Master v Cameron: Conditional Contracts in NZ

You have agreed on the main commercial points, shaken hands, exchanged emails, or signed a short heads of agreement. Then someone says, “we’ll get the formal contract done later”. This is where New Zealand businesses often get caught. A founder assumes there is no binding deal until the long form document is signed. Another business owner starts spending money on setup because they think the other side is locked in. Someone else relies on the words “subject to contract” without checking what they actually mean in context.

The case commonly known as master v cameron is a practical guide to this exact problem. It helps businesses work out whether an agreement is already binding, only partly binding, or not binding until a formal contract is signed. That matters before you sign a term sheet, before you rely on a verbal promise, and before you commit cash, stock, staff time, or premises on the assumption a deal is done.

This guide explains what Master v Cameron means for New Zealand businesses, the legal issues to check before you sign, the mistakes founders commonly make, and how to reduce the risk of an expensive dispute about whether a contract exists at all.

Overview

Master v Cameron is about whether parties who have agreed key terms intend to be immediately bound, bound only after a formal document is signed, or bound in some limited way while fuller terms are finalised. For New Zealand businesses, the practical lesson is simple: the wording you use, the conduct of the parties, and any conditions attached to the deal can all affect whether you are already in a contract.

Check whether the parties intended to be legally bound straight away, or only after a formal agreement is signed.
Look closely at phrases such as “subject to contract”, “subject to board approval”, or “subject to due diligence”.
Confirm whether all essential terms are settled, including price, scope, timing, termination rights, and any key conditions.
Review what happened after the negotiations, including payments, performance, purchase orders, or other conduct suggesting the deal had started.
Make sure your heads of agreement, term sheet, email summary, or letter of intent clearly says what is binding and what is not.

What Master V Cameron Means For New Zealand Businesses

The central point is that a business can be legally bound even if it expects a fuller document to be signed later. The opposite can also be true, a signed document may record agreed points but still not create a binding contract if the parties intended to wait for a formal agreement.

Master v Cameron is an Australian case, but it is often discussed across common law contract analysis because it offers a useful framework for understanding intention and conditional agreements. In New Zealand, courts also look closely at objective intention, the words used, the commercial setting, and whether the essential terms are sufficiently certain.

The classic categories in plain English

The case is famous because it identifies common situations where parties have agreed terms but still plan to sign a formal contract later. In practical business language, those situations are usually:

The parties have reached a final deal and intend to be bound immediately, while expecting the formal contract to simply restate the deal more fully.
The parties have reached a final deal on all essential terms and intend to be bound immediately, but they also expect the formal contract to add extra terms that do not change the core bargain.
The parties do not intend to be bound at all until the formal contract is signed.

Later case law has also recognised that parties can be bound straight away to follow agreed terms, while still expecting a later formal contract to replace or supplement those terms. The exact category matters less than the practical question: what did the parties objectively intend?

Why this matters in day to day business deals

This issue comes up well beyond major M&A transactions. It often appears in ordinary SME situations, especially where people move quickly and record only part of the deal.

Common examples include:

a supplier and customer agreeing pricing and volume by email, then planning to “paper it up” later
a software provider issuing an order form before the full services agreement is settled
a founder signing a heads of agreement for investment or sale of shares
a business agreeing commercial lease terms with a landlord before formal lease documents are prepared
a manufacturer committing capacity after receiving a signed term sheet
a distributor relying on verbal exclusivity promises before a written agreement is finalised

In each case, the business question is the same. Can one party walk away, or has a binding commitment already been made?

What New Zealand courts usually look at

New Zealand contract law focuses on objective intention. That means the court is less interested in what one person privately thought and more interested in what a reasonable person would understand from the words and conduct of both parties.

Before you sign a contract, or before you assume no contract exists, the key factors usually include:

the exact wording used in the document, emails, messages, and meeting notes
whether the document says it is binding, non binding, or subject to conditions
whether all essential terms are agreed
whether anything important is still open for negotiation
whether one party has started performing the deal
whether money has changed hands, including deposits or mobilisation costs
whether the parties acted as though the agreement was already in effect

This is where founders often get caught. A short document may feel informal, but if the essentials are there and the conduct points to commitment, the law may treat it as binding.

