Reviving Lapsed Agreements and Navigating Suspensive Conditions: Lessons from Australian Contract Law

Navigating Complexities of Commercial Contracts

In business and legal transactions, not every contract unfolds neatly. Agreements may lapse due to inaction, missed deadlines, or unmet conditions. Others stall when parties wait on third-party approvals, finance, or regulatory sign-off—what we call suspensive conditions or conditions precedent.

Australian contract law offers guidance in these grey areas. But the risks are real: parties may find themselves without a binding agreement—or in disputes over whether an agreement even exists.

In this post, we unpack how Australian courts handle these scenarios, drawing insights from landmark decisions.

When Is an Agreement Truly "Lapsed"?

Not all agreements fall away permanently. Whether an agreement can be revived—or was binding to begin with—depends on the intentions of the parties.

A cornerstone case here is Masters v Cameron (1954). The High Court categorised “subject to contract” agreements into four types:

1) parties intend to be immediately bound by the agreement, even though they contemplate a formal document;

2) parties intend to be immediately bound, but also contemplate a more formal document replacing the first;

3) parties do not intend to be bound at all until the formal document is executed; and

4) parties intend to be bound immediately and exclusively by the terms of the agreement, but also contemplate a further contract with additional terms. 

Takeaway:

If your deal fits into Category 1 or 2, it might still be enforceable—even without a signed contract.

If it’s Category 3 or 4, the agreement likely has no legal force unless renewed through fresh offer and acceptance.

Suspensive Conditions: A Double-Edged Sword

Suspensive conditions delay a contract’s effect until certain events occur—like obtaining finance or selling an asset.

In Meehan v Jones (1982), the contract was subject to the buyer securing finance "on terms satisfactory to him."Though vague, the High Court upheld it—so long as the discretion was exercised honestly and reasonably.

In contrast, Perri v Coolangatta Investments Pty Ltd (1982) shows the risks: the buyer failed to sell their property in a reasonable time, and the seller terminated. The court sided with the seller.

Takeaway:

Suspensive conditions must be actively managed—you can’t just sit back, and hope conditions are met.

What If You Start Acting on a Deal Without Finalising It?

Sometimes, parties begin performing under a contract even though conditions haven't been met or no formal contract has been signed.

In Godecke v Kirwan (1973), despite the deal being "subject to formal contract," the High Court found a binding agreement existed based on parties’ conduct.

Takeaway:

Actions can carry legal weight. Courts will assess what the parties do, not just what’s written.

Key Essential Insights to Avoid Contractual Pitfalls

1. Clarify Intent

   Know where your deal fits under Masters v Cameron. Don’t assume it’s binding unless the intent is crystal clear.

   
   

2. Define Conditions Precisely

   Vague terms like “satisfactory” can still be enforceable—but courts may imply a duty of good faith.

   
   

3. Follow Through on Conditions

   Failing to take reasonable steps (like securing finance or selling a property) could kill the deal.

   
   

4. Formalise Any Revival

   If an agreement has lapsed, don’t rely on casual exchanges. Document everything properly.

   
   

5. Align Words and Actions

   Inconsistency between what you say and do can lead to costly disputes.

In summary, whether you're drafting, negotiating, or trying to enforce a stalled agreement, Australian case law shows that:

• Intention matters

• Precision protects

• Proactivity pays off

  
  

Lapsed agreements can be revived, and suspensive conditions can be satisfied—but only with clarity, diligence, and a firm grasp of your legal footing.

When in doubt, get legal advice early. The cost of ambiguity is often far higher than the effort to get it right from the start.

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Disclaimer: This post is for general information only and isn’t legal or professional advice. While care is taken in its preparation, I make no warranties as to its accuracy or completeness. By reading it, you agree not to rely on it without seeking your own advice and to release and indemnify me from any resulting claims or losses. For advice specific to your circumstances, please consult a qualified professional.