It related to the breach of a business development agreement between the two companies, and the resulting attempts of Burger King to terminate the contract.

The case is significant in Australian contract law as one of the most expansive characterisations yet of an implied term of good faith, particularly as it operates to limit parties exercising their contractual rights.

[2] Several more disputes arose between the parties in the early 1990s, revolving around Burger King's desire to enter the Australian market directly.

Hungry Jack's argued that its failure to comply with clause 2.1 did not give Burger King a right to terminate the agreement.

[1] Hungry Jack's argued that this meant Burger King would not have a right to terminate until the grace period expired, or else it would lose its opportunity to remedy the failure to comply.

[1] Hungry Jack's also argued that the Development Agreement included an implied term of good faith (that is, that the parties must act in good faith when exercising their rights under the contract), and that Burger King had breached this term by denying the financial and operating approval to new restaurants, leading to Hungry Jack's failing to meet the minimum stores requirement.

[1] The court disagreed with Burger King's broad reading of the consequences of a breach of clause 2.1, concluding that such an interpretation would mean that Hungry Jack's could not take advantage of the grace period, and that a narrower view should be preferred.

[4] In this case, the court said that the term was reasonable and necessary, since otherwise Burger King would be able to deny approval for new stores "capriciously, or with the sole intent of engineering a default of the Development Agreement".

[1] The court held that Burger King's actions in denying financial and operating approval for new restaurants were not the legitimate pursuit of interests under the Development Agreement, but were rather efforts to harm or hinder Hungry Jack's.

[7] Horrigan identified the case as one of a number of cases in which New South Wales courts were leading the way in terms of good faith in Australian contract law, while noting that the idea has yet to catch on extensively in other jurisdictions, identifying good faith as one of the important unresolved areas of "fairness-based business regulation".

Adrian Baron has argued that the implication of a term of good faith runs contrary to basic principles of contract law, because it tends to disregard the reality that (at least in commercial contexts) parties to a contract "pursue their own commercial interests, and enter into terms that reflect the risks and benefits that each party is prepared to bear".