Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
Contract; contents; universal terms; duty to co-operate.
Facts: St Martins purchased property from Secured Income (SI) for a price that would be determined in part by the extent to which space in the building could be successfully let to tenants during a specified period. Towards the end of this period, when it was apparent that fewer tenants had signed leases than expected, and anxious to maximise the purchase price, SI itself applied to lease the remaining space. St Martins rejected this offer. SI sued for breach of an implied term that St Martins should cooperate in securing tenants, and should therefore not have rejected SI's offer to lease the remaining space in the building.
Issue: Was the rejection of SI's offer a breach of contract?
Decision: There was an implied term of the contract to cooperate, but St Martins had not breached this term. Reason: Mason J said (at [25], [26]):
"[T]he contract imposed an implied obligation on each party to do all that was reasonably necessary to secure performance of the contract ... As Griffith C.J. said in Butt v. M'Donald ..: 'It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.' "
Since St Martins had not acted 'capriciously or arbitrarily' in rejecting the offer, but only after properly evaluating SI's merits as a tenant, there had been no breach of this duty.