King & Wood Mallesons

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Contract law update: Cedar Meats Pty Ltd v Five Star Lamb Pty Ltd [2013] VSC 164

In this case, the Victorian Supreme Court looked at the rules of abandonment of contracts and when a clause will be a penalty clause.

This case demonstrates that even if a party refuses to terminate an agreement and subjectively did not intend to do so, their outward actions may demonstrate they have abandoned it. By not expressly or impliedly reserving any rights that may have accrued under the agreement prior to the abandonment, they may also be taken to have abandoned them too. The case also confirms that a breach is not necessary for the law on penalties to apply — all that is required is a link between the relevant payment and securing the performance of primary obligations.

This case centred on a manufacturing, processing and packaging services agreement between an abattoir (Cedar Meats) and a lamb producer (Five Star) entered into in 2009. The agreement stipulated that Five Star was to provide certain daily volumes of lamb to Cedar Meats…

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