The recent Court of Appeal decision in Edubase Limited v Minister of Education [2024] NZCA 430 is a useful reminder of the issues that can arise in determining an appropriate payment for services, in circumstances where services are delivered and the parties have not agreed on pricing for those services.
Edubase Limited (Edubase) is a Tauranga-based provider of in-home childcare and education services. During the first days of the COVID-19 lockdown in March 2020, Edubase was approached by the Ministry of Education (Ministry) to provide childcare for essential workers who were still needed in their workplaces. Edubase immediately set about making arrangements to provide this care. It did so on the basis of initial indications by the Ministry regarding the terms on which the childcare scheme was likely to be funded, which were still subject to change. When Cabinet approved funding for the scheme, it was calculated differently and at a lower rate than Edubase had expected. Although Edubase nonetheless provided the needed services during the initial level 4 lockdown (which continued for nearly 5 weeks), it did not sign the Ministry's proposed contract and the parties continued negotiating the basis for payment. Edubase invoiced the Ministry for its carers' hours (and that revenue was passed through to carers) but it did not invoice the Ministry for its administration services.
Subsequently, Edubase brought a claim against the Ministry for the fees it believed it was entitled to receive. The High Court dismissed the claim, finding that Edubase had, by its conduct, affirmed the contract.
Edubase successfully appealed to the Court of Appeal, which found that no legal contract had been formed between Edubase and the Ministry and therefore affirmation could not occur (and was not available to the Ministry as a defence). The fact that Edubase performed the services and invoiced the Ministry for the carer component of the service fee did not amount to acceptance of the Ministry's offer, as Edubase had made clear from the outset that it did not agree with the Ministry's proposed fee structure and had continued to negotiate while working with the Ministry. In the absence of a concluded contract, the Court allowed a claim by Edubase in 'quantum meruit' for the reasonable price payable for its services and awarded $50,000 to the company plus interest from May 2020 (with the Court noting that Edubase had the benefit of both other funding from the Ministry and the wage subsidy).
The Court's decision highlights that, even where terms have been exchanged, services are being provided, and fees are invoiced and paid, a binding contract may not have been formed if the parties have not reached agreement on the essential terms of their arrangement. A party cannot rely on 'acceptance by conduct' where the other party is clearly rejecting the terms proposed. Parties working together without a formal agreement may find themselves liable to each other on a legal basis that is far less certain than would be the case under a clear written contract.
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