VIC Breaking of an Agreement - No Right to Sue?

[Rod]

Hi guys,

There is an agreement in place between 2 parties that contains clauses that say either party cannot sue the other party over anything connected to the original dispute. The agreement was signed by both parties and ends a dispute that would have resulted in legal action.

Question: If one party breaks a key term of the agreement, and the other party then claims a breach of contract and reinstates their right to sue on the original dispute, is the first party (the one that broke the agreement) able to also sue, or are they still bound to the agreement that says they cannot sue under commercial law?

Due to the confidentiality clauses in the agreement, I need to be careful about how much is explained. Hope this question makes sense.

 

[Sophea]

Hi Rod,

From what you have described above, I gather there is a settlement agreement in place, whereby the parties have agreed to settle a dispute based on certain terms. If one of the parties fails to carry out their obligations under the settlement, the contract is breached and as far as I am aware - that is the end of the settlement and its on for young and old again. By then responding to the breach by suing under the original dispute, the innocent party is acting as though they no longer consider themselves bound by the settlement agreement. Therefore I doubt that they could then bring it to the court as a defence to any counter suit that the breaching party would bring in relation to the original dispute.

Does that make sense?

 

[Rod]

Hi Sophia,

Yes it does. I wasn't sure if suing ended the agreement in its entirety, or still allowed for certain parts to still be enforced by the non-breaching party.

The other option is to sue for the breach of the agreement rather than suing for matters that were part of the original agreement. Are cost orders automatically granted by courts when requested when there is a finding of a clear breach of a settlement agreement?

 

[Sarah J]

It is up to the party who did not breach the settlement agreement whether they wish to sue to breach of that settlement agreement (meaning they wish to uphold the rest of that agreement) or whether they wish to treat it as termination of the agreement and repudiate the whole agreement. Note that a party cannot terminate an agreement on breach of a warranty, only a condition (i.e. essential term of the contract without which the party would not have entered into the settlement agreement). Whether a term is a condition or warranty depends on the facts: where it's located in the agreement, nature and content of the term and pre-contractual negotiations.

If the judge finds a clear breach of the agreement and the culpability is relatively clear, then cost orders are generally ordered right afterwards. If culpability is difficult to determine, the other party has a defence etc. then it may go on to a taxation hearing.