Fenwick Elliott Grace Legal Notes


Estimating: Kyren v Built Projects

Disputes often arise as to what sort of construction contract the parties have entered into. Normally, the analysis will lead to one of the following conclusions:


In the first case, the lump sum is usually derived from the contractor's estimate; the contractor estimates how much it is going to cost him to do the work, and from there the parties agree the lump sum. Croshaw v Pritchard [1] is the leading authority for the unremarkable proposition that the use of the word "estimate" does not preclude the conclusion that that estimate became a binding lump sum price; it has been conventionally cited in Australia [2] as well as elsewhere [4].

Against this background, Kyren Pty v Built Projects Ltd is a curious case. The work was done pursuant to an offer from the contractor sumarised by the Judge as follows:


  6    The facsimile from Mr Henderson to Mr Samaras dated 7 September 2005, read:

Dear Sir,

Further to our meeting yesterday I have listed below cost for your approval our estimate of material and labour to carry out the said works.

The document then set out the details of materials to be used, including the quantities, price per unit, and delivery costs; and gave a total cost for materials and delivery. It then set out the itemised and total labour that would be involved in the work, including the price per metre square. A summary of the amounts and total costs for balcony ceilings was given as "$76615-00", including a reference to the agreed fee of 20 per cent. The facsimile continued:

As agreed we can either purchase the materials on your behalf or Ceilings 2000 can supply but our fee percentage will apply to which way your [sic] go.

To confirm our agreement can you please Sign [sic] below and fax back ASAP...

Given the option presented here, one would expect that the analysis would start by asking if this was a construction contract at all, or merely an agency arrangement, as in Corradini. But the court appears not to have addressed that issue at all. Instead, it appears to have proceeded on the unspoken assumption that the contract was a construction contract (in the sense that the contractor was in the contractual chain) and concluded that the magistrate had been right to find for a cost plus arrangement, on the basis that

"this was a written contract and the word ‘estimate’ was used in its ordinary meaning and there is no reason to go behind that."

This is a surprising conclusion for at least two reasons:


It will be hard for parties in the future, if faced with this case, to avoid the suggestion that it was decided per incuriam, and is thus not to be followed in the future.

See also Newsletter and Full text of the case


 

[1]    (1899) 16 TLR 45

[2]    See eg, Building and Construction Contracts in Australia, Dorter & Sharkey at para 1.44, Halsbury's Laws of Australia, para 65-455, Tapper v Buccaneer Pools & Spas Pty Ltd (1998) 19 SR (WA) 128

[3]    See Corradini v O'Brien Lovrinov Crafter [2000] SASC 224 at paragraph 91

[4]    See eg Building Contract Disputes: Practice and Precedents, Fenwick Elliott at para 1-30,  Hudson's Building and Engineering Contracts at paragraph 1-022

[5]     See for example Chitty on Contracts para 32-156.