17 October 2018
7 min read
The 'battle of the forms' is a tale as old as time with counterparties often exchanging contractual terms (quotes, invoices, purchase orders, contracts and the like) in an attempt to ensure that their preferred terms prevail.
Often, through this exchange, discrepancies are left unresolved and the parties are left arguing as to the proper terms of the contract when a dispute arises.
This type of conflict is generally resolved by the ’last shot’ doctrine, which provides that the battle is won by the person who fires the last shot (i.e. the person who sends the final document in the series of exchanges leading to the conclusion of the contract).
However what happens when the parties conclude a contract and then enter into a subsequent contract for the same works without rescinding the first – does the ’last shot’ doctrine still apply?
In the recent case of Stepanoski v Aslan [2018] NSWSC 1160, Emmett AJA was asked to consider this very question and found that, despite the parties originally entering into one type of construction contract, a Cost Plus Contract, their subsequent Lump Sum Contract reigned supreme.
This article looks at how Emmett AJA reached this conclusion and the important takeaways for contracting counterparties.
Facts of the case
Mr and Mrs Stepanoksi engaged Mr Aslan to construct two residences on their land in Chatswood. It was not disputed that on 14 October 2014, the parties signed a Cost Plus Contract to complete the construction works, however, after the Cost Plus Contract was entered into the parties subsequently entered into a Lump Sum Contract for the same works.
At the time of signing the Cost Plus Contract, the “estimated” cost of the works was $1,080,000. The Lump Sum Contract price was also $1,080,000.
A dispute then arose as to:
Mr Aslan initially contended that the Lump Sum Contract was not intended to replace the Cost Plus Contract to any extent and that it was, in effect, no more than a sham. However Mr Aslan later revised his position alleging that:
On the other hand the Stepanoski’s alleged that the only applicable contract was the Lump Sum Contract.
Emmett AJA considered the parties oral and contemporaneous written evidence to resolve the dispute.
Oral evidence
The oral evidence heard by the Court evidenced an understanding by both parties that the Lump Sum Contract was for the primary purpose of obtaining the loan from Macquarie Bank.
Mr Aslan revealed that he felt pressured to sign the Contract to obtain funding for the build and only did so on the basis that it would not be binding with respect to the cost of the works. The problem was Mr Aslan never communicated his position to Mr or Mrs Stepanoski and later conducted himself as if the Lump Sum Contract applied.
Based on the unreliability of the oral evidence, mainly due to faulty recollections, the Court placed more weight upon the contemporaneous material (set out below) to resolve the question as to the true terms of the contract.
The contemporaneous material
The Court found the following matters to be particularly relevant:
Findings
Based on the matters set out above, the Court held that:
Lessons learnt
While there were several inconsistencies in the evidence put before the court, what was clear is that the Lump Sum Contract was indeed signed to ensure that Mr and Mrs Stepanoski could obtain funding from Macquarie Bank.
Lump Sum contracts do however present a very different commercial arrangement to Cost Plus contracts. If the Defendant (Mr Aslan) was unable to complete the works for the price set out in the Lump Sum Contract this is something that ought to have been negotiated prior to entering into the Lump Sum Contract. Mr Alsan should not have stayed silent nor acted if the Lump Sum Contract was binding if he considered otherwise.
In this case, based on the parties conduct, the ’last shot’ doctrine applied despite there being a previously concluded contract that was not properly rescinded.
The lessons learnt for contractors from this case are:
This case is also a reminder for principals and/or home owners that when obtaining finance you should check with the financier in relation to the type of acceptable contract for finance purposes.
Authors: Jacqui Doyle & Andrea Wilson
Contacts
Brisbane
Troy Lewis, Partner & National Head of Construction and Infrastructure
T: +61 7 3135 0614
E: troy.lewis@holdingredlich.com
Stephen Burton, Partner
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E: stephen.burton@holdingredlich.com
Suzy Cairney, Partner
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E: suzy.cairney@holdingredlich.com
Melbourne
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E: stephen.natoli@holdingredlich.com
Kyle Siebel, Partner
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E: kyle.siebel@holdingredlich.com
Sydney
Scott Alden, Partner
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E: scott.alden@holdingredlich.com
Christine Jones, Partner
T: +61 2 8083 0477
E: christine.jones@holdingredlich.com
Helena Golovanoff, Partner
T: +61 2 8083 0443
E: helena.golovanoff@holdingredlich.com
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