From Torque to Tension: When Distributorship Dreams Unwind

What happens when a long-standing distribution relationship morphs into a promise of “forever” — and then collapses under the weight of commercial reality?

That’s the story in Torc Solutions Pty Ltd v Unex Corporation d/b/a Hytorc [2025] FCA 1124, where the Federal Court had to untangle claims of perpetual agreements, economic duress, misleading conduct, and an alleged “termination strategy”.

The Background

Torc Solutions was the Australasian distributor of torque wrenches and industrial tools sold by US entities Torc LLC and Hytorc.

When Torc LLC shut down globally in 2020, Torc Solutions looked to keep its business alive through a home-branded (“private label”) supply deal with Hytorc.

A teleconference between the parties fuelled Torc’s belief that an ongoing “Hytorc Agreement” had been struck, giving them perpetual supply rights on the same terms as their earlier Distributor Agreement.

Later, a formal Branded Product Distribution Agreement (BPDA) was signed. When that deal fell apart over insurance requirements and Hytorc’s decision that the arrangement was no longer viable, Torc alleged that:

• a binding agreement already existed from the teleconference,

• the BPDA was signed under economic duress, and

• Hytorc had engaged in misleading, deceptive, and unconscionable conduct.

The Court’s Findings

Justice Neskovcin dismissed all claims by Torc, finding:

• No perpetual contract – Courts rarely find distributorships to be “forever agreements”. The Distributor Agreement ended when Torc LLC closed.

• No binding teleconference deal – The discussions fell into Masters v Cameron’s third category: “we’ll get something in writing later”. No enforceable contract arose until the BPDA was executed.

• No duress – Telling a counterparty “sign the agreement or we won’t supply” was not unlawful pressure, but part of hard commercial bargaining.

• No misleading or unconscionable conduct – The evidence didn’t support that Hytorc had promised supply it never intended to provide.

Bottom line: application dismissed.

Why It Matters

For brand owners and distributors alike, the lessons are sharp:

• Paper it, or risk it – A teleconference transcript doesn’t replace a signed agreement.

• “Forever” is a fantasy – Unless clearly expressed, distributorships and licences will be terminable.

• Economic duress is hard to prove – Commercial pressure, even bluntly applied, rarely crosses the line.

• Don’t over-rely on private label promises – A failed transition can leave the distributor exposed.

This case is a reminder that distribution and licensing deals live and die by what’s actually written down.

Not So Fast, Wingman: Why the Federal Court Said No to a “Teaming Agreement”

Cirrus Real Time Processing Systems Pty Ltd v Jet Aviation Australia Pty Ltd (formerly Hawker Pacific Pty Ltd) [2025] FCAFC 85

When is a deal not a deal? When it’s a teaming arrangement built on a handshake, a hopeful email chain, and a quotation that looks more like a wishlist than a contract.

The Full Court has dismissed an appeal by software supplier Cirrus, who claimed that Jet Aviation (formerly Hawker Pacific) was contractually bound to subcontract Cirrus if it won a lucrative New Zealand Defence Force (NZDF) tender. It didn’t help that the “agreement” was cloaked in contingency, caveats, and future negotiation.

Here’s what happened — and what it means for anyone navigating teaming deals or tender arrangements in the tech or defence space.

🛩 The Backstory: Simulations, Sensors and Soft Promises

In 2016, Jet Aviation was preparing a tender response to the NZDF to provide airborne training systems. It needed software to simulate and display mission data — and turned to Cirrus, developer of a system called ACOTS.

Over several years, Cirrus and Jet Aviation had exchanged emails, draft scopes of work, and multiple versions of quotes. In the final stages of the bid, Cirrus provided a detailed “Version 4 Quotation” (V4Q) and authorised Jet to incorporate it into its tender — but only on condition that Jet would subcontract Cirrus if it won.

Cirrus later alleged this exchange created a binding “teaming agreement”, the breach of which led to it being left out of the deal when Jet secured the head contract and went with a different software supplier.

📜 The Legal Questions

The central issues were:

1. Did the parties intend to create legal relations on 21 December 2016?

2. Were the terms of the alleged agreement sufficiently certain?

3. Did Jet Aviation breach the agreement by not subcontracting Cirrus?

🔍 The Full Court’s Answer: No Contract, No Breach

The Full Court upheld the trial judge’s decision. While acknowledging that the parties had clearly hoped to work together, that wasn’t enough.

Key takeaways from the reasoning:

🔹 No present intention to be bound

The language of the emails and the quotation made clear that:

• A future subcontract was still subject to negotiation;

• Critical commercial terms were open (including price and IP);

• Even the “trigger” for the obligation to engage Cirrus was inconsistently worded across documents.

This was not a present commitment, but a proposal contingent on future events — and possibly further agreement.

