Parties Dispute Liability of Manufacturer to Broker
Grayson supplied broking services for Wombat Valley. Grayson claims fees pursuant to their agreement. Wombat opposes such claims alleging that there had been a variation in the agreement to the contrary. The Court, in adjudicating this case determined whether or not the fees are to be calculated on gross sales or net sales.
Facts:
Grayson supplies sales and marketing services to manufacturers of processed foods in return for a fee, it does not take possession of the foods into its own warehouse and deliver them to customers. Wombat Valley, as manufacturer keeps possession, despatches the goods, issues the invoices and receives payment. On 1 July 2016 Grayson supplied its broking services to Wombat Valley. Grayson claims $37,409.96 made up of $27,409.96 in fees and $10,000.00 as a bonus. Wombat Valley says that pursuant to a variation of the agreement from September 2017 Grayson’s fee was to be calculated as percentages of net sales rather than gross sales as was the position at the beginning. “Net sales” means, in Wombat Valley’s submission, that rebates and claims are to be taken out of the gross figures. Wombat Valley says that the bonus was only in effect in the first few months of the parties’ relationship before sales budgets were set, and that the bonus would only be payable if Grayson achieved sales of at least $100,000.00 per month for three consecutive months and that thereafter the sales did not decrease by more than 20%.
Issues:
I. Whether or not broker’s fees to be calculated on gross sales or net sales.
II. Whether or not bonus payable only on sales before September 2017 or throughout the contract.
Applicable law:
Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 - held that post contractual conduct is admissible on the question of whether a contract was formed, but was not admissible on the question of what a contract means.
Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd [2018] NSWCA 213 - where consideration for the variation was found in the mutual abandonment of existing rights by the parties and the conferment of new benefits by each party on the other.
Analysis:
A contract can be varied by agreement, but not unilaterally. It is also a principle of contract law that parties’ post contractual conduct is generally not admissible for the purpose of construing a formal written agreement. Wombat Valley did not make an offer, it unilaterally announced that it was reducing Grayson’s fees.
The offer of a bonus does not sit well with the notion of variation to the contract, because the party making the offer is, by definition, saying that it will do something over and above its contractual obligations. Grayson had achieved sales of $100,000.00 per month by 2017, even allowing for the possibility that there may have been some months which weren’t as good, Wombat Valley’s sales significantly increased on Grayson’s watch.
Conclusion:
The Court concluded that each party has leave to be represented by a legal practitioner. Wombat Valley is liable to Grayson for the two claims of $27,409.96 and $10,000.00. The respondent shall pay the applicant a total of $37,409.96 and shall reimburse to the applicant the filing fee of $696.10.
