Contracts

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Contracts
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What is Law

• Generally accepted Rules of Behaviour
• Contract Law developed from the need to enforce
  promises or an undertaking. These promises were
  enforced by the King represented by the courts
• To ensure that every one received consistent
  justice, decisions were recorded so that future
  decisions could be based on similar principles
• The is called Common Law

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Sources of Law

• Common Law Is law derived from previous
  decisions on cases of similar merits. Known as
  Judge made law.
• Why is this important?
• To allow for certainty!
• This system has problems, what are they
• Contract Law is based on Common Law

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Sources of Law

• Statute Law
• Law enacted by parliament
• Ensure that law will reflect the needs of the
  community

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Source of Law

• Were there is a conflict between statute law
  common law
• Statute Law will prevail
• This has important ramifications for Contact Law
• Contract Law has been affected by statute law

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Civil Court System in NSW
Each State will have a similar system
High Court of Australia Final Court of Appeal
Full Bench Federal Court of Australia
Appeals
Court of Appeal NSW
Federal Court of Australia Commonwealth
Matters Bankruptcy, Trade Practices
Appeals
Supreme Court NSW Unlimited
Appeals
Appeals
Appeals
District Court Cases up to 750 000
CTTT Cases up to 500 000
Other Tribunals i.E. Land Environment Court
Appeals
Magistrates Court Cases up to 40 000
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Civil Court System in NSW
Binding Precedence Lower Courts are bound by
decisions from a superior court in their
jurisdiction
High Court of Australia Final Court of Appeal
Full Bench Federal Court of Australia
Court of Appeal NSW
Federal Court of Australia Commonwealth
Matters Bankruptcy, Trade Practices
District Court of NSW is not bound to follow
decisions of the Supreme Court of Victoria
Supreme Court NSW Unlimited
District Court Cases up to 750 000
CTTT Cases up to 500 000
Other Tribunals i.E. Land Environment Court
Magistrates Court Cases up to 40 000
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Contracts

• What is a Contract ?
• A legally enforceable promise by one party do
  something or to refrain from doing something
• To be legally enforceable the agreement must
  comply with Common Law requirements for a valid
  contract

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Essentials of a Valid Contract

• Intention for the parties to enter into a legal
  relationship enforceable by law
• Offer Acceptance
• Valuable Consideration or execution under seal
• Legal Capacity to Act
• Genuine Consent
• Legality of the Objects of the Contract

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Intention

• Is there an intention to enter into a legally
  binding agreement
• Social Agreement are presumed no
• Business Agreement are presumed yes
• Intention can be expressly excluded

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Essentials of a Valid Contract

• Intention for the parties to enter into a legal
  relationship enforceable by law
• Offer Acceptance
• Valuable Consideration or execution under seal
• Legal Capacity to Act
• Genuine Consent
• Legality of the Objects of the Contract

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Offer

• Offer may be in writing, verbal or implied by
  conduct
• Offer must be communicated
• The Offer can be withdrawn at any time before
  acceptance (Postal Rule)
• An offer will lapse if- not accepted with in a
  stated time- not accepted within a reasonable
  time- a counter offer is made by the other party

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Offer

• Invitation to Tender is not an offer Invitation
  to treat
• Offer will terminate on rejection

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Essentials of a Valid Contract

• Intention for the parties to enter into a legal
  relationship enforceable by law
• Offer Acceptance
• Valuable Consideration or execution under seal
• Legal Capacity to Act
• Genuine Consent
• Legality of the Objects of the Contract

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Acceptance

• Must be final and not qualified (other wise it is
  a counter offer
• Only person who offer has made to can accept
• Silence is ineffective
• Conduct can constitute acceptance
• Once accepted no other negotiations can be
  conducted
• Method of Acceptance can be specified (See Postal
  Rule)

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Essentials of a Valid Contract

• Intention for the parties to enter into a legal
  relationship enforceable by law
• Offer Acceptance
• Valuable Consideration or execution under seal
• Legal Capacity to Act
• Genuine Consent
• Legality of the Objects of the Contract

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Valuable Consideration

• Something of Value Usually Money
• Does not have to be a fair deal
• Simple Contracts must have considerationThis is
  the fundamental Difference between a contract a
  promise

