Contractual claims: it’s not enough to simply consider the contract
Many contracts are administered by contract managers who are commercially astute but not legally qualified. They typically have an excellent understanding of the terms of the contracts that they administer, having read them many times before. If the contractor claims extra money or extra time under the contract, they form an opinion on the contractor’s entitlement based on what the contract says. Likewise, if the claim is significant and is elevated to the company’s management or board for a decision, it is not unusual for the decision to be taken based on their reading of the terms of the contract. Such an approach is ill-advised for reasons that I will explain.
It is, of course, important to start with the contract when making or assessing a claim for extra money or extra time. The express contract terms will usually provide an answer to the question of whether an entitlement to extra money or time exists. But to the surprise of many commercially astute people, the contract often fails to provide the full or correct answer. “Surely the answer lies within the contract”, they say, without realising that the complete answer is regularly found outside the contract.
The law has developed many remedies for contracting parties who feel they have been treated unfairly. If a contractor genuinely feels it should be entitled to extra money or extra time and that it would be unjust for the principal to refuse such a claim, the law will often provide it with a remedy even though the express terms of the contract do not. It doesn’t matter how well you read the contract in these situations, as you won’t find the correct answer within it. Rather, a good understanding of the legal remedies that the law provides outside the contract is required to properly assess the contractor’s entitlement.
For example:
estoppel and waiver: the contractor’s expectation may be based on what the principal has said or done since the contract was signed. For example, the principal may have indicated that it would consider a claim for extra payment or time arising from a particular situation despite there being no express contractual entitlement, or despite a contractual requirement not being complied with. Such conduct, if reasonably relied upon by the contractor, can result in a court finding that it would be unconscionable for the principal to subsequently insist that the contractual terms are applied. Alternatively, it can result in the contractual requirement being waived;
oral amendment: similarly, the statements and/or conduct of the parties since signing the contract may have amended the contract or created a collateral contract. This can occur even when the original contract states that all amendments or collateral contracts must be in writing and signed by the parties;
implied term: there may be a term that the court will imply into the contract to provide the contractor with a remedy, for example, a term requiring the principal to provide timely site access, instructions, or other things the contractor needs to fulfill its obligations. Or a term requiring the parties to act in good faith;
prevention: the principal may have done something, or failed to do something that has caused the contractor to fail to deliver on time. A court will not allow the principal to benefit from a breach of an obligation if it has prevented the contractor from fulfilling it, even if the contract does not expressly require the principal to do or not do the thing that has prevented compliance;
misleading conduct: the principal may have misled the contractor. Conduct that is misleading – even inadvertently – can provide an affected party with a right to compensation or other remedy under the Australian Competition and Consumer Act 2010. A failure to disclose information can also constitute misleading conduct;
quantum meruit / restitution for unjust enrichment: if a contractual right to payment does not exist, the court may consider it unjust for the principal to retain the benefit of work or services performed by the contractor at the principal’s request without paying a reasonable amount for it.
The above is a snapshot of just some of the legal doctrines that courts have developed to deliver justice where the express terms of a contract won’t – there are many more. Accordingly, it is critical that anyone considering a claim for extra money or time under a contract seeks advice from a contract law specialist who understands the full range of legal remedies available outside the contract. Simply reading the contract won’t provide the complete answer.
