How contract terms can be varied – whether contractors are entitled to charge only a reasonable hourly rate for work done
Where a contractor is entitled to a contractually agreed rate, the question of whether or not that rate is reasonable does not arise. An authorised communicated acceptance of a proposed variation is required to change the contractually agreed rate.
Vadasz (appellant) engaged Gadaleta Steel Fabrication Pty Ltd (respondent) to supply certain steel and welding services with respect to the construction of a school hall (the works). The parties did not entered into a written contract. The works were undertaken during the period 27 November 2012 to 29 January 2013.
Throughout the period during which the works were carried out, the respondent issued nine invoices for payment by the appellant for a total amount of $70,168.01. The respondent argued that the agreed rates included an hourly rate of $75 plus GST for the normal time of all the respondent's employees (including trainees), an hourly rate of $85 plus GST for the respondent's site supervisor, Mr Salvemini, with a minimum two hour charge for any day worked by Mr Salvemini and an overtime rate for all employees for Friday afternoon and weekend hours.
Mr Savlemini included the above hourly rates in the claim sheets that were signed by the appellant's site foreman, Mr West, on behalf of the appellant. The respondent argued that Mr West's signing of the claim sheets amounted to acceptance by the applicant that the claim sheets are accurate.
The appellant challenged the amount claimed by the respondent. The appellant in his notice of appeal sought an order for judgment for a 'just and equitable amount that properly reflects the work carried out by the respondent at the request of the appellant'.
Nicholson J held that the contract provided for an hourly rate of $75 plus GST and Mr Salvemini was obliged to complete that contract at that rate unless and until the parties agreed to vary that hourly rate.
His Honour held that it was not incumbent on the appellant to reject Mr Savlemini's implied request for a variation. It was incumbent on Mr Salvemini to point to an authorised communicated acceptance of a variation. Mr West, in signing the claim sheets, did not have the authority to vary the contractual terms. The hourly rate of $75 was held to apply to every employee, including Mr Savlemini and his apprentices.
As the respondent was entitled to a contractually agreed rate, the questions of whether or not that rate was reasonable and, if not, what would constitute a reasonable rate, did not arise. The amount due and payable by the appellant was adjusted accordingly.