A counter-offer you can’t refuse: NSWCA decides whether a contract was formed pursuant to a Supplier

The recent decision of the NSWCA in C & V Engineering Pty Ltd v Hamilton & Marino Builders Pty Ltd [2020] NSWCA 103 considered whether the terms of a contract which was the subject of negotiations required the supply of materials at a price per unit ‘as required‘ or at a fixed sum, where the quantity of units required was unknown at the time of contracting.

Hamilton and Marino Builders Pty Ltd (Builder) was engaged to construct 55 units in Mascot, Sydney which required the provision and installation of metal joiners to secure pre-cast concrete panels. The Builder requested C & V Engineering Pty Ltd (Supplier) to provide a quotation for the supply and installation of metal joiners, at a rate per metal joiner.

On 10 April 2015, the Supplier quoted for the supply of 1000 metal joiners at a price of $44 for the supply and $128 for the installation of each metal joiner. In the dispute that arose between the parties, the Supplier argued that this quotation amounted to an offer made to the Builder in the nature of a “lump sum contract”. On 13 April 2015, the Builder agreed to the quoted rate of each metal joiner and instructed the Supplier to proceed with the supply and installation ‘as required‘. At this point, the Builder made no mention of the precise number of metal joiners required and maintained that it was unable to determine the quantity until pre-cast drawings were obtained. This was in line with earlier communications where neither party knew the precise number of metal joiners that would be required for the works, although the total number was estimated at between 881 to 1020. The Supplier responded to the Builder’s instruction by email on 13 April 2015 stating that it would get the work underway.

The Supplier argued that the communication from the Builder on 13 April 2015 amounted to acceptance of the Supplier’s original offer and quotation. Alternately, the Builder claimed that the email of 13 April amounted to a counter-offer to purchase an undefined number of joiners at the price quoted by the Supplier.

Following receipt of the pre-cast drawings, the Builder emailed the Supplier on 15 May 2015 ordering the supply and installation of 150 metal joiners for which it would pay the Supplier $5,380 (being the total sum of the quoted rate for 150 units) and requested the Supplier to resubmit its 10 April 2015 quotation for the revised quantity. The Supplier refused to resubmit its quotation and subsequently commenced proceedings against the Builder for $101,708.80 on the basis that the Builder had failed to make payment for the supply and installation of 1000 metal joiners and had repudiated the agreement.

The Builder was successful at first instance, and the Supplier appealed to the NSWCA. The issue on appeal was whether the primary judge had erred in finding that the agreement was not for a fixed volume of metal joiners.

White JA of the NSWCA (with whom the other judges agreed) dismissed the Supplier’s appeal, finding that the Builder’s email to the Supplier dated 13 April 2015 was a counter-offer for payment of the supply and installation of metal joiners ‘as required‘ at the agreed rates, which the Supplier had accepted in its response on 13 April 2015.

White JA provided the following reasons for his decision:

•   the Builder’s email dated 13 April 2015 did not amount to an acceptance of the Supplier’s offer to supply and install 1000 metal joiners, as the email had to be read in the context of both parties working on an estimate;
•   the agreement had to be construed on the basis of what a reasonable business person would have taken the plain meaning of the term ‘as required‘ to mean;
•   the context of the agreement made clear that ‘as required‘ referred to the Builder’s need for an undetermined number of metal joiners that had not yet been finalised and communicated; and
•   in this case, the Supplier’s profit in respect of each component was independent of the number of actual metal joiners supplied and installed as there was no total agreed sum for the supply and installation.

Where a contract provides for the supply of material in an undetermined quantity, care should be taken to ensure the contract terms accurately reflect the parties’ intentions.

The full decision can be found here.