Professional liability: incorporating unsigned and unsighted documents into contracts of service
October 26, 2015
Surfstone Pty Ltd & Anor v Morgan Consulting Engineers Pty Ltd  QSC 290
A contractual limitation of liability clause contained in an unsigned document has defeated professional negligence litigation in pre-trial proceedings before the Supreme Court of Queensland. Moray & Agnew Lawyers acted for the successful defendant.
In proceedings filed in 2014, the plaintiffs (City Beach) alleged negligence against the defendant relating to a warehouse engineered by the defendant for the plaintiffs in or around 2003. The plaintiffs contended that from around April 2009, the internal concrete slab floors of their warehouse exhibited signs of rotation and deflection which was caused by the defendant’s negligence. The plaintiffs sought judgment against the defendant in the sum of approximately $1.24 million, interest and costs.
The defendant denied any negligence as alleged or at all and pleaded in its defence that the defendant’s fee proposal included the ACEA Guideline Terms of Agreement (the Guideline Terms) which at clause 4.3 included a time based limitation of liability to preclude proceedings being brought by the plaintiff against the defendant after one year from the completion of the services. The defendant contended that the contract entered into by the parties prevented the plaintiffs bringing the proceedings against the defendant, the services having been completed in 2005 (9 years prior to the proceedings having been instituted).
In May 2015, the Court, prior to a trial of the proceeding, heard argument on whether the Guideline Terms were incorporated into the contract between the parties and if so, whether clause 4.3 operated as a bar to the plaintiffs bringing the proceeding against the defendant.
The defendant’s fee proposal contained the following passage:
The commission would be generally in accordance with the ACEA Guideline Terms of Agreement…
The Guideline Terms were not attached to the fee proposal, were not requested by the plaintiffs and were not provided to the plaintiffs by the defendant. The parties did not reduce the contract to a signed agreement, but rather acceptance was constituted through the performance and payment of services as evidenced by invoices.
The evidence before the Court from the chief executive of the ACEA (now Consult Australia), a director of the defendant and two architects, was that the Guideline Terms were in common use at the time, were commonly not appended to fee proposals and were easily accessible.
The plaintiffs unsuccessfully argued that the use of the words ‘generally in accordance with’ in the fee proposal were vague and insufficient to incorporate the Guideline Terms into the contract. The fee proposal addressed matters not fully dealt with by the Guideline Terms, such as the total amount of the fee and the times at which invoices were to be submitted. In this context, His Honour concluded that a reasonable person would understand that the expression ‘generally in accordance with’ was used in the sense of ‘for the most part’ because not all matters were finally dealt with in the Guideline Terms. His conclusion was that, as a matter of construction, the fee proposal incorporated the Guideline Terms, including clause 4.3, by way of the reference to them in the fee proposal.
His Honour referred to a number of authorities dealing with the situation where one party offers to contract with another on terms which include those set out in an identified (albeit unsigned) document and adopted the proposition that:
The fundamental question is whether the offeror (the defendant) is reasonably entitled to conclude that the acceptor (the plaintiffs) has accepted the terms in the document, including the exemption clause. That conclusion should be reached where the second party has had a reasonable opportunity to consider the terms, including the exemption clause, and has behaved in a way which manifests acceptance of the document as recording contractual terms.
His Honour heard in evidence that there was enough time after receipt of the fee proposal for the plaintiffs to obtain a copy of the Guideline Terms and for the plaintiffs to have obtained legal advice about their suitability and in accordance with his adopted proposition above, concluded that:
A reasonable person in the position of the plaintiffs would have concluded that, at the time that the Fee Proposal was accepted, the defendant intended to enter into a contract to provide the relevant engineering services, only on the terms identified in the Fee Proposal; and a reasonable person in the position of the defendant would have concluded that the plaintiffs agreed to contract on those terms. Those conditions extend to the Guideline Terms, including clause 4.3.
His Honour also considered whether for the defendant to rely on clause 4.3 it was necessary for it to have taken some step specifically to draw the plaintiffs’ attention to the clause. His Honour found that the limitation clause was appropriate for this type of contract and, although onerous from the point of view of the plaintiffs, it was not a clause that was ‘not reasonably to be expected’. He concluded that the use of Guideline Terms was sufficiently common to make it unnecessary for the defendant to have brought clauses such as clause 4.3 specifically to the attention of the plaintiffs. On this alternate approach, His Honour concluded that clause 4.3 was also incorporated into the contract between the parties.
On 19 October 2015, the Court dismissed the plaintiffs’ proceedings against the defendant.
The High Court of Australia has previously found that parties are ordinarily bound by the terms contained within the body of written agreements that they have signed, irrespective of whether they have read the agreement or been made aware that it contains unusual or onerous terms.The present case says that parties are also bound by terms contained in documents incorporated by reference into agreements formed without any signature, irrespective of whether they have read the document or received it from the other party, provided it was otherwise accessible to them.
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