KEYWORDS: CONTRACTUAL RECORDS

KEY TAKEAWAY

The recent Supreme Court decision in Diploma Construction (WA) Pty Ltd v Best Bar Pty Ltd [No 2] [2015] WASC 230 serves as a useful reminder of the importance of good record keeping, especially as to the terms of your contract!

The facts

The dispute was a traditional "war of forms" concerning the supply of reinforcing bars by the defendant (Best Bar) for a number of projects being undertaken by the plaintiff (Diploma) in 2007 and 2008.

Diploma sued Best Bar seeking compensation for overpayments it alleged it had made on three projects undertaken in 2007. By counterclaim, Best Bar claimed damages associated with alleged underpayments for the supply of reinforcing bars on three projects undertaken in 2008. The core of the dispute was a fundamental disagreement as to the terms on which they had agreed to do business.

The Court traced the parties' relationship to 15 March 2007, when Best Bar provided Diploma an estimate associated with a specific order of reinforcing bar as well as an application for credit form. The evidence was that Diploma never signed the application for credit form and expressly rejected some of the terms. However, that did not stop Diploma from ordering, or Best Bar from supplying, reinforcing bars. As a matter of fact, the court found that there was a general pattern for ordering reinforcing bar adopted by the parties where Best Bar would provide an estimate on a form which included a term that "this quotation is subject to Best Bar terms and conditions" 114

Best Bar alleged that the terms and conditions were those set out in the Application for Credit which, relevantly, included a term stating

"No subsequent correspondence or document, including any order by the Purchaser will modify or vary these Terms and Conditions unless such variation is expressly accepted or acknowledged in writing by Supplier or otherwise permitted pursuant to the Terms and Conditions" 115

Following receipt of an estimate, Diploma would place an order using its "standard" purchase order. There were two similar (but different) standard forms in evidence but the Court was not presented with evidence about why one was used instead of the other.116 In each case the purchase order contained a term which sought to oust any other terms put forward by Best Bar, namely:

"No terms stated by the Vendors in making a quotation or accepting or acknowledging this Order which differ from the terms of tis Order shall be binding upon the Purchaser or shall be deemed to form any part of the agreement between Vendor and Purchaser." 117

There was no document containing terms and conditions that was signed (or even acknowledged as being binding) by both parties. The argument about the terms of the contract(s) focused on whether the contract was subject to price escalation. The relevant clause (pressed by Best Bar) was contained in the Application for Credit form.

Discussion

Diploma's argument was, in essence, that by supplying reinforcing bars in accordance with the order (without expressly rejecting the terms of the purchase order), Best Bar should be taken to have accepted the terms.118 The Court rejected that argument on the basis of the facts known to the parties, relevantly:

  1. There was no course of dealing between the parties prior to 2007.
  2. Best Bar had set out its terms and conditions in the Application for Credit, stated its intention to contract only on those terms and repeated that position in each estimate form.
  3. The terms themselves sought to oust subsequent correspondence.
  4. The dealings between the parties included supply of steel but also of a substantial credit facility.

The Court thus held that at the time each order was placed, Diploma was aware of Best Bar's intention to trade only on its terms and Best Bar had done nothing to indicate a departure from that position.118 Consequently, the Court inferred an offer and acceptance of terms.120 It followed from that conclusion that Best Bar was entitled to claim escalation in accordance with the clause in the application for credit agreement.

Conclusion

Like many construction cases this was a "simple case with difficult facts."121 But it needn't have been so. Much of the judgment is directed towards contests on the evidence about correspondence and meetings. Reading between the lines, it is apparent that neither party kept very comprehensive records nor, indeed, sought to administer the contract that it sought to enforce on the other side. For example, the Application for Credit form was returned to Best Bar unsigned and with handwritten annotations but no further action was taken (by either side) to close out the issue. There is no indication in the judgment why that was so but it is plain that this is a case where, if the parties had invested time in getting their terms of trade agreed at the outset, then a lengthy dispute (running for seven years from 2008 to 2015) could, perhaps, have been avoided.

http://www.austlii.edu.au/au/cases/wa/ WASC/2015/230.html

Footnotes

114 At [21]
115 At [30]
116 At [19]
117 At [14]
118 At [153]
119 At [154]–[155]
120 At [146]. See also Currie v Currie [2013] WASC 428 at [19] (Allanson J); Lighting By Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd (2008) 35 WAR 520 at [21]–[23] (Pullin JA), [89]–[90] (Buss JA) and [203]–[205] (Le Miere J); RJ Baker Nominees Pty Ltd v Parsons Management Group Pty Ltd [2010] WASCA 128 at [92] and [97] (Newnes JA); Fazio v Fazio [2012] WASCA 72 at [188] and [195] (Murphy JA)
121 See, eg, Baulderstone Hornibrook Ltd v Qantas Airways Ltd [2003] FCA 174 at [1] (Finkelstein J)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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