Conditional contracts are still contracts in some cases

A contract can be binding even when it includes conditions. A deal that is “subject to finance”, “subject to due diligence”, or “subject to landlord consent” is not automatically non binding. The real question is whether the parties intended to enter a contract now, with obligations that depend on those conditions being met, or whether they intended no contract at all until the condition was satisfied.

That distinction matters commercially. If your agreement is already binding but conditional, you may still owe duties such as acting in good faith toward satisfaction of the condition, not preventing the condition from being met, or complying with interim obligations stated in the document.

Legal Issues To Check Before You Sign

The safest approach is to say clearly whether you are binding now, binding only in part, or not binding until a later step happens. If the document is silent or inconsistent, the argument gets much harder and more expensive.

1. Intention to create legal relations

Your document should make the parties’ intention unmistakable. If you want immediate legal effect, say that. If you want no binding obligations until a formal agreement is signed, say that too.

Useful issues to settle include:

whether the whole document is legally binding
whether only certain clauses are binding, such as confidentiality, exclusivity, costs, or governing law
whether signature of a later long form agreement is a condition to any binding deal
whether board, investor, lender, or landlord approval is required

Vague wording causes trouble. Phrases like “agreement in principle” or “we intend to enter into a contract” may not give a clear answer on their own.

2. Essential terms

A contract is harder to enforce if key terms are missing or too uncertain. Before you sign, check whether the core commercial bargain is actually complete.

Depending on the deal, essential terms might include:

what is being supplied, sold, licensed, leased, or delivered
price, payment timing, and adjustment mechanisms
term length, renewal, and milestones
service levels or performance standards
exclusivity or territory
risk allocation, including indemnities, liability caps, insurance obligations, and other liability clauses
termination rights and what happens on exit

If these matters are still genuinely open, that may point away from a concluded contract. But if the missing points are minor and the core deal is settled, a business may still find itself bound.

3. Conditions and approval clauses

Conditions can either delay performance under a binding contract or delay the very existence of a contract. You need the document to spell out which one applies.

Before you accept the provider’s standard terms or sign a term sheet, check:

what the condition is
who benefits from it
when it must be satisfied or waived
whether the parties must use reasonable efforts to satisfy it
what happens if it is not met
whether one party can walk away at discretion, or only on stated grounds

For example, “subject to due diligence” can mean very different things. If the buyer alone decides whether it is satisfied, the clause may operate very differently from a clause requiring objective concerns about specified issues.

4. “Subject to contract” and similar labels

The words “subject to contract” are helpful, but they are not magic. They usually suggest no binding contract exists yet, but context still matters.

If the rest of the communications, conduct, and document point strongly toward an immediate commitment, the label may not end the argument. This is especially risky where a business starts performing before the formal contract is signed.

Before you rely on a label alone, check whether the document also includes conflicting signals, such as:

language saying the parties “agree” or “must” do certain things now
payment obligations that start immediately
delivery dates already triggered
exclusive dealing obligations during the negotiation period
termination language that assumes a contract already exists

5. Conduct after the document is signed

What your business does after signing can strengthen or undermine your position. Courts often look at conduct to interpret whether the parties treated the arrangement as a concluded bargain.

Examples of risky conduct include:

ordering stock before the formal contract is complete
paying a deposit without clarifying whether it is refundable
starting work before scope, variations, and payment mechanics are settled
moving into premises before the lease or agreement for lease is finalised
announcing the deal externally as complete

Before you spend money on setup or begin performance, make sure the legal status of the arrangement matches the commercial reality you are acting on.

6. Industry specific pressure points

The Master v Cameron issue can look different depending on the transaction. In a technology services deal, scope creep and milestone ambiguity can make it unclear whether a final agreement exists. In a supply agreement, quantity commitments and delivery terms may be the sticking point. In a commercial lease, rent may be agreed but fit-out, commencement, incentives, or landlord works may still be unresolved.

The more operationally significant the missing terms are, the more careful you need to be before you sign.

Common Mistakes With Master V Cameron

The biggest mistake is assuming a document is either fully binding or fully non binding just because it is short, informal, or described as a heads of agreement. The law is more nuanced than that.

