Contracts

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Contracts Contractual Procedures Ref
Contractual procedures in the construction
industry A Ashworth 2nd Edition
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Contracts can be made by word of mouth, in fact
we are surrounded by contractual situations but
rarely realise it, the contract is often not made
apparent until something goes disastrously wrong.
Every time you purchase an object or a service
there has effectively been a contractual
exchange, which is now normally covered by
statutes. Contracts for specific services
should however be in the form of a written
agreement. The definition of contract by Sir
William Anderson reads- a contract is a
legally binding contract between two or more
parties by which rights are acquired by one or
more to acts of forbearances on the part of the
other or others The idea of a legally binding
contract is that it will be upheld in court.
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Recently statutes have been brought in to protect
against the bargaining power of large
corporations and the law of contract has moved
away from a total commitment to enforce without
qualification any agreement which has the basic
elements of a contract.
Ultra vires- The presumption was that those
entering into contracts with a company knew or
ought to know the contents of the objects clause,
I.e a company can only contract on matters
falling within its objects clause- and those
making a deal outside these objects clauses only
had themselves to blame. This was revised when we
joined the EEC Intention to create legal
relations, it must be demonstrated that both
parties intended to enter into a contract and in
contract law it is important to know what has
been agreed, I.e it is possible for parties to
use words which are susceptible to
interpretation. ( consensus ad idem) Raffels v
Wichelhaus 1864
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Offer and acceptance is the basis for a contract
formation. An offer must be distinguished from a
mere attempt to negotiate. Contractors can
revoke their offer prior to formal acceptance.
Tenders for building works do not remain an
offer indefinitely- Offers are made on the
basis of detailed terms and conditions and
parties are bound by these conditions even though
they may not have read or be aquatinted with
them. An offer and acceptance is sometimes made
on the basis of subject to contract, in practice
courts tend to view such an expression as of no
legal effect.
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Consideration- the most common form of
consideration is the payment of money, provision
of goods and performance of work. Unenforceable
contracts- these can be described as void- or
violable or unenforceable-- a mistake or it
involves the performance of something that is
prohibited by statute. Misrepresentation in
contract terms is when a person makes an untrue
statement which induces the other party into the
contract. Express or implied clauses, express is
when it is written into the contract, implied is
when it is not mentioned within the contract but
is in the minds of those who made the
contract. Implication is necessary in order to
give business effect to the contract, I.e implied
are by law deemed to be part of the
contract. Implied by---- By Custom----- By
Statute------ By the Courts
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Limitations of Actions- The Limitations Act 1980,
if an action is not commenced within a certain
time usually the right to sue is extinguished
after 6 years on a simple contract not under
seal, in a contract under seal this is extended
to 12 years. Contra proferentem-- any ambiguity
in a contract will be interpreted against the
party that put it forward. Discharge of
Contracts. Discharge by performance- I.e the
contract is concluded-- and or substantially
performed and an adjustment made for the work
that is incomplete. Discharge under conditions--
Conditions although not expressed are intended
because the parties must have contracted under
these conditions. If a contractor agrees to
complete a building for a specific use and it is
incapable of this use once complete then the
client can sue for his money back Discharge by
renunciation. I.e one of the parties refuses to
perform his obligations under the contract
conditions. I.e. An architect designs a building
for a client and the client decides not to go
ahead with the scheme, the architect can sue on a
quantum merit basis ( I.e what it is worth)
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Discharge by fresh agreement- I.e a fresh
agreement supersedes the preceding ones, this is
known as recission of the original contract. (
When one party to a contract is released by a
third party from his obligations this is known as
novation) Frustration -- Impossibility of
performance of the contract. I.e incapable of
execution-- hardship, inconvenience or loss are
however not acceptable factors. Determination of
contract. Determination of the contract due to
none performance or breach of contract Assignment
, I.e one contractor taking over from another and
assigned the liabilities by novation
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Remedies for Breach of Contract.
Breach occurs when one party fails to perform an
obligation (a) A contractor refuses to obey an
AI ( Architects Instruction) (b) The client fails
to honour an Architects Certificate (c) The
contractor fails to hand over antiquities (d) The
contractor fails to proceed diligently
This has two principal consequences 1 Damages 2
Determination potential Nominal Damages-- breach
of contract that carries no substantial loss,
nominal amount of damages awarded. Substantial
Damages- These represent the measure of the loss
sustained by the injured party. Despite the name
they can be quite small Remoteness of Damage- a
breach creating a chain of events that has
considerable effect. In ordinary circumstances
the damages claimed are those that arise from
immediate damage. If the contract specifies the
extent of liability then no question of
consequential damages arise
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Liquidated damages
Each standard form of contract provide for the
payment of agreed damages should the building not
be complete on time. They are recorded in the
contract as a sum over time and should be a
genuine estimate of the damages that the building
owner may suffer. If the sum is excessive then
it may be regarded as a penalty and may be
unenforceable. They are a reflection of loss to
the building owner, however if the owner decides
to move into the building in its incomplete state
this would normally deprive him of claiming
liquidated damages. Quantum Merit If for some
reason one party breaks the contract the other
can sue under quantum merit, that is for what it
is worth. I.e claim the sum of what the work
done is worth. If the two parties cannot agree on
a price of what it is worth then the courts will
decide.
