Pre-contract Pitfalls in Business

HOW CASUAL SALES DISCUSSIONS CAN LEAD TO COSTLY DISPUTES UNDER AUSTRALIAN CONSUMER LAW

In this episode of The Travelling Lawyer, filmed near Balladonia Homestead on the Nullarbor, Fiona Henderson shares a Supreme Court case that started with a friendly sales chat — and ended with weeks of hearings and millions in legal costs.

The lesson? Legal risk often begins before a contract is signed.

You’ll learn:

• Why pre-contract discussions can create binding obligations
• How courts assess “what was said” under the Australian Consumer Law
• Why “entire agreement” clauses don’t always provide full protection
• How to reduce pre-contract exposure while keeping deals commercial

If your business engages in sales calls, demos, or negotiations, this episode shows you where the legal line is — and how to stay safely on the right side.

 

VIDEO SCRIPT

This video is the second part in our six-part series, filmed on the road across the Nullarbor, where I’m unpacking the most common and costly contract mistake I see in business before a contract is signed — and how to avoid it.

This is Balladonia Homestead, which, as you can see, has seen better days. Heaven knows why you’d want to live out here.

We’ve just passed a sign proudly declaring we’re coming up to Australia’s straightest section of road — 146 kilometres of uninterrupted bitumen.

Which is great news for Peter, who’s still driving, because I’ve now run out of corners to helpfully comment on.

If only business deals were that straightforward.

I want to tell you about a case I ran in the Supreme Court of New South Wales a few years ago.

It all started with a trade show conversation.

No contract yet.
No invoice.
Just a friendly, helpful sales chat.

And it ended with weeks of courtroom hearings and millions of dollars in legal costs.

Here’s what happened.

My client sold advanced, high-spec glass processing machinery — the kind that’s imported from overseas and costs serious money.

Back in 2012, at GlassTech Düsseldorf, a potential buyer approached my client and asked about a new vertical machine.

They talked about specs, pricing, and features — a classic early-stage sales conversation.

And my client was careful. He said things like:

• “It depends on your specs.”
• “We can’t confirm cycle times without knowing what you’re producing.”
• “We offer training and service, but we need to understand your process.”

He didn’t make any commitments.

Just commercial curiosity and helpful answers.

The buyer didn’t move forward because he couldn’t afford a new machine.

But a few months later, a second-hand version came up. It had been repossessed. It was in rough condition and needed significant work — parts replaced, filters repaired. It hadn’t been looked after.

But of course, that made it much more affordable.

So my client reached out. The buyer flew in for an inspection.

They saw the condition — the rust, the grime, the broken filters.
It was definitely not a plug-and-play.

But during the visit, the buyer asked questions:

• “Will you bring it up to spec?”
• “Can it do 50 panels per shift? Three shifts a day?”
• “What’s its uptime? What’s its downtime?”
• “Will your technicians train our team?”

And in good faith, my client said:

• “We’ll bring it into good working condition.”
• “We’ll replace what needs replacing.”
• “And yes, our technicians will install it and train your staff.”

Soon after, they signed a contract.

That contract included — as you’d expect — a whole agreement clause:

“This contract is the full agreement.”

It also included a non-reliance clause:

“You are not relying on any statements made before signing.”

Everything seemed good.

But once the machine was installed, things went downhill.

It was too complex for the buyer’s team.

Downtime was high. Output was low.

The panels being produced were far more complex than expected.

And suddenly, the buyer claimed my client had made binding guarantees:

“You promised it would work like new.”
“You guaranteed 50 panels per shift.”
“You said there’d be full training and support.”

To back those claims, they didn’t rely on the contract.
They pieced together:

• comments from the trade show,
• emails,
• and notes from the site visit.

They built a case under the Australian Consumer Law, arguing those informal conversations were misleading and deceptive.

And here’s what I want you to take away.

The legal risk didn’t come from the contract.
It came from the pre-contractual conversations.

That’s where I see so many businesses exposed.

Because the court doesn’t just look at what’s written.
It looks at what you said.
What you showed.
What was implied.
What you didn’t say.
And what the other party assumed.

Even if your contract says one thing, your conduct before signing can say something very different.

If that makes you uneasy — it should.

Because these risks live in the places no one thinks to look:

• in sales conversations,
• in demonstrations,
• in inspections,
• in proposal calls.

If your team is in the habit of being commercially helpful, we can help them do that — without stepping over the legal line.

At Argyll Law, we give businesses simple, practical ways to reduce risk without killing the deal.

If you want to talk about training, risk mapping, or reviewing how your team communicates, message me on LinkedIn or visit www.argylllaw.com.

In the next video, I’ll bust a big myth about contracts — because even when they’re perfectly drafted, they may not protect you the way you think.

I’ll see you at the next roadhouse.