Manfate Pty Ltd v Krahe (No 1) [2016] NSWDC 70

Significance

Erasmus Lovell-Jones has concluded from his analysis of this case that the courts will adopt an objective test when determining whether an oral contract has been formed and in determining the content of the express terms of such an agreement. Although a quote will fix a price, an estimate will not.

Facts

Mr and Mrs Krahe (owners) entered into an oral contract with Manfate Pty Ltd (builder) to construct a restaurant on their property in Tenterfield. The builder was owned and operated by Mr and Mrs Murphy. Mr Krahe and Mr Murphy had previously contracted on numerous occasions over a protracted period on various jobs. These contracts were usually oral and were administered on the basis of the good faith and good will between the parties. During the course of the construction of the restaurant Mrs Krahe and Mrs Murphy had a falling out. A dispute regarding the sum owing ensued.

The owners claimed the builder had quoted them a fixed price of $100,000 and admitted that there had been an oral variation to that contract, or in the alternative an additional contract, for the provision of disabled access in the sum of $10,000. The builder denied offering a fixed quote and brought a claim for damages for breach of contract in the sum of $92,142.40 plus interest. In the alternative, the builder brought a claim for unjust enrichment in relation to the goods provided and the services rendered in the sum of $112,477.84 plus interest.

Decision

The builder's claim for breach of contract was successful and the court awarded damages in the sum of $92,142.40 plus interest.

Neilson DCJ found that the parties had objectively expressed an intention to be bound by their agreement through their words and conduct. His Honour held that although it was likely the builder had provided the owners with a price of $100,000, in the circumstances, the price could only be objectively characterised as an 'estimate' and not a 'quote'. In reaching this conclusion, his Honour gave weight to the lack of specification of the material to be used during construction, the fluid labour arrangements agreed between the builder and the owners and the absence of an approval from the Tenterfield Shire Council at the time the price was purportedly quoted. His Honour also preferred the evidence of the builder and found that, given the limits of human memory, it was unlikely that the owners would be able to provide near verbatim transcripts of their conversations with the builder some nine years after the event, despite such accounts appearing in their affidavits.

By way of obiter, his Honour noted that in the event the claim for breach of contract had been unsuccessful, he would not have awarded greater damages for unjust enrichment than would have been recoverable if the remedy had been for breach of contract.