In the legal world, binding agreements are put into writing and solidified into deeds or settlements. However, does that mean that an agreement is only binding when it is in writing?
The recent landmark case Radovanovic v Stekovic [2024] NSWCA 129 provides further clarity on this question. Mr Radovanovic sold a property for $675,000. His sister and her husband the Stekovics, however, claimed an equitable interest in the property, which led to them placing a caveat on the title preventing the property from being sold. To allow the sale to continue, the parties came to an agreement: the Stekovics would remove the caveat and the sale proceeds would be held in the solicitor’s trust account until the dispute was resolved.
Following the sale, the funds remained in the trust account for nearly two years. In June 2022, Mr Radovanovic sought to release these funds, which prompted the Stekovics to make a settlement offer. This offer was rejected by Mr Radovanovic, who then made a counteroffer that contained the term that the parties would enter a “Deed of Settlement and Release”. This offer was accepted by the Stekovics via email. No deed was signed or executed.
In August 2022, Mr Radovanovic stated that he was not bound by the agreement to accept his counteroffer. The Stekovics commenced proceedings. The primary Judge agreed that the counteroffer was binding. Mr Radovanovic appealed arguing that the acceptance of the counteroffer did not give rise to a binding agreement on the basis that:
- There was no executed “Deed of Settlement”,
- The agreement lacked “Key Terms”,
- There was no intention to be bound.
The NSW Court of Appeal held that the counteroffer was binding.
The Court of Appeal held that the relevant term in the email interaction was a promise between the parties to enter into a deed at some point in the future. Thus, the deed was an unfulfilled term of the bargain that would be fulfilled later.
The Court of Appeal held that no “key term” was lacking in the agreement and that the language of the agreement clarified the obvious.
The Court of Appeal concluded that the use of the phrase “without prejudice save as to cost” indicated an intention to be immediately bound upon acceptance of the offer. This phrase typically engages the principles set out in Calderbank v Calderbank [1975] which allows parties to argue for favourable cost orders if the offer is unreasonably refused. You can learn more about Calderbank offers here.
This case highlights the importance of using clear and precise wording when making offers, always include the relevant key terms when making offers, and most importantly, follow up any offer with a written agreement promptly.
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