In Mirabela Nickel Ltd (In Liq) (Recs and Mgrs Apptd) v Mining Standards International Pty Ltd [2025] WASCA 82 (30 May 2025) the Court of Appeal of Western Australia canvassed the jurisprudence pertaining to variation of a contract. The court wrote:
…
[180] The variation of a contract involves the alteration of the rights accruing or the obligations assumed under a contract. It is fundamental to any variation of contract that there is a valid and subsisting contract to be varied. Ordinarily, once there is a valid and subsisting contract:
By the general rules of the common law… it is competent to the parties at any time before breach of it, by a new contract … either altogether to waive, dissolve, or annul the former agreements, or in any manner add to, subtract from or vary or qualify the terms of it, and thus to make a new contract …
See Goss v Lord Nugent.54
[181] That passage assumes that the varied contract is a ‘new’ contract. Plainly there are two contracts — the original contract and the further agreement by which the parties vary the original contract: Cmr of Taxation (Australia) v Sara Lee Household & Body Care (Australia) Pty Ltd.55 But it is not necessarily the case that the further agreement brings an end to and constitutes a replacement of the original contract. Whether the parties terminate the original contract and replace it with a new contract, or alter the original contract without affecting its existence, depends on the intention of the parties as disclosed by the further agreement: Cmr of Taxation (Australia) v Sara Lee Household & Body Care (Australia) Pty Ltd [22]- [24].
[182] The further agreement must itself satisfy the rules governing contract formation: GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd.56
[183] There may, in this respect, be formalities affecting the recognition of the further agreement; for example, there may be requirements that such a contract be in writing or be evidenced in writing. No such considerations arise in the present case and nothing needs to be said about this potential complication. So too, despite cl 16.1 of the Sale Agreement, it is not necessary to consider the authorities dealing with the effect of a contractual provision that requires any contractual variation to be in writing or a particular form of writing. The primary judge’s rejection of this aspect of the respondent’s defence is not challenged in the appeal and there is otherwise no reliance on cl 16.1 on appeal.
[184] In terms of contract formation, in the same way as there must be offer and acceptance or a manifestation of mutual assent in the formation of the original contract, the parties must agree to the variation effected by the further agreement. The rules of contract formation apply equally to a variation as they do to the original contract. However, depending on the circumstances, the fact and terms of the original contract — as well as the parties’ dealing in relation to the original contract — may inform whether, viewed objectively, the parties intend to vary the original contract by entering into the further agreement.
[185] Before there can be a variation to a contract which is binding in law there is also a requirement that the further agreement effecting the variation must be supported by consideration: Agricultural and Rural Finance Pty Ltd v Gardiner.57
[186] The requirement for valid consideration will sometimes be problematic. Depending on the circumstances the performance of an existing contractual obligation may not provide legally sufficient consideration for a variation. So too past consideration cannot normally support a variation of contract. It is, however, well settled that a mutual exchange of promises will constitute consideration: Boothey v Boothey.58 So too the conferral of a ‘tangible benefit or advantage’ or some form of ‘practical benefit’ will suffice as consideration: Director of Public Prosecutions for Victoria v Le.59
[187] There will be no consideration for the promise by one party to agree to a variation where the parties to a contract agree to vary the time for satisfaction of or to vary the quantum of an unconditional obligation owed by only one of the parties: Foakes v Beer;60 D & C Builders Ltd v Rees.61 Consideration is not present so far as the variation is exclusively for the benefit of one party. However, where parties agree to vary some other aspect of their contract — not merely an unconditional obligation owed only by one party — the agreement by each party for the variation of the mutual rights and obligations of the parties will be consideration for the other party’s promise: Inness v Waterson.62 See also Henderson v Curtis.63
[188] In the latter case, the possible benefit or detriment due to the variation of the parties’ mutual rights and obligations suffices to provide consideration for the promise of each party. The possibility of benefit or detriment suffices given Lord Selborne LC’s endorsement of the criteria of ‘any benefit, or even any legal possibility of benefit’ in Foakes v Beer ie some independent benefit, actual or contingent (613 – 614). Looked at in this way, what must be found to render a contract variation binding is something more than one party to the existing contract simply forgoing an existing contractual right: Hill v Forteng Pty Ltd.64
(emphasis added)
A link to the full decision is here.
54 Goss v Lord Nugent (1833) 5 B & Ad 58, 64–65 (1833) 110 ER 713, 716
55 Cmr of Taxation (Australia) v Sara Lee Household & Body Care (Australia) Pty Ltd [2000] HCA 35; (2000) 201 CLR 520 [22].
56 GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; (2003) 128 FCR 1 [226].
57 Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570 [49] , [84] , [96].
58 Boothey v Boothey (Unreported, FCt SCt of WA, Library No 970092B, 13 March 1997) 15 (Ipp J; Malcolm CJ & Murray J agreeing).
59 Director of Public Prosecutions for Victoria v Le [2007] HCA 52; (2007) 232 CLR 562 [43].
60 Foakes v Beer [1884] 9 App Cas 605, 611, 613, 623–624, 629–630.
61 D & C Builders Ltd v Rees [1966] 2 QB 617, 623–624, 626.
62 Inness v Waterson [2006] QCA 155 [49].
63 Henderson v Curtis [2008] WASC 283 [16] –[19].
64 Hill v Forteng Pty Ltd [2019] FCAFC 105; (2019) 138 ACSR 344 [22].
