Homework Question - Course of Dealings and Acceptance of Contract Terms

[procrastinasian]

I had a random bus talk with someone who found out I was a law graduate and I just had a question I thought I'd pass to the forum.

If you are negotiating a contract for services and you send the other party a request for amendment (i.e. let's say removing the scope of services for tasks outside your area of expertise), then will Australian courts imply that you accept all the other terms by default and hold you to them?

A scenario would be if you send the amendment request, but the client asks you to carry out services in the meantime within your preferred scope because the work is time sensitive and you comply. They never respond to the amendment after multiple requests and neither party signs the agreement. They still pay you for the work.

You finish the work and then years down the road, something wrong happens and lawsuits start popping up. The other party claims you agreed to indemnify them because you never brought up indemnity clauses as an issue in your amendment request.

I would be inclined to agree with that train of thought. However, it occurs to me that one cannot make a proper analysis of risk without first confirming the scope. I do not think it is in the reasonable contemplation of a party to readily accept additional liability if they have not unequivocally confirmed the extent of their works to begin with.

Would I be I wrong in this rebuttal argument?

 

[Rod]

The problem with hypothetical scenarios is that they are notoriously short of detailed facts that can swing a legal ruling the other way.

Staying at a high level:

• There is no signed written contract
• There is probably a mix of written and verbal terms.
• We have no idea as to what services or goods were provided
• We don't know what has 'gone wrong'
• We don't know what caused something to 'go wrong'
• While the other party may claim you indemnified the services/goods, the onus will be on them to substantiate the claim

If we assume the provider of services has done something wrong and it can be proven, the extent of the liability will depend on undisclosed/unknown factors. There cannot be any automatic assuming of liability based on the unsigned written contract. The unsigned contract may not have any legal effect whatsoever.

Does this answer your question?

 

[Tim W]

I had a random bus talk with someone who found out I was a law graduate...............

Clarify for me...
Graduate... As in completed the degree, but neither conferred, nor admitted?

 

[procrastinasian]

Hi Tim.

Graduated. Currently pursuing PLT "for fun" on working holiday so I can be both an Australian and Canadian lawyer.

Originally from Canada, and just waiting to write my bar exam in Canada for March. But I am also a Licensed paralegal in Canada with trial experience.

I don't tell people I am a lawyer because I am not right now, which is why I joined this forum to engage in discussion outside my student body who basically just ask for law exam answers (which as you know are usually constructed to be very open ended). It's a nice way to learn what the "real" problems are and then use those topics as a basis for conversation with my professional networks and while job hunting.

When people hear that I went through law school, they like to ask me for my opinion on things and then I just refer them to any lawyers in my network. I try to keep it as general as possible and I have to constantly remind them that they need to speak to a lawyer because I can't give advice in Australia.

Hopefully that answers your question

 

[procrastinasian]

The problem with hypothetical scenarios is that they are notoriously short of detailed facts that can swing a legal ruling the other way.

Staying at a high level:

• There is no signed written contract
• There is probably a mix of written and verbal terms.
• We have no idea as to what services or goods were provided
• We don't know what has 'gone wrong'
• We don't know what caused something to 'go wrong'
• While the other party may claim you indemnified the services/goods, the onus will be on them to substantiate the claim

If we assume the provider of services has done something wrong and it can be proven, the extent of the liability will depend on undisclosed/unknown factors. There cannot be any automatic assuming of liability based on the unsigned written contract. The unsigned contract may not have any legal effect whatsoever.

Does this answer your question?

Hi Rod,

Thank you for allowing me to elaborate a little bit. I apologize but I tried to keep my conversation with the gentleman on the bus as vague as possible and asked him to speak to a lawyer (as per my explanation to Tim).

For the sake of discussion, let's say that this is a job for painting a fence ('the Services') between Painter and Owner.

All terms are written. The term for fees is agreed upon verbally while the scope is not and the Painter emailed refusal of the scope. The other terms were not addressed (i.e. indemnity clause). The contract not only requires Painter to paint the fence, but to also ensure that the fence posts are secure (i.e. outside the usual work of a painter).

So contract is still in negotiation. Painter does not want to be responsible for securing the fence and sends an amendment request to Owner. He doesn't address any other clauses.

Owner does not respond to amendment, but tells Painter to paint the fence in the meantime and they will work out the rest of the contract later.

Contract is never agreed or signed. Fence is painted and Painter is paid. But let's say for the sake of argument, third party suffers a loss because of the fence (i.e. posts aren't secure, assume Owner is liable.)

Owner argues that there is a clause in contract that says Painter agrees to indemnify Owner for losses arising from the Services. Also, by finishing the services, Painter implicitly agreed to the whole contract.

Would the Painter have accepted the indemnity clause because it was not originally brought up during the amendment request?

Or is the indemnity clause beyond the reasonable contemplation of the parties because the Painter did not agree to the scope and therefore couldn't accept the risk of indemnification until that was confirmed?

I would like to think that because you didn't agree to a confirmed scope, you would therefore not implicitly agree to the indemnification. (Of course, as you know, in QLD you cannot contract out of negligence or proportionate liability.)

I hope this makes sense. If it is convoluted, then maybe it is because I picked a bad example and I apologize.

Basically, silence is not considered as acceptance unless it is accompanied by other circumstances (e.g. doing the work.) It is a spin on the Empirnall Holdings case except instead of bankruptcy, the issue would be indemnification from a claim.

 

[Rod]

Painter has no liability in the hypothetical you mentioned. First contract was never agreed to and therefore doesn't exist. Second contract formed and is limited to painting.

Painter has only agreed to paint the fence and therefore would have no liability for the structural integrity of the fence. Can't see any negligence or proportionate liability attaching to the painter. Owner seemingly knows there is a problem with the fence and does nothing to fix it. Hiring a painter to only paint the fence cannot move liability to the painter.

'Silence as acceptance' is not an issue here because the painter has already explicitly said he will not work on or take responsibility for the integrity of the fence.