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 [2009] NSWSC 324 confirms that care is required in using the term 'quote' because it a could be a contractually binding offer.

Background

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.

Issues

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 agreement.

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 'quotation'.

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.

Implications

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.

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