The Importance of Terms & Conditions in a Contract
August 16, 2022
Most small business owners know the difficulty of successfully running a company. This is especially when only one person is responsible for the day-to-day operations or services as well as the paperwork and invoicing. For people with a small business that provides a service, records can easily fall behind. However, as we see in a recent decision from the Provincial Court of Alberta, it is important to provide customers with invoices and to document money owed. If someone fails to do that and later finds themselves in a position where they are pursuing commercial disputes through civil litigation, they may end up without the ability to support their claims.
Vacuum service provider claims invoices went unpaid
The plaintiff is a small family-owned company that provides vacuum truck services. It is run by a father (“LH”) and his son (“BH”). The plaintiff had provided the defendant with vacuum truck services at some of the defendant’s oil well lease sites. LH did the on-site work while BH was responsible for most of the bookkeeping and record keeping related to the services they provided.
The plaintiff initially claimed that the defendant owed it $45,600, plus interest for services rendered. However, once the trial began, the plaintiff conceded that the amount owed was closer to $7,000. The plaintiff told the court it had trouble with invoicing and communicating with customers, stating that it was not good with technology.
There was no written contract between the plaintiff and the defendant. However, the defendant stated that they contacted LH and provided him with a description of the work they would require as well as the location where the work was to be performed. Again, there was no written record of this conversation.
There is no dispute that the plaintiff completed the work as requested. LH told the court he would have created a “ticket” describing the work performed after each site visit and delivered it to a representative from the defendant company. If there was no representative there, he said he would have sent the ticket and an invoice to the defendant’s head office in Calgary.
Defendant says it did not receive invoices
The plaintiff told the court that a total of six invoices totalling $7,116.38 were delivered either personally or via email to the defendant. Only one of these tickets was introduced to the court. The ticket presented in court was signed by a representative from the defendant company. The defendant claimed it had not received any additional invoices or tickets beyond that. An employee responsible for managing invoices for the defendant provided the court with a spreadsheet showing invoices that had been entered into the system. She said the spreadsheet does not show any invoices from the plaintiff. The plaintiff testified that it did not require payment from the defendant until an invoice was provided.
So, the court had to determine whether there was a contract for the services in the alleged invoices. If so, it would ask whether a debt was due and payable. If it is determined there is no contract, the court stated it would explore whether compensation for services would be available.
Was there a contract?
Since the parties did not enter into a written agreement that can be used to establish the terms of the work done and how the payment would be provided, the court had to determine whether an oral contract was entered into. The court wrote that a 2018 decision from the Alberta Court of Queen’s Bench provides us with a good summary of the guiding principles relevant to oral contracts. They are reproduced below:
Credibility: Witnesses’ credibility must be tested against those facts that are not seriously in dispute, and with the preponderance of the evidence and the probabilities surrounding the events.
Burden of Proof: The person seeking to enforce a disputed oral contract carries both the legal and evidentiary burden of proving, on a balance of probabilities, that the alleged oral contract was made.
Basic Contractual Principles Apply: There must be proof of offer, acceptance, and certainty of terms.
Consensus ad idem: Parties must agree on essential terms, and these terms must be capable of being determined with a reasonable degree of certainty.
Legal Test to Find Agreement: The Court must assess whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract. This is not about a party’s subjective intention or belief; it is an objective test.
Additionally, a 2019 decision from the Alberta Court of Appeal stated that three requirements for a contract to be enforceable. The first is that the parties intended to enter into a contract. The second is that the essential terms of the contract had been settled, and the third is whether a reasonable person would understand that an oral contract had been entered into.
Invoicing was not an essential term of the oral contract made
The court determined that the parties had indeed entered into an oral contract. It found that the plaintiff was asked to provide vacuum services, which it performed them satisfactorily. The defendants did not contest this.
The defendants maintained that there is nothing payable because no invoice had been sent. The court held that even though an invoicing system had been contemplated, it was not an essential term of any agreement between the parties. They had not discussed the term and condition of being invoiced for work for it to be payable it in their oral arguments.
The court ordered that the defendant pay the plaintiff for the full amount of what would have been invoiced.
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