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Standard forms of Contract
The use of a standard form of contract is
strongly recommended. These forms are usually
agreed by all sides of the industry consequently
are more valid in the eyes of a court. Using a
constructed contract, an older version of a
standard form or making amendments to a standard
form of contract may well be viewed as contra
proferentem by a court I.e any ambiguity being
interpreted against the person writing or
offering the contract. Contracts are continually
being amended and it is important that the
contract is run on the conditions of the original
contract signed by all parties involved in the
contract. Where the client proffers his own
contract or his own preference for a less noted
standard form, the architect should compare the
proposed document with the conditions in the
appropriate standard form and inform the client
of any relevant differences.
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There are at least 25 standard forms of contract?
Any standard form proposed should 1 suit the
clients proposed procurement route 2 suit the
size and complexity of the project 3 Be a
standard form agreed by an official body or
bodies 4 be unammended and use the appropriate
supplementary forms The architect usually
becomes the contract administrator in all except
design and build contracts. The architect s
duties as laid out in his appointment by the
client in A SFA92 Standard form of Appointment
of an Architect CE95 CE98 the Conditions of
Engagement SW 96 Shorter form of Agreement for
Small Works Should be the same as those laid out
in the contract documentation
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The contract serves a series of purposes
1- Establishes the contractual commitments of the
parties I.e the employer and the contractor. 2-
Identifies the working relationship between the
parties 3- Identifies those other administrators
of the contract I.e the architect etc 4- Defines
administrative procedures such as architects
instructions, certificates and payments.
Contractual commitments and the procedures
through which they are implemented are expressed
in the contract conditions.
Possession of site Practical completion Defects
Liability period Architects Instructions Payment
Arrangements Statutory Obligations Sub-
Contractors etc
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The architect as the contract administrator is
normally responsible for the formation of the
contract documents. The contract documents as a
record of the contract agreement will normally
consist of The Contract any supplementary
agreements The Specification and or bill of
quantities Schedules and Record Drawings Any
amendments to these documents which are agreed by
the parties involved at a later date must be
documented as signed and dated. The documents
must be signed by an appropriate authoritative
person of each party involved in the contract.
It is necessary to check who is the appropriate
authoritative person in advance of the signing
of the documents especially for corporate bodies.
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(a) Directors normally sign on behalf of
incorporated companies. (b) Elected
representatives normally sign on behalf of public
bodies. ( c) Officials Committee members
normally sign on behalf of private clubs and
organisations. The names and addresses of those
who have signed should be recorded and the
signatures on contracts should be witnessed. In
cases of large contracts involving corporate
bodies it is normal for their solicitors to be
involved Each party is entitled to a set of
contract documents. The architect normally keeps
the employers set. The contract documents should
be kept separate from any developing or amended
design drawings.
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The JTC (Joint Contracts Tribunal) is the most
frequently used form of contract. There are
numerous kinds of JCT contracts related to a
variety of procurement routes and size and
complexity of project. JCT Standard Form of
Building Contract JCT 80 JCT Intermediate Form of
Building Contract IF 84 JCT Minor Works Form of
Building Contract The standard form of contract
also exist in the three Local Authority versions
for use with Quantities, with approximate
Quantities or without Quantities. An intermediate
and a minor works version also exist. Standard
form of Building contract with contractors design
WCD81 JCT Management Contract MC87 The Standard
Prime Cost Contract PCC92 The Measured Term
Contract MTC/1 The Jobbing Agreement JA/T C
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Other Standard forms which may be encountered
The General Conditions of Contract for Building
Civil Engineering series which are a Government
contract. These are more extensive than the JCT
forms and should be used with full details prior
to tendering. The Association of Consultant
Architects series (ACA) which were devised as a
flexible document in order to meet various
situations. The Architects and Surveyors
Institute (ASI) series which mirror JCT 80 IFC84
and MW80, but as the forms are not agreed across
the industry they run the risk of being treated
as contra Proferentem if they ever appear in the
courts and consequently are not widely used. The
institute of Civil Engineers in association with
other Engineering associations also produce a
range of standard forms of Contract. The latest
of which is The New Engineering Contract NEC
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The architect acts as the clients Agent in
administering the works on site. Agency is a
special relationship whereby one person the agent
agrees to conduct a contract on behalf of a
principal with a third party. Provided that he
acts within his authority his acts become the
acts of the principal. However the architect
under the normal standard forms of building
contract is expected to adopt the role of an
impartial contract administrator? Whilst employed
by the client. This impartial role is not
associated with the Standard Form of Building
Contract With Contractors Design WCD81 which
makes no reference to the architect or the
conventional duties of the architect. An
architect may be appointed within the contract as
the employers agent however he will be the
employers agent, and should not undertake the
role of impartial administrator of the contract.