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Essentials of a Valid Contract

• Intention for the parties to enter into a legal
  relationship enforceable by law
• Offer Acceptance
• Valuable Consideration or execution under seal
• Legal Capacity to Act
• Genuine Consent
• Legality of the Objects of the Contract

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Legal Capacity

• Minors generally do not have legal capacity
  except -Items of necessity -Items that are
  beneficial
• Mentally ill do not have capacity
• An intoxicated person does not have capacity -
  but on sobering up can affirm the contract
• Corporations are treated as individual entities
  and have capacity to contact beware who you are
  contracting to
• Alien Enemies capacity is reduced
• Convicts have capacity
• Married Women Unfortunately are allowed to
  contract to receive credit cards

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Essentials of a Valid Contract

• Intention for the parties to enter into a legal
  relationship enforceable by law
• Offer Acceptance
• Valuable Consideration or execution under seal
• Legal Capacity to Act
• Genuine Consent
• Legality of the Objects of the Contract

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Genuine Consent

• The consent must not be induced by deception of
  fraud
• Contract can not be formed under duress
• Contract cannot be formed by Unconscionable
  Conduct

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Essentials of a Valid Contract

• Intention for the parties to enter into a legal
  relationship enforceable by law
• Offer Acceptance
• Valuable Consideration or execution under seal
• Legal Capacity to Act
• Genuine Consent
• Legality of the Objects of the Contract

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Legality

• The object of the contract cannot violate Statute
  law- you can not contact to kill someone and
  then expect a court to enforce payment
• Illegal under Common Law- Contract to commit a
  tort- Promote Corruption- Prejudicial to
  Administration of Justice- Prejudicial to Public
  Safety

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Forms of Contract

• Simple Contracts
• Can be either Verbal or Written
• Implied
• Can evidenced by Written Communication

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Forms of Contract

• Formal Contracts
• Derived from old law before the Common Law
  principles of Contracts was developed
• Method to make promise enforceable
• Must be written
• Sometimes referred as Deed

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Forms of Contracts

• Express Contract
• Normal Type of Contract
• Conditions Warranties documented
• Supporting Documents i.e. Drawings, Spec etc
• Dispute Resolution Process?
• Time For Completion
• Liquidated Damages Spelt out

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Form of Contract

• Implied Contract
• Contact constructed by the courts
• Actions or Inactions by the parties indicate a
  contract exists
• Conditions Warranties to be determined by the
  court at a later date

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Implied Contracts

• Builder Contracts to build house on C1 block of
  land
• By error Builder builds on C2 land which is next
  block. C1 is unaware of this.
• Most evenings C2 has a beer with the builder and
  has a chat.
• C2 has an implied contract and must pay the
  builder. C2 has a duty to stop the builder

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Contract Terms

• Condition
• Major requirements of the Contract
• Fundamental to the contract
• Breach allows innocent party to either Terminate
  the Contract or Sue for Damages

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Contract Terms

• Warranties
• Minor Term of the contract
• Contract is not substantially different
• Breach allows innocent party to sue for Damages
• Termination will be a breach of contract and
  innocent party may be liable for damages

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Contract Terms

• Innominate Terms
• May either be a warranty of Condition(Paint one
  door the wrong colour vs the whole building)
• Is a subjective assessment
• Most terms will fall in this area
• Must take care in dealing with these breaches

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Operation of Contract

• Privity
• Only parties to a contract have rights and
  liabilities under a contract
• A contracts with b to build a house for C
• C cannot sue A for any breach

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Operation of Contract

• Assignment of Contract
• Rights to a contract by be assigned to a third
  party
• Novated Lease is an example of this

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Discharge of Contract

• Discharge of Contract - Conclusion
• By performance
• By agreement before completion
• Operation of Law-Bankruptcy - Liquidation-Merger
  ?-Fraud

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Discharge of Contract

• Impossibility of Performance - Frustration
• Absolute Impossibility- contract to renovate
  house, house burns down
• Radical Difference Change of Council or
  Government Conditions, Court Injuctions
• Supervening Illegality Law is Changed after
  contract is formed to make it illegal?
• Futility Where purpose of the contract is no
  longer valid?

