Written agreement not final word on sealing the deal

By Andrew Goode

When you sell goods such as wheat, barley, sheep and cattle, or purchase tractors, headers, seeds, fertiliser or stock feed, it is important to know the terms of your agreement.

An agreement does not necessarily have to be in writing to be binding except in circumstances such as those dealing with land, and a few other exceptions. 

In most cases, an agreement which is not in writing can be enforced although there are practical problems enforcing verbal agreements if the other party seeks to avoid it or argue about what was agreed. 

In commercial transactions of any substance, the agreement will usually be in writing, although often one-sided in favour of a large corporation. 

A good reason for a written agreement is that you will have evidence of the terms rather than having to rely on recollections which may be vague by the time of a dispute, and there may be a difference in recollection. If, however, you have a written agreement, make sure you read it before you sign. 

Just to complicate matters, even where an agreement purports to set out everybody's rights, there may be legislation which overrides some of its terms. For example, the Australian Competition & Consumer Act imposes obligations that must be met by sellers regardless of what the agreement may say. 

But just because you have a written agreement, you should not assume that it will help you if the other party, for example, is a company with minimal assets, and it goes into liquidation.

The same principle applies to agreements between governments. You might think governments will honour agreements but sadly, that is not always the case. 

For example, in the 1994 Budapest Agreement  the USA, Russia and the UK all reaffirmed ‘their obligation to refrain from the threat or use of force against the territorial integrity or political independence of Ukraine’. (Read 1994 Budapest Agreement)

Clearly, the Budapest Agreement was not worth the paper it was written on as Russia has annexed the Crimea - after the people's vote, of course.

The most famous example is the September 1938 'Agreement' between Neville Chamberlain of the UK and Adolf Hitler. ( 1938 Signed Agreement - document 1 / 1938 Signed Agreement - document 2)

France and Italy were also party to the first part of it. The agreement noted that ‘The final determination of the frontiers (of the Sudeten German Territory) will be carried out by the international commission. This commission will also be entitled to recommend to the four powers - Germany, United Kingdom, France and Italy - in certain exceptional cases minor modifications in the strictly ethnographical determination of the zones which are to be transferred without plebiscite’. 

The following day Adolf Hitler and Neville Chamberlain met and signed a summary of that further meeting which noted that the initial agreement was ‘symbolic of the desire of our two peoples never to go to war with one another again. We are resolved that the method of consultation shall be the method adopted to deal with any other questions that may concern our two countries, and we are determined to continue our efforts to remove possible sources of difference and thus to contribute to assure the peace of Europe’. 

Comforting words indeed except, as we are reminded on Anzac Day, Hitler did not honour the spirit of that agreement. 

While you may have a written agreement, which may give you some comfort, you should always prepare for contingencies as some people will not honour agreements even when they are in writing. Makes me want to have a look at the ANZUS Agreement with the USA! 

Stock Journal Publication

Details: Andrew Goode Phone: 08 8414 3411 e:agoode@mellorolsson.com.au

Practice Area: Farm Law , Corporate, Commercial & Business

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