Confused frustrated man reading letter in cafe, receiving bad news

Beware: Finalise the terms of your Construction Contracts

Ben Johnson ||

In a recent decision of C & V Engineering Pty Ltd v Hamilton & Marino Builders Pty Ltd [2020] NSWCA 103, the New South Wales Court of Appeal has illustrated that it may construe a commercial contract by reference to its “commercial purpose”. The decision has important and far reaching implications for those involved in the Building & Construction industry and is a lesson on when a Court will stop you from recovering payment where there is no final agreement on the terms of a contract.    

Background

Hamilton and Marino Builders Pty Ltd (Builder) was the Builder contracted to develop a unit complex in Mascot (Project). The Builder reached out to C & V Engineering Pty Ltd (Supplier), requesting the provision of metal joiners for the Project. All negotiations between the parties occurred by way of email correspondence.

During negotiations, the parties acknowledged that there was uncertainty as to the specific amount of metal joiners required for the project. Despite this, the Supplier provided the Builder a quote for the supply of 1000 metal joiners for a price of $44 per unit and asserted that it was a lump sum contract. After receiving the quotation, the Builder instructed the Supplier to proceed with the supply “as required”.

As the Project progressed, the Builder was able to determine that only 150 of the metal joiners would be required. The Builder notified the Supplier as soon as this information became available. In response, the Supplier asserted that the Builder had accepted a formal offer of 1000 units and was liable for the full amount of $44,000 ($44 x 1000).

Court proceedings were commenced to determine the proper construction of the contract. The Builder succeeded at first instance in asserting that it was only bound to accept the rates provided by the Supplier rather than for the sum of $44,000. The Supplier filed an appeal.

Businesslike Interpretation

The majority of the Court of Appeal dismissed the appeal, finding that the Builder’s email reply constituted a counteroffer for metal joiners “as required”, on the rates agreed in the reply email.

The Court highlighted that the contract was to be interpreted based on what a “reasonable businessperson”, in the circumstances, would have understood of the term “as required”. In making this assessment, the Court gave considerable weight to the fact that during negotiations, both parties were uncertain on how many metal joiners would be required. This was exemplified by the fact that the Supplier’s profit margin was not contingent on 1000 units being ordered.

Ultimately, it was concluded that the Builder had only accepted the rates stipulated in the quotation and not the number of units contained therein.

Important Takeaways

This case provides a useful reminder that parties should ensure that contracts reflect the parties’ commercial intentions, and the importance of parties to a contract being on the ‘same page’ in relation to their intentions about what is being offered and accepted.

If you require any assistance in relation to your contracts or to clarify any uncertainty in relation to a construction contract, please do not hesitate to contact a lawyer in Coleman Greig’s Building & Construction team, who would be more than happy to assist you.

Share:

Send an enquiry

Any personal information you provide is collected pursuant to our Privacy Policy.

Categories
Archives
Author

More posts

Employers should exercise caution when dismissing during probationary period

Can you dismiss an employee during the probationary period? Yes, but a recent case is a lesson in caution. The recent Federal Court decision of ‘Dabboussy v Australian Federation of Islamic Councils’ is a warning to employers to consider the importance of timing if dismissing an employee during probation.

The business impacts from the Government’s new cyber security laws

Cybercrime ‘is a multibillion-dollar industry that threatens the wellbeing and security of every Australian’. In an effort to combat the impact on businesses and individuals, the Australian Government has introduced cyber security legislative reforms into the Parliament.

A guide to intrafamily adoption

Adoption is the process where a parent’s legal rights for their child are transferred to another person. The formal adoption of a stepchild or close relative is known as intrafamily adoption.

Passenger movement and visa data-matching by the ATO

Heading overseas for work or a holiday? Taxation issues, including tax residency, should be on front of mind when departing from or arriving to Australia. Why? Because the Australian Taxation Office (ATO) can follow your footprints and, if you’re not careful, spring unexpected taxes on you.

Is it really necessary for my executor to have so many powers?

People often question why the executor of their estate needs to have so many powers. Simply put – if your executor isn’t given any additional powers by your Will, then they are limited to what is set out in the Trustee Act. One area that this can lead to issues in, is the family home – particularly if beneficiaries aren’t in agreement.

Essential terms of a commercial lease

A commercial lease is a contract that details the rights and obligations of a tenant and landlord. So, what are the necessary terms of a commercial lease?

Responding to data breaches

In the final part of our four-part series on your business’ responsibilities related to cyber attacks and data breaches, Special Counsel John Bennett how businesses should respond to data breaches, including application and requirements of the Notifiable Data Breaches Scheme.

Security of personal information

Part 3 of a four-part series on your business’ responsibilities related to cyber attacks and data breaches where Special Counsel, John Bennett provides an overview of some court decisions and proceedings where ‘security’ of personal information has come into issue.

Parental alienation in Family Law

The concept, Parental Alienation Syndrome, was initially brought about by American psychiatrist Richard Gardner in 1985. The term parental alienation is used to describe a situation where one parent is involved in psychologically manipulating their child to turn against the other parent.

Are you liable for labour hire workers if they are injured?

Many employers (host employers) engage employees of labour hire companies, particularly in the building and construction, hospitality and manufacturing industries. However, what happens when one of these employees gets injured at the host employer’s work site? Who is liable for the injuries?

© 2024 Coleman Greig Lawyers  |  Sitemap  |  Liability limited by a scheme approved under Professional Standards Legislation. ABN 73 125 176 230