Ipex Software Services Pty Ltd v Hosking [2000] VSCA 239
Facts: Hosking owned a software company. He agreed with Schwalb to merge his company with the Ipex group of companies which was controlled by Schwalb. Schwalb indicated informally to Hosking that Hosking would get some shares in the new group of companies. Before anything was done to formalise this undertaking, Hosking transferred his business to the new group, assisting in the transfer of his customers and accounts. Only after Hosking had done this did Schwalb make a written promise to give Hosking a 5% share in the new group of companies. Schwalb did not carry out this promise and Hosking sued to enforce it.
Contract; formation; consideration; past and executed consideration; certainty of promises.
Issue 1: Past and executed consideration: Given that Hosking had transferred his company to the group before the written promise to give him a 5% share of the new group was made, had Hosking given sufficient consideration for Schwalb's promise?
Decision: In the circumstances, there was sufficient consideration to make the agreement legally enforceable.
Reason: Hosking had performed services (transferring the customers and accounts to the new group) because of, and relying on, the indication that he would be given shares in the consolidated group of companies. In such circumstances the services already performed are sufficient consideration for the later promise. This is called 'executed' consideration rather than 'past' consideration.
Issue 2: Certainty of promises: Schwalb had promised to give Hosking the 5% share in whatever form Schwalb thought appropriate. Was this promise sufficiently certain to be enforceable?
Decision: The promise was sufficiently certain.
Reason: Eames AJA said (at [56]):
"[T]he court will, if possible, give effect to [the parties'] intention by overcoming difficulties said to arise from uncertainty or incompleteness... That the form of words adopted may allow a latitude of choice as to the manner in which [they] will be carried into effect does not render the agreement void. Nor does the fact that there may be more than one interpretation of what was meant, ... so long as the relevant term is capable of being assigned a meaning then the meaning is that which the court assigns it. The task of the court is to ascertain the intention of the parties and in so doing 'no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements'."