Stretching the Friendship

By 23 March, 2017News

Stretching the friendship … When is an offer not an offer?

The law of contract is about the formation and enforcement of agreements. In theory, the process is fairly straightforward – an offer is made by one party, which is accepted by the other, and something of value (“consideration”) is given by both to bind the bargain. But “agreeing parties” do not always intend that their agreement be legally binding or if they do, they may fail to satisfy the rules of formation, which usually leaves one party without a remedy under the common law. But equity recognises and enforces rights and duties of which the common law takes no notice. The two do not clash, but one takes up the matter where the other leaves it off.

In an interesting NSW case decided not so long ago, a photographer operated his photography business in various rooms within the basement of the Holme Building at the University of Sydney. The nature of the business was that of a “Graduation Photography Studio”. The photographer would take and produce photographic portraits, on Sydney University graduation days, of recently graduated students and their families. For the purpose of conducting that business the photographer had entered various written licence agreements with the University. In 2013, at the time he commenced proceedings against the University, the photographer was about 60 years old and had been in the commercial photography business all his working life.

About six months before the expiry of his license, the photographer sent an email to the managing agents for the University, stating:

“…would it be stretching the friendship to ask for a 5+5 with a further option to renew, at the end of the time period?

The managing agents replied:

USU [University of Sydney Union] are happy to offer you a new license but are unable to offer a term past 2017”.

There were some follow up emails between the parties, however, the University made it clear that it would not commit to a new license and advised the photographer that he would remain on a month to month basis for the time being, until, without any indication or warning, the University gave the photographer one month’s notice to leave.

The Court found that:

  • the photographer’s email was no more than a polite enquiry as to the University’s attitude and accordingly, the University’s reply was not an acceptance of any offer that might have been implicit in the photographer’s email;
  • the University’s email reply was no more than an “invitation to treat” and could not be characterized as an offer, particularly because it did not nominate a term or fee for any new license; and
  • no agreement arose from the conduct of the parties after the email exchange.

But that was not the end of it …

The photographer had been in occupation of the basement area for 22 years and had no other source of income other than that generated by the graduation photography business. He then gave this evidence in response to the judge’s questions:

Q. “How does work come your way? Is it by word of mouth, is it a reputational basis?

 A. It is both, and I have been out of the industry now for seven years. All the people I used to work for are all gone. And now I have to talk to 20, 22 year olds. And I walk through the door with grey hair, I am 60 years of age, I am seen as well as [sic] Methuselah…

 Q. You say you have been out of the industry for seven years?

 A. That’s right.

 Q. You mean since the studio closed?

 A. That is correct.

 Q. So what do you mean by being out of the industry, you mean practicing only at Sydney Uni?

 A. Well, that is correct.”

The photographer was therefore faced with having to re-invent himself, which he said in evidence may take two or three years.

The Court found that discussions between the parties about potential relocation, the month to month arrangement, and an assertion by the University that it would not consider a CPI increase for “this year only” evidenced that the parties conducted their relationship on the basis that the photographer’s occupation would not be disturbed without reasonable notice. The Court found that one months’ notice, without any indication or warning, was unreasonable, oppressive and unconscionable.

The lessons from this case were twofold:

  • First, if you hold an existing licensee that is about to expire and you want a new license for a further term then you will need to ensure that your offer to the licensor is expressed in clear correspondence. A “polite enquiry” as to the licensor’s intention will not be enough to constitute an offer to contract for a new license capable of acceptance by the licensor; and
  • Secondly, equity relieves against strict insistence upon common law rights when such insistence is against conscience. Those who are at a special disadvantage and are unconscientiously exploited by another are able to call upon equitable principles to shield against unreasonable, oppressive and unconscionable conduct in commercial and consumer dealings, including hire purchase contracts, licenses and leases.

So, if you would like some surety on the formation and enforcement of your agreement or if you are concerned about being without a remedy, contact one of our expert Litigation Lawyers, on 1800 123 529.

 

“The information in this article is general only and is not intended to constitute legal advice.”