ARCHITECTS REGISTRATION COUNCIL SEMINARS CONTRACT FORMATION FRED PHIRI ARCH.Bw May 27, 2017 1
Contents Legal Systems Legal Systems Examples Legal System Applications Civil Law Relationships Law of Obligations Defining a Contract A Law is binding at Law Requirements for Contract Capacity to Contract Privity of Contract Contract Terms Implied Terms in Practice Void & Avoidable Contracts How a Contract becomes void How a contract becomes Avoidable Glossary Sources
Legal Systems Criminal Law Civil Law Administrative Law This aspect of the Law is concerned with offences against society as a whole E.g. Murder, robbery, theft tax and road traffic offences. Where a person seeks redress from another. It deals with enforcement of rights and obligations of individuals and corporations Where a person can challenge decisions of the state and public bodies such as local authorities
Legal System Examples Criminal Law Civil Law Administrative Law Example: If I take someone's property, without authority, with the intention of permanent deprivation, this is theft and a crime for which I can be fined or imprisoned Example: Someone whose property I have converted (taken as mine) can seek an order requiring me to return the property, to pay compensation or damages in Tort Example: If property is taken by the state or public body, in wrongful exercise of a statutory or other power, this decision can be challenged under administrative law.
Legal System - Applications CRIMINAL LAW CIVIL LAW ADMINISTRATIVE LAW Civil Law is principally concerned with the imposition of fines and imprisonment. Civil Law is Principally Concerned with awarding compensation and making orders in favour of one person against another Administrative Law is principally concerned with making orders concerning administrative actions of the State and public bodies.
PERSON Civil Law Relationship STATE SUCCESSION EMPLOYMENT PROPERTY FAMILY CONTRACT TORT
Law of Obligation Law of Obligation Law of Contract Law of Torts A Persons obligations are founded on Agreement and are prescriptive A Persons obligations are determined by general principles of law and are generally owed to persons generally. Based on standards of conduct and the obligation to exercise reasonable skill and care
Defining a Contract Since a contract is based on agreement, the parties are free to agree obligations to which to be bound. This is known as the Doctrine of Freedom to Contract. Parties to a contract will ordinarily be bound by their Agreement however lopsided or ruinous. Corollary to Freedom to contract, a person cannot be forced into a contract. If terms cannot be agreed either party is free to walk away
A Contract is binding at Law Once A Contract is concluded it, it binds both parties in law. The aggrieved party can seek redress through: Enforcement to payment (a claim in debt) Seeking financial compensation for losses suffered (claim for damages for breach of Contract Claim for Specific performance Injunction
Requirements for Contract OFFER ACCEPTANCE CONSIDERATION An offer can be made to a single person or a class of persons It can be verbal, It can be in writing or It can be by conduct Acceptance the Agreement of offer can similarly be verbal, written or by conduct. Consideration is a legal term that embodies the notion of Bargained for Exchange. It means each party must give a promise of something of value in the Eyes of the Law. Consideration does not have to be fair value or equivalent exchange. It is irrelevant whether a party makes a good or bad bargain.
Capacity to Contract Individuals Only Legal persons have the capacity to contract. Minors and mentally disturbed people do not have this right. People who are drunk or on drugs also do not have capacity to contract. Mentally challenged or people drunk on drugs can be assumed to have the capacity to contract if they are Lucid at the time of entering the contract. Corporations The most common type of corporations is the registered company. The corporate name of company ordinarily be public limited (PLC) or the limited company (Ltd). These have capacity to contract in their own right. A contract made by or on behalf of a corporation is a contract with the corporation. Neither corporation members or office holders are parties to the contract. known as the corporate veil When a corporation is incorporated under statute, its capacity to contract is limited by statute. Such a corporation can only enter into contracts that are authorised by relevant statute. If not authorised by statute, contracts will be ultra vires or unenforceable.
