Contractual parties' conduct can affect how actions taken pursuant to a contract are interpreted by the court.
Dewu Pty Ltd, the proprietor (Owner) brought proceedings against Mr Fabiano, the builder (Builder) claiming damages for breach of a building contract between the parties (Contract). The Builder cross-claimed for amounts that he says were due under the Contract or, alternatively, the unpaid value of his works on a quantum meruit basis.
It was common ground that the Contract between the parties had come to an end but the circumstances of termination and breach were in dispute, with each party claiming that its termination of the Contract had been valid. There were issues regarding the form of the Builder's final payment invoice (Disputed Tax Invoice) as it was issued under the Builder's company name instead of the Builder's name as well as the effect of the Owner's actions in moving goods onto the site prior to its termination of the Contract.
The court held that the Builder could correctly treat the Owner's purported termination as a repudiation and was therefore held to have validly terminated the Contract. The Builder was awarded damages comprising unpaid progress claims, unclaimed variations and unclaimed out of pocket expenses and a 25% builder's margin on the work that, but for suspension and termination, he would have done.
Contract terms regarding suspension, termination and defect rectification given their effect
The Owner purported to terminate the Contract after calling on the Builder to rectify defects. However, because the Builder was held to have previously suspended works validly under the Contract, McDougall J held that the Owner had no contractual right to call upon the Builder to rectify purported defects and therefore its termination was invalid.
Disputed Tax Invoice
His Honour held that the Disputed Tax Invoice was valid despite not meeting the form requirements for invoices under the Contract. In analysing the Contract, the obligation to pay was imposed by reference to the staged payment requirements of the payment schedule. The requirements of the invoice content did not, by its terms, create a condition precedent to payment. His Honour also noted that there was no evidence to suggest the Owner had ever taken issue with the form of previous invoices from the Builder with similar characteristics. He held the Owner had waived its right to refuse to pay (if one truly existed).
Owner's conduct triggered deemed practical completion under the terms of the Contract
Pursuant to the Contract, his Honour held that deemed practical completion took place when the Owner moved goods onto the site (as expressly provided for by the Contract), despite a substantial amount of building work remaining outstanding. However, this was not taken to be a termination or repudiation of the Contract as the consequence of the early taking possession was dealt with in the Contract