Requirements for a Contract to Come into Existence

Acciona Infrastructure Australia is a Spanish sub-contractor entered a contract with Transport for NSW (TfNSW) to build Sydney light rail project. The company accused the NSW Government for misleading and deceptive conduct. The company had demanded $1.2 billion claim for the expenses and damages against the state government. The legal basis for the claim by Acciona is;

There are certain elements that are required to be taken into consideration for a contract to come into existence. These are offer by one party, acceptance by another party in exchange for consideration. In addition, the contracting parties must intend and possess the capacity to establish legal relationship which does not include any illegal conduct (lawhandbook.sa.gov.au, 2009). Acciona entered into a contract with TfNSW and lawsuit is related to the power infrastructure being supplied by Ausgrid. It has been alleged by the contractor that they were made to believe that Ausgrid had evaluated and accepted the terms and conditions of the contract but they had not. Furthermore, the contractor were not allowed to communicate with Ausgrid regarding the terms and conditions of contract (Jade, 2018). If Ausgrid was involved in the contract, their consent must have been taken by the other two parties. The offer made by the TfNSW must have been accepted by Ausgrid. The formation of contract requires the presence of all the parties to the contract. In this case, Ausgrid was not aware of the contract terms and clear communication was not established between Ausgrid and Acciona. So, the essentials of the contract do not suffice for the formation of contract. The factors influencing real and genuine consent or approval by the other party are mistake, misrepresentation, and unconscionability. Acciona entered into the contract misrepresented by the TfNSW as they did not disclose that the contract was to construct the CBD light rail on a “false premise” as there were underground electricity network possessed by Ausgrid and various other water and gas companies. Furthermore, the factor of unconscionability as mentioned in case of Commercial Bank of Australia Ltd v Amadio (1983) also applies in this case. It was held by the court that the plaintiff was aware that the defendants had English language issue and did not search for independent advice and imposed a contract (Jade, 2018). This was held to be unconscionable conduct taking into reflection the background of the defendant. TfNSW was aware that the communication between Acciona and Ausgrid was not allowed and imposed the contract on Acciona which is an unconscionable conduct on the part of TfNSW (Carter, 2018).

Parole Evidence Rule states that in case when the contract is not certain, external evidences such as correspondence, site meetings, and other specifications can be taken into consideration. In this case, Acciona was not allowed to communicate with Ausgrid whether they are ready for the contract or not and deceived by TfNSW that Ausgrid accepted the contract. Mentioning the name of Ausgrid required their complete involvement and awareness about the contract or details related to meetings or any other kind of correspondence with them. In case of B and B Constructions (Aust) Pty Ltd v Brian A Cheeseman & Assoc Pty Ltd (1994), the Court of Appeal in NSW considered the issue of ambiguity. The question raised by the decision is whether, if the words and interpretations in the contract has a plain meaning free from ambiguity, evidences of surrounding circumstances is acceptable to demonstrate that the parties had intended a different meaning (consultaustralia.com.au, 2012). The court held that extrinsic evidence can clearly be allowed to resolve ambiguity if possible.  Thus, there is requirement of clear ambiguity in order to find an exception to the parole evidence rule.

Misrepresentation and Unconscionable Conduct by the NSW Government

It exhibits that lack of fulfillment of contractual terms and conditions by TfNSW make them liable for misrepresentation and unconscionable conduct on the basis of which, Acciona could claim compensation. In addition, Acciona could claim on the basis of breach of duty of good faith by TfNSW as they should have performed in the welfare of the other parties to the contract as well as for the welfare of the contract but they did not.  

Acciona can also claim on the basis of section 18 of the Australian Consumer Law (ACL) states that a corporation should not engage in misleading or deceptive conduct. TfNSW has been engaged in misleading and deceptive conduct and infringed Section 18 of ACL as they did not provide complete information to Acciona regarding the project and made them believe that Ausgrid were well aware about the terms and conditions of the contract. In addition, Section 52 states that the terms and conditions of a contract must not be in breach of any laws or regulations. TfNSW formed a contract which opinionated the appropriate administration of justice as they did not reveal all the required information to the other party (O’Sullivan, 2018).

1. To support the claim, Acciona should present the proof that they were not allowed to communicate with Ausgrid and if it had already been aware that Ausgrid required more costly work, it would not have signed the contract of project because it would have exposed Acciona to significant risk. Furthermore, lack of availability ofany kind of external evidences in the form of correspondence between Acciona and Ausgrid proves that both have not mutually discussed the terms and conditions of the contract, the benefit of which was obtained by TfNSW(O’Sullivan, 2018). The misrepresentation and unconscionability by TfNSW should be established by Acciona in order to claim for compensation.

