Empirnall Holdings v Machon Paull Partners (1988)
A landmark case on contract formation through conduct and acceptance by taking benefits.
Court
NSWCA
Judges
Kirby P, Samuels and McHugh JJA
Judgment Date
11/11/1988
Material Facts
In 1983, Empirnall Holdings, a property developer controlled by Eric Jury, bought a building in Crows Nest with plans to redevelop it. They hired Machon Paull Partners, a firm of architects and project managers, to handle the development. What followed was a classic case of "we have a deal... or do we?"
The relationship started smoothly. Through Empirnall's property consultant David Abrahams, the parties discussed the project, with Machon Paull proposing to work on a "cost plus 12.5%" basis. When it came time to formalise the arrangement, Mr Machon prepared a standard building contract. But here's where things got interesting.
When Mr Machon called about sending the contract in September 1983, Mr Abrahams delivered a bombshell: "Hold the contracts... Eric doesn't sign contracts."
Mr Machon's response? "Well, he had better start signing them now."
Despite this exchange, Machon Paull sent the written contract in October 1983, asking for it to be signed and returned. It never was. Instead, they sent another letter stating:
"With reference to our letter dated 3 October 1983, concerning the return of the signed contracts we are proceeding on the understanding that the conditions of the contract are accepted by you and works are being conducted in accordance with those terms and conditions."
Business as Usual... Until It Wasn't
For months, everything ran smoothly: work progressed, payments were made according to the contract schedule, Empirnall even paid for the MBA contract forms, and there were no complaints about quality or terms.
This continued until March 1984, when Empirnall hit financial troubles and could only pay $45,000 of a $111,000 progress claim. When Machon Paull eventually sued for unpaid fees, Empirnall suddenly claimed they'd never agreed to the written contract - after all, Mr Jury "never signs contracts"!
The Legal Question
Can you be bound by a contract you never signed, especially when you've explicitly said you don't sign contracts?
This case wrestled with a fundamental principle: silence generally doesn't equal acceptance. You can't force someone into a contract by saying "if I don't hear from you, we have a deal." But what if they act like there's a deal?
The Court's Analysis
The General Rule and Its Exceptions
The Court of Appeal acknowledged the starting point:
"An offeror may not impose a contractual obligation upon an offeree by stating that if the latter does not expressly reject the offer as made, it will be taken to have accepted it."
However, Justice McHugh identified a crucial exception:
"Where an offeree with a reasonable opportunity to reject the offer of goods or services takes the benefit of them under circumstances which indicate that they were to be paid for in accordance with the offer, it is open to the tribunal of fact to hold that the offer was accepted according to its terms."
Why Context Matters
The court emphasised several factors that pointed to acceptance:
1. Commercial relationship: This wasn't a casual arrangement between friends but a substantial commercial project involving large sums of money
2. Knowledge of terms: Empirnall received the contract and knew exactly what terms Machon Paull was working under
3. Benefit taken: Empirnall accepted months of work performed explicitly on the contract's terms
4. Payment pattern: Progress payments followed the contract procedures exactly
5. Timing of objection: Only when financial trouble hit did Empirnall claim there was no contract
Justice Kirby noted that from late August, there was agreement to use MBA standard contracts, with Mr Abrahams saying it would be "fine" to get them.
The Decision
The Court of Appeal found that Empirnall had accepted the written contract through its conduct. Despite Mr Jury's general policy of not signing contracts, by accepting the benefit of work offered on specific terms, Empirnall was bound by those terms.
Most significantly, this meant Empirnall was bound by Clause 26, which created a charge over the land for unpaid fees - a crucial advantage for Machon Paull given Empirnall's financial difficulties.
Key Principles Established
The Objective Test:
As Justice McHugh explained: "The ultimate issue is whether a reasonable bystander would regard the conduct of the offeree, including his silence, as signalling to the offeror that his offer has been accepted."
Taking Benefits = Acceptance:
When you know work is being offered on specific terms and you take the benefit of that work over an extended period, you can't later claim you never agreed to those terms.
"I Don't Sign Contracts" Isn't a Magic Shield:
The court found this objection was "not to the terms and conditions but to the manner of acknowledging them."
Why This Case Matters
This decision shows that in commercial relationships, your actions can bind you as effectively as your signature. You can't have your cake and eat it too - accepting months of work done explicitly under contract terms while claiming you never agreed to those terms.
For businesses, it's a reminder that:
• Stating you "don't sign contracts" won't protect you if you act like there's a contract
• Taking benefits with knowledge of terms can create binding obligations
• Courts will look at the whole picture, not just whether a document was signed
The case stands as a practical application of the principle that contracts are about genuine agreement, not just formalities. When a reasonable observer would say "these parties clearly had a deal," the law will generally find a way to enforce it - signature or no signature.