JOHNSON MATHEY LTD V. AC ROCHESTER OVERSEAS CORPORATION – (1990)
Supreme Court of New South Wales – 13 December 1990
The parties were involved in contractual relationship to supply car parts for installation in motor vehicles manufactured in Australia. The parts were to be coated in Australia to take advantage of Commonwealth government policy which provided financial incentives for motor vehicle manufacturers to use locally produced parts.
On 19 February 1990, ACOC, the defendant, gave notice to JM that the agreement would end as JM had failed in the reasonable opinion of ACOC to be competitive with other suppliers of the coated parts on the basis of price, with all other terms and conditions being equivalent. It was common ground that the competitive prices used by ACOC in forming its opinion were prices of coated parts from sources in the United States. JM challenged the termination on the basis that it was the only with another supplier of substrate coated in Australia that comparison could be made for the purposes of ACOC’s right to give notice.
Reliance was placed on negotiations between the parties before the contract was entered into to show that ACOC was estopped from denying that the right to terminate was to be made using the prices for Australian coated parts.
Could evidence of pre-contract negotiations to be used to amend the language of the written contract?
Was there an implied term in the contract that the right of ACOC to terminate on the basis of price was to be exercised using the prices for Australian coated parts?