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Contract Law News August 2011

Courts review why it is critical to include all the agreed terms in a contract

The recent case of Keays v JP Morgan Administrative Services Australia Limited emphasises the importance of including all agreed terms and conditions either party intends to rely upon in the contract document. While the contract document is not wholly determinative of the bargain struck between the parties, the decision in the Federal Court of Australia illustrates the importance of contract documents in contrast to oral evidence. 

In this case, Mr Keays was an executive employed by JP Morgan in 2005 after previous employment at Deutsche Bank. Mr Keays was made redundant by JP Morgan in 2008. Mr Keays claimed JP Morgan had breached the employment contract and that their conduct in forming the contract had been misleading or deceptive under the Trade Practices Act 1974. Mr Keays claimed he would have remained at JP Morgan until retirement had he not been made redundant and sought $6 million damages. At this point it is important to note that in investment banks there is a division in the operation of the company between private and public operations though some cross-over at times occurs which is described as ‘wall-crossing’ . When Mr Keays was approached by JP Morgan he requested a written job description of the role. After much deliberation Mr Keays was provided with a role described as Head of Corporate Derivative Marketing. This implied a public-side position in the company and the possibility of wall-crossing as required. Mr Keays worked at JP Morgan in the public-side role until February 2008 when his reporting line changed and when Mr Keays was moved to a  private-side role.

Mr Keays resisted this change, preferring to remain in his current position because of the reduction in bonuses and status despite no loss to actual earning capacity. Mr. Keays was not persuaded to take up the new role on offer and was made redundant. 

Mr Keays claimed JP Morgan had made misleading and deceptive representations to him when negotiating the contract that

  • His role at JP Morgan would be a promotion from his role at Deutsche Bank
  • Would suffer no financial loss as a result of accepting the role at JP Morgan as he would be compensated for loss of Deutsche Stock entitlements by cash payment or issue of equivalent JP Morgan stock interests
  • Mr Keays’ role/responsibilities at JP Morgan would remain as set out in the job description provided
  • The role at JP Morgan would be an ongoing and long-term role until Mr Keays chose to retire.

Mr Keays also contended that JP Morgan had always intended to transfer him to the private side despite the written job description and had kept this information from him. This was rejected by the Court who found nothing to suggest Mr Keays had been misled to believe his terms of employment were any different than those outlined in his contract of employment. His Honour placed importance on the signed contract document to outline the terms mutually agreed upon by the parties to define the rights and obligations of the parties.

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