Acciona will also have to establish the infringement of Section 18 and Section 52 by TfNSW as they involved in misleading and deceiving conduct as well as did not disclose the essential information to the contractor. To achieve the purpose, Acciona will have to present the documents in which, TfNSW has declared to enter into contract with the costs as disclosed to them and the involvement of Ausgrid for the same (Jade, 2018). It will prove that TfNSW had not disclosed the actual costs to either Ausgrid or to Acciona.

1. TfNSW would have to establish an opposition of their claim as well as to counterclaim for which they should take support of;

“Promissory Estoppel”prevents an individual from going back upon a promise not to enforce contractual rights wherein, the promisee has acted in accordance with the promise in such a manner as to suffer some harm if the promisor were allowed to go back on the promise. N Waltons Stores (Interstate) Ltd v Maher (1988), the plaintiff entered into negotiations to have a building demolished and a new building built for the purpose of opening a store. The solicitorsof the plaintiff sent the solicitor of the defendant the redrafted lease incorporating amendments and the building was destroyed.  The plaintiff argued that there was no lease and no exchange of contract but the court found that it would be inappropriate for the defendant not to accomplish the contract as the plaintiff had supposed that the exchange of documents was just a formality and their opinionwas encouraged by the failure of the defendant to establish the fact (Jade, 2018). Applying to this case, the contractor is legally bound to accomplish the contract as they encouraged the assumption of TfNSW that Ausgrid had accepted the contract as such, by not communicating with the Ausgrid and confirming their state of mind for the contract.

The requisites of standard contract demands for latent conditions to be fulfilled under which, the contractor should reasonably examine and inspect all the information made available in writing by the contracting authority for the purpose of forming contract along with all the risks associated with the physical conditions on the site as well as surroundings. In case ofBMD Major Projects Pty Ltd v Victorian Urban Development Authority [2007], BMD was contracted to carry out excavation work as mining debris was spread across the site when VicUrban intended to develop anemptyexcavationin the form of residential estate. Butwith the progression of the project, BMD claimed the natural surface level of the site was less than it could have reasonably anticipated and claimedit to be a latent condition.The decision of the court confirmed that the examination for what the contractor must reasonably anticipatedis to be adjudicated by what a competent and appropriately qualified contractor would believe to come uponthrough physical conditions in the execution of the project.In this context, TfNSW could take shelter of the lack of attentiveness of the contractor as they did not examined and inspected all the physical conditions as mentioned in the contract and did not emphasize on discussing them with Ausgrid as well.

Relevant Sections of the Australian Consumer Law

In a similar manner, TfNSW can demand for the performance of the contractor in reasonable time as it is essential in contract that  the contractor must perform the work in such a manner so as to achieve their contractual obligations, which include planning, provisions of sufficient as well as proper materials, management of work force so that they could perform their obligations under the contract to an acceptable standard as well as in accordance with their time obligations as mentioned in West Faulkner Assoc v London Borough of Newham (1993)).

1. In order to be prepared for the hearing in the court, both the parties should be prepared to present their evidences;

Acciona has accused the state government of misleading conduct because of their disappointment to reveal that it had not made available the agreement of power company Ausgrid regarding the handling of crucial cables under the route. In order to establish this in court, Acciona will have to submit the documents that show that there is no agreement between Ausgrid and contracting authority. Initially, in 2014, during the bidding process, Acciona required negotiating with TfNSW for “satisfactory contractual mechanism” regarding the dealing of utility services beneath the streets and plan was eventually agreed between the two. In order to prove it, Acciona will have to provide the documents related to the agreement between the two. As Acciona claimed that Ausgrid had not accepted the terms and conditions for its services as established in the plan, it states that there was confusion in the sense of understanding between all the three parties and language of the document of agreement or contract was ambiguous and made diverging sense for all the parties as they all understood. The terms and conditions of the contract are required to be clear and unambiguous and should be clearly understood by all the parties to the contract. It should be established by the Spanish company that the contract was ambiguous and it meant differently to them as well as to Acciona. Acciona should use Ausgrid as their witness in the court as the claim being demanded by them are based on the disagreement of Ausgrid related to the terms of the contract. To establish infringement of Section 18 and 52 of ACL, misleading and deceiving conduct of TfNSW, and ambiguous behavior of TfNSW, the witness of Ausgrid is compulsory. However, in order to decide the amount the claim and expenses increased in this duration of delay in completion of project, the financial records related to increased expenditure should be submitted in the court (Commonwealth of Australia, 2018). In addition, it is the responsibility of Acciona to accomplish the project as they entered into contract with TfNSW for the light rail project.       

On the other hand, TfNSW accused the contractor for showing unwillingness to provide meaningful timeline for the completion of project. In order to establish their point in the court, they will have to show the documents related to contract completion date. The issues resulted due to the cable lines beneath the ground increased the problems for Acciona to finish their work on time. TfNSW will be required to provide extension for completion of project as it was their mistake that they did not prepared the contract simple and unambiguous to be understood by both the other parties to the contract (Libguides.acu.edu.au, 2018). As claimed by Acciona that they will complete their project, TfNSW should demand written approval by them to provide actual date for completion of project through the court in order to prevent further confusions (Nissen, 2009). They can also use Ausgrid as witness if they rely on the documents of contract they have signed with Ausgrid so that it could be proved that Ausgrid was aware of the terms and conditions of the contract and there were not confusions among them regarding it.   