Treating heads of agreement as harmless

Founders often treat a heads of agreement, memorandum of understanding, or term sheet as a commercial placeholder. Sometimes that is right. Sometimes it is very wrong.

The name of the document does not decide its legal effect. A one page heads of agreement can be binding. A signed “agreement” may still be non binding if the language makes that clear. What matters is substance, not the label.

Leaving binding and non binding clauses mixed together

Many preliminary documents try to do both jobs at once. They say the main deal terms are subject to contract, but confidentiality, exclusivity, breakup costs, or governing law are intended to bind immediately.

That can work, but only if drafted clearly. If the document does not separate the binding clauses from the non binding ones, disputes can arise over whether all of it was meant to take effect straight away.

Relying on verbal assurances

A common founder moment looks like this: the written term sheet says one thing, but the other party says not to worry because “we’re definitely doing the deal” or “that condition is just standard”. If the wording is unclear, those assurances may not save you.

Before you rely on a verbal promise, get the important points recorded properly. Oral side conversations create exactly the sort of uncertainty that leads to Master v Cameron disputes.

Starting performance too early

Commercial pressure pushes people to get moving. A customer wants delivery. A landlord wants fit-out works started. A supplier wants a production slot confirmed. But performance can be used as evidence that both sides considered the deal binding.

If you need to proceed before the long form agreement is complete, put an interim arrangement in place that says:

what work may begin
what fees or costs are payable
whether either party can stop
who owns work product, stock, or materials if the main deal never closes
what happens to confidential information and data, including any privacy notice or data protection requirements

Using conditions that are too vague

“Subject to satisfactory due diligence” sounds commercial, but it can be a recipe for argument if “satisfactory” is undefined. The same problem arises with “subject to approvals” where no one says which approvals, by when, and on what standard.

Better drafting usually identifies:

the exact condition
the deadline
the evidence needed to show satisfaction
whether a party may waive it
the consequences if it is not met

Forgetting the cost of being wrong

The practical risk is not just losing the deal. A dispute about whether an agreement was binding can trigger claims for damages, wasted costs, deposits, lost profits, or injunction style pressure in the middle of a time sensitive transaction.

Even if the business eventually wins, the uncertainty can delay funding, stock orders, staffing, or premises commitments. That is why clarity before you sign is usually cheaper than arguing later.

FAQs

Is a heads of agreement binding in New Zealand?

Sometimes, yes. A heads of agreement can be binding if the wording, essential terms, and surrounding conduct show the parties intended legal commitment. The title alone does not decide the issue.

Does “subject to contract” always mean there is no contract?

No. It often points in that direction, but courts look at the whole context. If the parties act as though the deal is already on foot, or the document contains immediate obligations, the position may be less clear.

Can a contract be binding even if it has conditions?

Yes. A contract can be binding but conditional. The key question is whether the parties intended to make a contract now, with performance depending on the condition, or intended no contract until the condition was met.

What if we agreed everything important by email?

Email exchanges can create a binding contract if they show offer, acceptance, intention, and enough certainty on essential terms. This is why founders should be careful with “agreed”, “confirmed”, or “we accept” language before a formal document is ready.

What should a business do before signing a term sheet?

Make sure the document clearly states what is binding, what is not, what conditions apply, when they must be met, and whether any work or payments can start before the final agreement is signed.

Key Takeaways

Master v cameron is about whether parties intended to be legally bound now, later, or only in part when a formal contract is still to come.
For New Zealand businesses, the outcome depends on the wording used, whether essential terms are settled, any conditions attached to the deal, and what the parties do after the document is signed.
Labels such as heads of agreement, memorandum of understanding, or “subject to contract” help, but they do not automatically decide whether a binding agreement exists.
Conditional agreements can still be contracts, so approval, finance, due diligence, and landlord consent clauses need careful drafting.
The safest course before you sign is to state clearly whether the document is fully binding, partly binding, or non binding until a later formal agreement is executed.
If performance needs to start early, use an interim document that deals with scope, payment, confidentiality, ownership, and exit if the main deal never completes.

If you want help with heads of agreement, conditional contract wording, term sheets, contract review, contract drafting, or binding and non binding clauses, you can reach us on 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.

Master V Cameron: Conditional Contracts and Binding Agreements