's claim in exchange for a $100 reduction in the account; rather the solicitor was trying to establish what his true obligation was under the pre-existing contract. Similarly, in AWB's submission, AWB was not offering to accept Soufflet USA's damages claim in exchange for a reduction in the freight balance. Rather, AWB was simply disagreeing with Soufflet N&eacute;goce's calculation of the freight balance. There was no offer of compromise regarding the freight balance because AWB was only offering to pay what it claimed was the correct amount. AWB submitted that these considerations undermine any claim that AWB was requesting a reduction in the freight balance as consideration for it accepting the damages claim.