🔹 The agreement lacked certainty

V4Q wasn’t an agreed contract. It was a complex, promotional-style document with open issues like milestones, warranties, and a caveat that Cirrus expected Jet to absorb risks of any “flowdown” from the prime contract. It was a bid document — not a signed deal.

🔹 Conduct didn’t show mutual commitment

Even after the December 2016 exchange, the parties continued negotiating the subcontract — including key terms like IP and pricing — without resolution. That showed they didn’t believe they were already contractually bound.

⚖️ Legal Takeaways

This decision is a case study in the limits of “pre-contract” deals:

• Clear commitment is key: Courts will not infer binding intent from businesslike conduct alone — especially where documents are provisional or refer to future agreement.

• Teaming agreements must be tight: If you want enforceability, avoid phrases like “we will negotiate a subcontract” and instead say “we agree to subcontract on the attached terms if X occurs”.

• Beware of ‘version creep’: The Court noted inconsistencies in the key clause across iterations of the quote and correspondence. Even small changes can defeat claims of consensus.

• No shortcut around uncertainty: Courts will not salvage an agreement just because it would be commercially desirable to do so.

💡 For IP and Tech Suppliers: What to Do Differently

If you’re contributing IP or proprietary software to a bid:

• Use a properly drafted Teaming or Binding Cooperation Agreement, separate from the quotation.

• Lock in key commercial terms and make them conditional only on defined trigger events (e.g. award of head contract).

• Ensure your licensing and IP terms are clearly stated and agreed.

• Avoid relying solely on emails or proposal documents with promotional or ambiguous language.

And crucially — don’t assume that authorising the use of your confidential material in a tender creates leverage. The law demands more than that.

Contract First, Practice Later? Why You’ve Got It Backwards

When a new business relationship begins, it’s tempting to grab a contract off the shelf, tweak a few names and dates, and call it a day. After all, the “real work” is about to start — the paperwork just needs to keep up. Right?

Or maybe you take a contract you’ve seen someone else use, and decide to change your business practices to comply with their terms. That makes sense, doesn’t it?

No — not quite.

A contract shouldn’t trail behind the deal like an afterthought. But it also shouldn’t reshape the deal without giving that deal any thought. A well-drafted contract should define and support the arrangement — tailored to how the service will actually be delivered, who will deliver it, how value will be created, and how risk will be managed.

Otherwise, you risk ending up with a document that’s legally tidy but practically unworkable — or worse, a source of confusion and liability down the track.

Here’s why the contract should follow the practice, not force it.

🎯 1. The Contract Should Reflect the Practice — Not Dictate It

Contract drafting isn’t an exercise in creative writing. It’s a legal mirror held up to your actual business model.

If the agreement assumes a formal signoff process but you operate with agile, iterative sprints — you’re going to breach your own contract just by doing business as usual.

If the contract says “transfer of IP on full payment” but payment is milestone-based and you’ve already handed over the work — you’ve just created ambiguity around ownership.

Rule of thumb: don’t draft a contract until you understand exactly how the service will be performed — including team structure, communication cadence, approvals, deliverables, timing and client involvement.

🧱 2. Contracts Are Guardrails, Not Strangleholds

A good contract provides structure, accountability and fallback positions — but it should never get in the way of the commercial reality.

That means building in flexibility where needed:

• SaaS development that permits user testing before signoff

• Design services that include concept revisions without resetting timelines

• Joint R&D where IP rights reflect actual contribution, not just billing rates

When the contract forces an artificial or overly rigid process, it can delay projects, sour relationships and ultimately undermine the client’s goals.

⚠️ 3. Misalignment Can Lead to Legal and Commercial Risk

If your practice and your paperwork aren’t aligned, it can backfire — fast:

• You might lose leverage in a dispute because your contractual obligations were never realistically achievable.

• You could accidentally license more than intended, or assign rights prematurely.

• Your service model may breach regulatory obligations, especially around data handling, privacy, or consumer guarantees.

And in litigation, courts often look past the black-letter terms to how the parties actually behaved. A contract that doesn’t match conduct can be more of a liability than a safeguard.

🛠️ 4. Tips for Getting it Right

• Start with a reality check. Understand your own processes — or your supplier’s — before putting pen to paper.

• Workshop the workflow. Map out the actual steps of delivery and make sure your contract reflects them.

• Speak human. Avoid boilerplate that doesn’t fit your practice. Contracts should be clear, not cryptic.

• Review regularly. As your service model evolves, your contracts should too.

🚫 Don’t Retrofit. Design Fit-For-Purpose.

The best contracts aren’t theoretical constructs — they’re practical frameworks. They don’t try to reinvent how you work. They protect how you actually do business.

So don’t write the contract first and force the practice to conform.

Understand the practice. Then draft the contract to match.