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Discharge of the Contract

• Time - Unless time is a Condition of the contract
  a contract will not lapse

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Discharge of the Contract

• Breach of Contract- Not every breach of contract
  allows for the termination of the contract
• Before this action is taken legal advise should
  be sought.
• A court will determine whether the breach was
  substantial enough
• Innocent party may be liable for damages

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Damages

• Unliquidated- Determined by Court
• Liquidated Damages- Genuine Estimate of loss
  agreed to in contract
• Penalty- if loss is not Genuine classed a
  penalty and will be reduced to genuine loss

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Types of Contracts

• Depending on the Client and Nature of the works
  will depend on the type of contract
• Refer page 17 18

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Types of Contracts P 20

• Lump Sum
• Cost, plus a fee
• Cost plus a percentage
• Schedules of Rates
• Labour Only
• Do and Charge
• Design Construct

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Building ContractsBasic Structure

• Contract Period- Specified Time for Contract to
  be completed- Builder has Control of Site
• Practical Completion- The works have reached a
  stage that is suitable for use by the client-
  Transfer of Works to client- Insurance by Client

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The Agreement

• Names Of Owner Builder
• Description of the Works Tender/Qoute
• Drawings/Specifications
• Contract Sum
• Contract Terms
• Signatures

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General Conditions

• Form of the Agreement
• Specifies the operation of the contract-Dispute
  Resolution- Payment Schedule-Access by Client-
  We will be look at a HIA Contract

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Status Of Owner Type of Contract

• Government will have there own form or may use
  standard form with their own terms
• Statutory Bodies generally use government
  conditions
• Large Companies Will have their own terms
• Smaller Companies Standard Form Contracts

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Other Factors that may Affect the Contract

• Lending Authorities Payment Schedule, May
  appoint Quantity Surveyor/ Clerk of Works,
  Architect
• Type of Works New Building, Renovation, Civil
  Works
• Time Influences May require contract to start
  before full documentation is complete FAST TRACK

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Other Factors that may Affect the Contract

• Rising Cost Provision may be made, Rise Fall
  Contract against fixed Cost

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Definition - OVERHEADS

• Cost that are incurred that are not directly
  attributable to the construction process.
• Insurance Overhead
• Office Costs Overhead
• Bricks/ Bricklayers Construction Cost
• Foreman Overhead
• Carpenters Construction Cost
• Workers Compensation - Overhead

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Types Of Contracting Arrangements

• Lump Sum Builder agrees to complete the
  documented works for an agreed price. Agreed
  price can only change by agreement i.e. variation

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Types Of Contracting Arrangements

• Cost Plus Fee Builder is paid for all material,
  labour and subcontractor costs.
• In addition the builder receives a predetermined
  fee to cover overheads profit

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Types Of Contracting Arrangements

• Cost Plus Percentage Builder is paid for all
  material, labour and subcontractor costs.
• In addition the builder receives a set percentage
  of costs to cover overheads and profit

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Types Of Contracting Arrangements

• Schedule of Rates A schedule of rates for
  construction items is agreed.
• Agreed rates include profit overhead
• Brickwork Supply Install 2.50 per brick
• Wall Framing 2.4h Supply Install
• Supervised Carpenter 65 per hour

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Types Of Contracting Arrangements

• Labour Only Agreement is to provide labour
  only at an agreed rate for each trade.The
  agreed rate covers the builders overheads
  profit.
• Clients usually provides materials

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Types Of Contracting Arrangements

• Do and Charge Agreement has no fixed price.
• Builder charges what they think is the value of
  works
• Usually leads to disputes

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Types Of Contracting Arrangements

• Package Deal Design and Construct Builder is
  responsible for design and construction based on
  parameters set by the client.

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Standard Printed Contract Forms

• Australian Standards
• MBA
• HIA
• Department of Fair Trading

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Definition Subcontractor

• Contract Between the Builder and other
  specialised organisations used to complete the
  works that relate to the Head Contract.Care
  should be taken to ensure that the same terms are
  included as the Head Contract
• Good practice would be to use contracts from the
  same organisation

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Definition Head Contract

• Contract Between the Client BuilderBuilder is
  called Head Contractor.
• This definition has applications outside the
  contract.
• OHS Law requires that Head Contractor provide a
  safe work place.

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HIA Contracts
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HIA Contracts