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Coming to terms with the absence of a formal written contract – the NSW Court of Appeal clarifies relevant contractual principles in C & V Engineering Pty Ltd v Hamilton & Marino Builders Pty Ltd [2020] NSWCA 103 ||| MTECC News 20.13

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The NSW Court of Appeal decision in C & V Engineering Pty Ltd v Hamilton & Marino Builders Pty Ltd [2020] NSWCA 103 illustrates legal principles that will be applied by Courts where parties enter into an informal contractual arrangement following an exchange of emails.

The respondent (builder) was constructing 55 units in Mascot and retained the appellant steel fabricator (subcontractor) to supply steel plates and angles to secure precast concrete panels. No formal contract document was executed, but a number of emails and the conduct of the parties objectively showed that the builder had retained the subcontractor in circumstances where the precise number of plates and angles that would be required for the project was not known or agreed.

The builder later advised the subcontractor that substantially fewer plates and angles than had been envisaged by the parties would be required. The subcontractor responded by asserting that the builder had agreed to purchase the quantity of plates and angles that the subcontractor had quoted on, irrespective of the number actually required for the project. The relationship soured and each party asserted that the other had repudiated the contract.

The trial judge in the NSW District Court dealt with the lack of agreement on a precise quantity of plates and angles by finding (in the absence of a submission by either party) that there was an implied term that each party was obliged to negotiate any variation in price in good faith and to do all that was necessary on its part to enable the other party to have the benefit of the contract [paras 41-42]. The trial judge also found that the subcontractor had repudiated the contract, which repudiation had been accepted by the builder.

The Court of Appeal agreed with the trial judge’s finding in relation to termination and dismissed the appeal, however the Court of Appeal disagreed with the trial judge’s findings as to the date of the formation of the contract and the existence of an implied term. The Court of Appeal noted:

  1. The (critical) question is what the email communications would objectively demonstrate to a reasonable businessperson [para 14] citing Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35]);
  2. Where a party responds to an offer by attempting to vary the offer by adding a new term this constitutes a rejection of the offer and the making of a counteroffer [para 50] citing (Heydon on Contract, Lawbook Co. 2019 at [2.300]); and
  3. The absence of agreement on the quantity of the plates and angles to be supplied did not necessitate the implication of a term because (on a proper construction of the parties’ emails) the builder had made a final counteroffer by offering to pay for “angles/plates as required at the rates set out in the (subcontractor’s) ‘Offer’”, which was accepted the following day [paras 50-1] (Emphasis added).

Andrew Laird

Liability limited by a scheme approved under Professional Standards Legislation

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