Case Title: Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130
- Court: New South Wales Court of Appeal
- Date of Judgment: November 30, 1988
- Judges: Kirby P, McHugh JA, and Hope JA
- Area of Law: Contract Terms, Certainty, Enforceability
In the case of Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130, the New South Wales Court of Appeal examined the enforceability of a term in an employment contract that offered an employee the option to participate in a non-existent equity sharing scheme.
Facts (Biotechnology Australia Pty Ltd v Pace)
Dr. Pace was employed by Biotechnology Australia Pty Ltd as a senior research scientist. His employment offer included a salary package of A$36,000 per annum, a fully maintained company car, and “the option to participate in the company’s senior staff equity sharing scheme.” However, at the time of the offer and throughout Dr. Pace’s employment, no such equity sharing scheme had been established. Upon leaving the company, Dr. Pace sued for breach of contract, alleging that Biotechnology Australia failed to provide the promised option to participate in the equity sharing scheme.
Legal Issue
The central issue was whether the promise of an option to participate in a non-existent equity sharing scheme constituted an enforceable term of the employment contract or was too vague, uncertain, or illusory to be upheld to constitute a binding contractual obligation.
Court’s Judgment in Biotechnology Australia Pty Ltd v Pace
The New South Wales Court of Appeal, by majority (Kirby P and McHugh JA), held that the promise regarding the equity sharing scheme was illusory and unenforceable. The court reasoned that the term was too uncertain, as it depended entirely on Biotech’s discretion to establish such a scheme, with no external standard or objective criteria to define its implementation. Therefore, the promise did not give rise to an enforceable contractual obligation.
Legal Principles
This case highlights key principles in contract law regarding:
Illusory Promises: A promise is considered illusory if its performance depends solely on the discretion of the promisor without any objective criteria, rendering it unenforceable.
Uncertainty: Contractual terms must be sufficiently certain to be enforceable. If a term is too vague or lacks clear standards for enforcement, courts may deem it void for uncertainty.
Impact
The decision underscores the importance of clarity and specificity in contractual agreements. Parties should ensure that all terms, especially those involving discretionary benefits or future schemes, are clearly defined and not left to the sole discretion of one party. This case serves as a cautionary tale for employers and employees to explicitly outline the terms and conditions of employment benefits to avoid disputes over enforceability.
List of references:
- https://www.australiancontractlaw.info/cases/database/biotechnology-v-pace
- https://doylesconstructionlawyers.com/wp-content/uploads/2015/09/Biotechnology-Australia-v-Pace.pdf
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