Commercial construction rarely waits for signature pages. Programs move, procurement deadlines bite, and site teams want subcontractors mobilised immediately. But the law does not treat an unsigned contract as a safe zone. Courts regularly find that a binding contract exists based on conduct alone.
That creates a real risk. A party may believe it is still “negotiating,” while its actions communicate something very different. Once that happens, the court decides not just whether a contract exists, but which terms apply, often by looking at the last exchange of offers before performance began.
This is how “accidental contracts” arise.
Why conduct can bind you
A legally binding contract still needs the familiar elements: offer, acceptance, consideration, certainty and an intention to create legal relations. But parties do not need to communicate acceptance expressly. Conduct can convey it just as effectively.
Courts approach this issue objectively. They do not ask what either party later says it intended. They ask what a reasonable person in the counterparty’s position would have understood from the parties’ words and actions at the time.
In a construction setting, that approach places real weight on site behaviour. A subcontractor that attends site, begins work, deploys resources or starts performing the works, and then follows directions or submits claims consistent with a particular contractual framework, can signal acceptance of that framework, even where no formal execution has occurred.
The principle that “silence is not acceptance” still holds. However, silence rarely operates in isolation on a live project. When one party performs work and the other allows it to continue without objection, that combination of silence and conduct can justify an inference that the parties have accepted the deal.
The tender process and the “last shot” problem
Construction contracts rarely form through a single, clean exchange of offer and acceptance. More often, the parties move through a series of steps. A subcontractor submits a tender with qualifications, the head contractor responds with a draft subcontract or letter of engagement, and the subcontractor returns further amendments or a “final tender.” The parties may then circulate additional drafts as negotiations continue.
Each of these steps typically introduces new or revised terms, creating a sequence of offers and counteroffers in which each counteroffer displaces the one before it. Against that background, the “last shot” risk becomes very real.
If one party issues a set of terms and the other party proceeds to perform the work without resolving the outstanding differences, a court may treat that final set of terms as the operative offer and the subsequent conduct as acceptance of it.
Courts do not apply a strict “last document wins” rule. Instead, they examine the parties’ dealings as a whole and assess what a reasonable person would have understood from that conduct. Even so, the last clear set of terms put forward before performance begins will usually carry real weight.
That risk becomes more acute where the parties treat contract execution as an administrative step to be completed later, while the project itself has already moved forward.
Forte v Moit: acceptance by conduct in action
In Forte Sydney Construction v N Moit & Sons, the parties went through a familiar tender and negotiation process. Moit submitted a final tender, and Forte responded with a letter of engagement and a proposed subcontract containing different terms. Neither party signed the documents or formally confirmed acceptance, but Moit went ahead and carried out the works.
The issue was which set of terms governed the relationship. The Court of Appeal found that Forte’s subcontract terms applied. It characterised Forte’s subcontract as a counteroffer that displaced Moit’s earlier tender. By commencing work in circumstances where those terms represented the latest offer, Moit accepted them through its conduct.
The Court reinforced that while silence alone cannot amount to acceptance, silence combined with conduct can. Where a party proceeds with performance in a way that is consistent with a particular set of terms, a reasonable person may conclude that those terms have been accepted, even without any formal execution.
This shows that in a “battle of the forms,” the timing of the last operative offer and the parties’ subsequent conduct can determine the contractual framework. Commencing work without resolving outstanding terms can leave a party bound to terms it never signed, but effectively accepted through its actions.
Practical controls to prevent “accidental contracts”
In practice, construction projects often move ahead before the parties finalise their contracts. Rather than trying to eliminate that risk altogether, focus on managing it in a disciplined and deliberate way.
Control when work actually begins
If your position is that no work should begin until the contract is executed, you need to enforce that operationally by linking execution to key project steps such as:
- issuing start directions;
- granting site access;
- scheduling inductions;
- releasing materials; and
- approving insurances.
When those steps occur before execution, a court may readily conclude that the parties intended to proceed on a contractual basis.
Be clear about how acceptance occurs
Define clearly how acceptance is to occur, and make sure your conduct aligns with that position. Conflicting messages create avoidable risk. For example, asking a subcontractor to sign and return a contract while also instructing them to commence work sends mixed signals about whether execution is truly required.
If you intend acceptance to occur only through execution, communicate that clearly and act consistently. If you are prepared to accept by conduct, adopt a structured approach, such as a purchase order model, and ensure the relevant terms are settled before any work begins. Consistency between what you say and what you do is critical.
Use early works agreements properly
Where early commencement is unavoidable, letters of intent or early works agreements can provide a controlled framework for limited works. To be effective, the document should:
- clearly define the scope of the early works;
- include a price cap to manage exposure; and
- set out essential terms such as payment, variations, insurance, and termination.
A binding letter of intent still operates as a contract and must satisfy the usual requirements of offer, acceptance, consideration, and certainty. Without those features, the parties risk recreating the very uncertainty the document was intended to avoid.
Control site instructions before execution
Manage site instructions carefully before contract execution as well. Disputes often arise where site teams behave as though the contract is already in force, for example by:
- issuing directions;
- approving variations; or
- administering claims in accordance with a draft subcontract.
A practical approach is to:
- restrict who can issue pre-contract directions; and
- require those directions to follow a standard form that identifies the governing instrument (such as a letter of intent) and any applicable limits.
This reduces the risk that conduct will unintentionally signal acceptance of broader contractual terms.
Manage the “battle of forms” deliberately
Where competing terms exist, address them directly rather than relying on silence. In practice, that means:
- rejecting the other party’s terms expressly where they are not accepted; and
- issuing your preferred terms in clear and definitive form, including the method of acceptance.
If the other party then proceeds with the work, you place yourself in a stronger position to argue that your terms govern the arrangement.
Checklist for project teams
Before allowing work to commence, project managers and contract administrators should confirm that the contractual position is clear and consistent with how the project will operate in practice. In particular, they should check the following:
- Identify the current offer by confirming which document is capable of acceptance and represents the latest position between the parties.
- Check for counteroffers by reviewing whether any marked-up returns or revised documents have displaced earlier terms.
- Confirm the contractual framework by ensuring there is an executed contract or a properly approved early works agreement in place; if not, reconsider whether work should begin.
- Clarify acceptance mechanisms and ensure the method of acceptance is clear, without undermining it through inconsistent conduct.
- Address tender qualifications by confirming that any qualifications or exclusions have been expressly dealt with, rather than left unresolved.
- Control authority for directions so that only authorised personnel can issue pre-contract instructions.
- Align site communications so that instructions, correspondence, and site behaviour reflect the intended contractual position, rather than suggesting a different arrangement.
- Reset where necessary if work has already commenced without clear terms, by taking steps to clarify the basis on which the parties will proceed, as early intervention can limit further risk.
Final perspective
In construction, contracts often take shape through what the parties do, not just what they sign. Courts recognise this commercial reality and focus on the parties’ conduct, assessing how a reasonable person would interpret their actions in context.
When a party attends site, carries out work, issues directions, or makes payment, those actions can collectively point to a binding agreement. Once the court finds that a contract exists, it will then determine which terms govern the relationship, often by looking to the final exchange of offers before performance began.
You can reduce the risk of “accidental contracts” by ensuring that your processes reflect your intended position. Strong gatekeeping, careful use of early works instruments, and consistent alignment between your documents and your conduct will place you in a far better position to control how and when contractual obligations arise.
If you are unsure whether your current practices expose you to unintended contractual risk, or if you would like to review your contracting processes, we can help you put practical safeguards in place.