1. In orderto avoid the problems encountered in the case, the contract should include standard arbitration clause in the construction contract. During drafting of the arbitration clauses, few things should be kept in mind i.e. privacy and confidentiality provisions, role of arbitrators, rules of evidences, appeal and enforcement rights as well as law of choice should be taken into consideration(Jade, 2018). The parties to the contract should follow the standard form dispute resolution clauses in the contract, which provides requirements of notice of dispute, procedures for conference between the parties to the dispute and referring the dispute to arbitration in case it is not resolved by the process of meeting between the disputing parties.

The Parole Evidence Rule

Clause 47 of the Dispute Resolution Clauses provides for the provisions related to dispute resolution. It involves a notice of dispute to the party involved for which written response is required to be provided by the other party (Murray, 2013). The Superintendent decides the matter through procedures such as mediation, arbitration, expert determination or any other if suitable. If the dispute does not get resolved by any of these ways, the matter is referred to for the purpose of litigation in the court.

The contract should also include standard ACICA Arbitration clause in the contract, according to which, any kind of dispute, controversy or claim occurring within the contract together with any queries related to its existence, validity or termination should be resolved by arbitration in accordance with the Arbitration Rules of ACICA (Resolution Institute, 2018).

The inclusion of dispute resolution framework and regulations in the contract would help in resolving the problems encountered in this case in future during the course of construction process. In addition, the terms and conditions of the contract are required to be clear and unambiguous so that all the related parties could understand them in a similar sense and not in their own sense (Jade, 2018). All the parties to the contract should meet and communicate and discuss the terms and conditions of the contract and should negotiate on the mutually agreed terms for the completion of contract. The main issue in the case is the confusion created among the parties to the contract regarding the dealing of cable lines underneath the light rail project being developed by Acconia (Consumer Law, 2018). The confusion occurred because of the ambiguity in the terms and conditions of the contract to which, all the parties understood in own personal benefits. In order to avoid such a situation to arise again in future, the terms and conditions of the contract should be clear and unambiguous. All the parties should physically meet and decide the plans for the future progression of the contract (Australian Contract Law, 2016). The mutual decision of all the parties should be in written form signed by them so that later on, no party would show disagreement on any of the terms and conditions of the contract.   

Acciona has claimed $1.2 billion for the costs and damages against the state. The costs for the project were initially $1.07 billion but $679 million are expected to be spent till the completion of the construction of line. Other expenditure and management costs are estimated to be around $175million as well as potential liquidated damages of equal to $147 million is the total compensation demanded by Acciona. The company is expecting to receive $966 million from the state for the project instead of loss of $1.1 billion.

Acciona should serve a payment claim under Section 14 of Building and Construction Industry Security of Payment Act 2002 on TfNSW to make the payment, in which the construction work or related goods and services for which the progress payment is related should be identified. It must mentions the amount of progress payment claimed by the claimant for the constriction work done or supply of goods and services required for the purpose (legislation.vic.gov.au, 2002). In response to it, under Section 15, TfNSW should reply to the claim through payment schedule to the claimant (NSW Legislation, 1999). It must identify the payment claim related to it and must mention the payment amount proposed by them in the form of scheduled amount. In case, if the scheduled amount is less than that of the amount claimed by the claimant, the reason behind less scheduled amount should be provided by the respondent or in this case TfNSW. When respondent does not provide payment schedule within time under the construction contract or in 10 business days following the payment claim, the respondent becomes liable to pay the amount claimed by the claimant on the due date for progress payment (legislation.act.gov.au, 2009).  

Promissory Estoppel

Furthermore, TfNSW cannot counter claim that the performance of Acciona is poor and delayed services as in Bitannia Pty Ltd and Anor v. Parkline Constructions Pty Ltd [2006], the court held that raising an argument that service was not effective because it involved misleading and deceptive conduct is not contradictory with either of Section 15(4)(b)(i) of contract law, which prohibits the respondent from cross claiming, or Section 15(4)(b)(ii), which prohibits them from raising any defence regarding the issues arising under the construction contract (Doyles, 2006). In addition, similar to Dualcorp v Remo Constructions [2009], Ausgrid cannot claim extra costs for the purpose of dealing with the cable lines as the principle of Issue estoppel states that entitlement to a payment or decision as to the value of construction work once determined by one adjudicator is binding upon subsequent adjudicator (Doyles, 2015; Security Of Payments Act, 2018).  

Therefore, Acciona could claim for the costs and damages but they are bound to complete the contract within re-scheduled time that should be decided by both the parties to the contract (Sso.agc.gov.sg, 2006). 

References

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