When negotiating the price for work or services, parties will
often say they are providing a 'quote'. The decision of the
Supreme Court of New South Wales in Megalift v Terminals
 NSWSC 324 confirms that care is required in using the term
'quote' because it a could be a contractually binding
Megalift Pty Limited (Megalift) was engaged by Terminals Pty
Limited (Terminals) to discharge a 270 tonne storage sphere from a
barge onto Terminal's land. When the barge arrived it was not
possible to discharge the sphere without first excavating some of
Terminal's land. This led to a great deal of inconvenience,
delay and cost. Megalift made a claim for the extra amount that it
was owed for its services including for hire of its barge.
Terminals cross-claimed for the excavation costs that it incurred
to discharge the sphere from the barge.
It was not disputed that the parties entered into a contract on
1 May 2006 (second agreement) with Terminals accepting a
'revised quotation' that was received on 28 April 2006. The
Court was required to consider whether in fact a contractual
relationship existed prior to 1 May 2006.
What The Parties Said
Megalift said that its letter dated 21 March 2006 was merely a
quotation or 'budget offer' that was not an offer capable
of acceptance. In support of this, Megalift emphasised clause 5 of
the Special Conditions in the quotation which read that it was
provided for 'budget purposes only'. On the other hand,
Terminals submitted that the letter and the Purchase Order
demonstrated that the parties had entered into a contract on 4
April 2006 (first agreement). Terminals submitted that it had a
right to sue the plaintiff for damages for the breach of the first
What The Court Decided
Justice Bergin, before turning to consider the specific facts,
said whether there was a contract was to be determined by:
Examining the objective intention of the parties.
The commercial context of the negotiations.
The context and circumstances of the use of the word
Justice Bergin found that the first agreement on 4 April 2006
was legally binding on the parties and Terminals accepted the terms
of Megalift's offer. In reaching this conclusion, her Honour
considered that the parties had been negotiating terms and
discussing the transportation and delivery of the sphere for many
months. The quotation amounted to an offer irrespective of the fact
that the estimate for the naval architect's assessment and
supply of the spacer barges was not a fixed price. Justice Bergin
was satisfied that Terminals accepted that it would pay the
ultimate costs of these services which were expected to be in the
vicinity of the approximate figures.
The fact that clause 5 of the Special Conditions read that the
quotation was provided for 'budget purposes only' did not
prevent the offer from being capable of acceptance. Justice Bergin
reached this conclusion on the basis that it would have been
inconsistent with clause 10 of the Special Conditions that required
Terminals to provide 'written agreement to all terms and
conditions as detailed' in the letter. In response to this
offer for services, it was held that Terminals' Purchase Order
accepted the terms offered in the letter of 21 March 2006.
The second agreement came into effect with Megalift's
'revised quotation' of 28 April 2006, which Terminals
accepted in the email of 1 May 2006. While this created a new
agreement between the parties, Justice Bergin found that there was
nothing in the express terms of the second agreement which
suggested that Terminals' right to sue for damages for breach
of the first agreement had been released. Instead, Megalift's
conduct amounted to a repudiation of the first agreement and that
Terminals was entitled to seek damages for the breach.
The case sends an important message to contractors which do not
intend an indication of price to be legally binding. If a party
does not intend to be legally bound to an estimate for services
then it is advisable that the quotation expressly provides that it
is not a binding offer. A contractor will need to be cautious when
providing subcontractors with a quote as the Court may have regard
to the context and correspondence to determine whether the estimate
constitutes an offer.
DLA Phillips Fox is one of the largest legal firms in
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This publication is intended as a first point of reference and
should not be relied on as a substitute for professional advice.
Specialist legal advice should always be sought in relation to any
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