Masters v Cameron Turns 72 This Year. People Still Get Caught by It
Summary
The law on when a negotiation becomes binding has been settled since 1954, when the High Court decided Masters v Cameron. So it was surprising to see the Supreme Court of Victoria, in Papanastassis v Papanastassis [2026] VSC 302, hold a party to an $8.5 million settlement deed they had never signed. Nothing about the law was new. The argument was about which Masters v Cameron category the parties had landed in, and the answer cost the losing side the deal. This article sets out the categories, explains which one the case fell into and how to stay free to walk away until you sign.
Key Takeaways
- Whether a half-finished negotiation binds you is judged objectively: not what you privately intended, but what a reasonable person in the other party's position would have understood from your words and conduct.
- Masters v Cameron sorts these situations into categories. Only the third, where the parties do not intend to be bound at all until a formal document is executed, leaves you free to walk away before signing. The other three bind you the moment agreement is reached.
- The rule tells you the categories but not which one you are in. That turns on your specific facts and the exact words used in the back and forth, and that is where people come unstuck.
- To stay in the third category, say in writing, early and more than once, that you are not bound until the formal document is signed by all parties. The words 'subject to contract' help but are not bulletproof.
- The label sets your intention, but your conduct has to match it. Mark a deal 'subject to contract' then carry on as though it is done, and a court can hold you to it regardless of the label.
The law on when a negotiation becomes binding has been settled since 1954. That was the year the High Court decided Masters v Cameron (1954) 91 CLR 353, the case every law student learns and every commercial lawyer is taken to know cold. It sorts half-finished deals into categories and tells you which ones tie you down and which ones let you walk.
So it was a little surprising to see a fresh decision turn on exactly that question. In Papanastassis v Papanastassis [2026] VSC 302, the Supreme Court of Victoria held a party to an $8.5 million settlement deed that they had never signed. Nothing about the law was new. The argument was about which Masters v Cameron category the parties had landed in. The answer cost the losing side the deal.
The Test
Whether a half-finished negotiation binds you is judged objectively. The question is not what you privately intended. It is what a reasonable person in the other party's position would have understood from your words and your conduct.
Where parties agree terms but plan to record them in a formal document later, Masters v Cameron sorts the situation into categories. There were three. Courts have since recognised a fourth. They are set out below, with the binding outcome and an everyday example of each.
| Category | The legal position | Bound before signing? | Everyday example |
|---|---|---|---|
| One | The parties have agreed every term and intend to be bound now. They plan to restate the deal in a formal document, but only to record it more fully or precisely. | Yes | You settle the sale of a business on agreed terms, intending the written contract to simply record what you have agreed. |
| Two | The parties have agreed every term and intend to be bound now, but have agreed that one or more terms will not be performed until the formal document is executed. | Yes | The same deal, but you agree that no money moves until the contract is signed. |
| Three | The parties do not intend to be bound at all until a formal document is prepared and executed. | No | You exchange heads of terms marked 'subject to contract', intending nothing to bind anyone until the formal agreement is signed. |
| Four | The parties intend to be bound now by the terms agreed, while expecting to make a further contract that replaces the first and adds terms by consent. | Yes | You agree the core terms and begin performing, expecting to sign a longer contract later that fills in the detail. |
Only the third category leaves you free to walk away before the formal document is signed. The other three bind you the moment agreement is reached.
Which Category This Case Fell Into
The defendants argued they were in the third category. Their position was that the mediation agreement said nothing was binding until the deed was reduced to writing and signed, so until they signed, they were free.
The Court put them in the first category instead. By the time the plaintiffs signed the deed and sent it back, the parties objectively intended to be bound by its terms. The signing by the defendants was a formality still to come, not the thing that created the deal.
A few facts drove that. The defendants' solicitor had dug in on the last open issue, the timing of payment, then attached a deed that reflected that fixed position. He said his clients were meeting to sign 'that Deed'. The plaintiffs' solicitor had already written that you cannot keep negotiating after agreement has been reached. Nobody on the other side pushed back to say they would only be bound once everyone signed. The mediation agreement did not rescue them either, partly because two of the people who signed the deed were never parties to that agreement.
Read against the categories, that is a first-category case. Agreement reached, signing to follow.
The Point
This is not a new rule. Masters v Cameron is older than most people reading this. It is taken to be known. The trouble is that the rule only tells you the categories. It does not tell you which one you are in. That turns on your specific facts and the exact words used in the back and forth. That is where people come unstuck. The defendants here were not undone by some obscure principle. They were undone by their own correspondence.
If you want to stay in the third category, you have to build it and then hold it. Say in writing, early and more than once, that you are not bound until the formal document is signed by all parties. The words 'subject to contract' help, but they are not bulletproof. The label sets your intention. Your conduct has to match it. In Stellard Pty Ltd v North Queensland Fuel Pty Ltd [2015] QSC 119, the Supreme Court of Queensland held parties to a deal struck over email even though the negotiations were said to be subject to a signed contract, because the emails and the surrounding circumstances showed they were content to be bound straight away. Mark a deal 'subject to contract' then carry on as though it is done, and a court can hold you to it regardless of the label.
If you are negotiating something that matters and you are not sure which category you are in, that is the moment to take advice, before the other side decides for you. If you would like confidential advice on a negotiation, a settlement deed or a dispute over whether a deal is binding, please get in touch or call (07) 4270 8880.
Sources and References
- Case lawMasters v Cameron (1954) 91 CLR 353
- Case lawPapanastassis v Papanastassis [2026] VSC 302
- Case lawStellard Pty Ltd v North Queensland Fuel Pty Ltd [2015] QSC 119
This article is for general information purposes only and does not constitute legal advice and should not be relied on as such. While we take reasonable care to ensure the accuracy of the information provided, we make no representations or warranties as to its completeness, currency or reliability. We accept no liability for any loss or damage arising directly or indirectly from the use of, or reliance on, this website's content. You should always seek professional advice tailored to your specific circumstances before acting on any information in this article. Liability limited by a scheme approved under Professional Standards Legislation.