When can a contract be formed based upon the conduct of a party?
In the world of commercial agreements, the formation of contracts can sometimes be a complex journey, especially when parties engage in numerous offers and counter-offers. What happens when there is no formal or written acceptance of terms? Forte Sydney Construction Pty Ltd v N Moit & Sons (NSW) Pty Ltd  NSWCA 186 offers a valuable lesson in contract formation based on party conduct, sparking critical questions about existence of a contract.
Contract Formation Through Conduct: A Case Study
The dispute in Forte Sydney Construction revolved around building and construction earthworks, particularly concerning which of two contracts applied to the work and payment, and the determination of the contract’s existence and the amount owed for the works performed under it. Central to this dispute was the pivotal question of whether an offer to perform works under a revised tender submission was accepted through the conduct of a party. Furthermore, the case explored the applicable rates of payment for those works.
To understand this concept, it’s essential to delve into the relevant principles and authorities, particularly the Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (14 NSWLR 523), which provides essential insights:
- Tacet Acceptance: An offeror cannot stipulate that silence equates to acceptance of the offer. However, acceptance can be implied from conduct rather than being explicitly expressed.
- Silent Acceptance: Silence, when coupled with other contextual circumstances, may signify an acceptance of the offer. If an offeree takes the benefit of an offer without expressly accepting it, they may still be bound by the contract, especially if it is reasonable to assume that the offer was accepted.
- Objective Assessment: The ultimate test is whether a reasonable, objective bystander would perceive the offeree’s conduct, including their silence, as an acceptance of the offer.
- Intent to Contract: Even if negotiations haven’t proceeded according to the anticipated contract formation process, the conduct of the parties may indicate their intent to contract given the prevailing circumstances.
- Acceptance Through Performance: When an offer is neither expressly accepted nor rejected, the offeree’s subsequent conduct in accordance with the offer’s terms generally signals an intention to accept the offer.
In the case of Forte Sydney Construction, Ward P, with the unanimous agreement of the Court, concluded that the “Revised Tender Quote” had not been accepted through the performance of works. It was suggested that the misunderstanding of the strict contractual position or an inattention to detail had contributed to this outcome.
Practical Implications and the Role of RCR Lawyers
The Forte Sydney Construction case underscores the importance of clarity and attention to detail in commercial negotiations involving offers and counter-offers. Parties should exercise caution before proceeding with work or delivering goods and services to confirm and clarify the terms of their contracts. This proactive approach can help prevent misunderstandings, disputes, and uncertainties regarding the acceptance of terms, including those related to payment.
RCR Lawyers, with its expertise in Australian legal jurisdiction, can play a pivotal role in guiding parties through these intricacies. Our legal team can draft carefully constructed letters or notes to confirm and clarify agreed-upon terms before any significant conduct takes place, ultimately reducing the risk of disputes.
If you have any queries about whether a contract has been formed based on conduct, it is advisable to seek legal advice and assistance. RCR Lawyers is here to provide expert guidance, ensuring your commercial agreements are secure, transparent, and in compliance with applicable laws in Australia. Our commitment to clarity and precision in contract formation can help you navigate complex negotiations with confidence. For any questions or assistance, please do not hesitate to contact us. Your peace of mind is our priority.
The blog published by Rostron Carlyle Rojas Lawyers is intended as general information only and is not legal advice on any subject matter. By viewing the blog posts, the reader understands there is no solicitor-client relationship between the reader and the author. The blog should not be used as a substitute for legal advice from a legal practitioner, and readers are urged to consult RCR on any legal queries concerning a specific situation.