The council's maintenance manager, Lilly, had commenced negotiations to find a new contract cleaner for the council premises. She interviewed several interested parties, but negotiations stalled over the contract price and the length of notice for termination. Finally, Lilly came to an agreement with the general manager of Lux Cleaners Pty Ltd (Lux) and typed up some 'heads of agreement' on her laptop. As they shook hands over the deal in her office, Lilly said "I'll give this to our lawyer to write up the paperwork".

Lilly was later instructed by the council's chief executive officer Ned not to proceed with the contract because several members of the council's Board had serious misgivings about the Lux general manager's poor reputation as a past director of several failed companies. Lilly advised Lux that the cleaning contract would not proceed to signing and, when threatened with legal action, she told Lux's general manager "We never put the contract into writing. Our talk was subject to contract."

Lily seeks your advice

Find out the main issue and apply relevant Australian contract laws.