Problem
The University of Canberra ("UC") decides to build a new student residence and puts out a request for tender. ABC Pty Ltd decides it wants to tender, but it will need to subcontract a lot of the work so it puts out its own request for tender to a number of the 'trade packages' (i.e. the components that will be subcontracted). ABC Pty Ltd says that it will use its own particular customised form of contract for the subcontracted works, and includes a copy of that contract in the request for tender. The contract particulars have not, however, been completed. In particular, the amount specified for liquidated damages is blank.
Perfect Precast Pty Ltd receives a request for tender from ABC Pty Ltd to supply concrete panels and submits its pricing. ABC Pty Ltd submits a tender to UC based on, amongst other things, the prices that Perfect Precast Pty Ltd has submitted. UC decides to accept ABC Pty Ltd's tender because it seems to be the most competitive. ABC Pty Ltd does not yet want to sign a contract with Perfect Precast Pty Ltd because it has not yet formalised its own contract with UC. However it needs to lock in the subcontractor prices so that they do not change.
ABC Pty Ltd then issues a Letter of Intent to Perfect Precast Pty Ltd that says:
We wish to inform you that your tender proposal has been accepted. Please proceed with ordering the materials and commencing work.
The formal contract will be issued shortly for your signature.
ABC Pty Ltd takes possession of the site and commences work and Perfect Precast Pty Ltd starts supplying panels to the project. After the second instalment of panels, ABC Pty Ltd finalises its written contract with the UC and then sends its own written contract to Perfect Precast Pty Ltd and asks it to sign. ABC Pty Ltd has completed the contract particulars with the prices from Perfect Precast Pty Ltd's tender, and inserted the completion date and liquidated damages amounts based on its head contract with the UC.
However Perfect Precast Pty Ltd responds and says it will not sign because it does not agree with the amount that ABC Pty Ltd proposes to charge for liquidated damages and it does not agree to be bound by the program that ABC Pty Ltd as agreed to with the UC. The third instalment of panels are delayed and this causes significant project delays.
• Do you think a contract has been entered into between ABC Pty Ltd and Perfect Precast Pty Ltd?
• Is ABC Pty Ltd entitled to:
o Require Perfect Precast Pty Ltd to comply with the construction program in the head contract?
o Charge liquidated damages?
• Is there a better way for ABC Pty Ltd to try and have its cake and eat it too? i.e. is there some way it can it lock its subcontractors into a contract without being locked in itself? If so, how?