Capacity to Contract (Contd.) Government Public Authorities Unincorporated Associations Government and government Ministries and Departments These ae incorporated by Statute (local authority / councils Public Authority contracts must relate to its authorised functions Organisations that are neither individuals nor corporations do not have the capacity to contract. The parties to the contract made with such an organisation will ordinarily be the person or persons whose communication resulted in the agreement or if they authorised the agreement to be made, the members of the organisation
Privity of Contract A contract ordinarily imposes rights and obligations on the parties to the contract, This Principle is known as the Doctrine of Privity of Contract - only parties to a contract can enforce their obligations or be liable for the nonperformance of their obligations except when: othe contract is assigned othe contract is novated
Contract Terms Express Terms: These can be written or oral - Oral terms should be evidenced in writing. Implicit Terms: Are those that are included in a contract even if not expressly referred to. Contract Terms may be implied by law or statute (Sale of goods) Implied by custom Implied to reflect presumed intention Goes without Saying Implied by course of dealing
Implied Terms in Practice Services: There is an implied term in the provision of services that these will be performed with reasonable skill and care in reasonable time Contracts for Work and Materials: The implied term is that materials supplied under contract will be of satisfactory quality. Satisfactory quality addresses questions of material durability, safety and reasonable suitability for purpose. as for services above Where a contractor is engaged to supply materials that are specified by the employer s consultant, only the implied term of satisfactory quality will apply. The contractor is not required to provide materials that are fit for purpose, since the employer relies on the consultants, not the contractor to select what is required.
Void and Avoidable Contracts Void Contract A voidable contract is one that does not create a legal relationship between parties Avoidable Contracts An avoidable contract is one that does create a legal relationship between parties but can be set aside (rescinded) at the choice (the election) of the innocent party
Ways in which a contract can be made void Illegality: A contract is illegal if it is made by committing a crime (E.g. disposal of stolen goods; Cash payment to avoid VAT; building without building permission.. Statute and Public Policy: Mistake: Where parties are mistaken about the existence of the subject matter e.g. the sale of a painting which both parties believe exists but has been destroyed. Mistake: where parties are at cross purposes about the subject matter Mistake where one party is mistaken about the terms of a contract and the other party is aware of the mistake.
Ways in which a contract can be made Avoidable Misrepresentation: If the person (innocent party) is induced to contract with another as a result of a false statement (a misrepresentation). The statement must be a statement of fact. Negligence or Fraud: Incorrect information on plans, specifications or ground investigation reports in tender documents if not making the contract avoidable, can lead to claims for compensation from the employer for negligent misrepresentation. Duress: If party enters into a contract because of wrongful pressure exerted by the other party, the contract maybe avoidable for duress (E.g. threats of physical violence, damage to property, economic interests. (Rescission must be done promptly).
Ways in which a contract can be made Avoidable (Contd.) Actual Undue Influence: Where one party exercises such a degree of domination or control over the other, that the innocent parties ability to make an independent decision is substantially undermined. EG a religious advisor using spiritual influence to obtain pecuniary advantage from members of his flock Assumed undue Influence: If the relationship between the parties, or between a party s agent and the victim, is of a type in which such influence is assumed, and the contract entered into to the clear disadvantage of the innocent party. One party will necessarily have the confidence of the other and the influence over the other that naturally grows out of this confidence e.g. parent and child; solicitor and client ; husband and wife
Glossary Act of prevention: An event which delays practical completion of a building contract, is caused by or on behalf of the employer, and to which the extensions of time clause does not apply. Contra proferentem: A Latin term meaning 'against the person putting [it] forward'. It is a rule of law adopted when considering a contract which contains an ambiguity of wording, The contract is interpreted against the interests of the person drawing it up, or who would benefit from it. Critical path: The sequence of stages in a building programme which must follow each other sequentially, each of which depends on the completion of the previous stage, and all of which are essential in order to achieve practical completion by the date for completion. Culpable delay: A contractor is in culpable delay when the contractual completion date has passed without practical completion having been achieved, and the contract administrator does not consider that the contractor is entitled to a further extension of time. Dotting-on: The dot-on principle is a method of granting extensions of time by adding the time attributable to the delaying event to the existing contractual completion date, thereby extending it for the period attributable to that delay. Time at large: A situation where the contractual date for completion no longer applies, usually because the contract has been delayed by the employer, or a reason which is not covered by an extensions of time clause. Balance of probabilities: The standard of proof required of a plaintiff in non-criminal cases to substantiate his claim. Base date: The date stated in the contract appendix for the operation of certain contract clauses, eg fluctuations. Causation: The requirement on party A to demonstrate that a particular act or omission of party B is directly responsible for loss or damage to party A.
Glossary (Contd.) Claimant: The party who brings a legal case as arbitration proceedings. In litigation such a party is known as the plaintiff. Common law: The system of law which has its historic roots in the common customs of the country. It is not based upon legislation or equity (principles of law based upon discretion and conscience) but upon case law. Condition precedent: A specific event which must come about prior to a particular situation occurring. Dayworks: A method of payment for building works where the hours worked by each operative and materials used are agreed. Payment will contain a further element for overheads and profit. Extension of time: The provision of an extended period to the contractor to complete the contract work for one or more of a number of prescribed reasons where the contractor has not caused the delay. Float: The period in a contractor's programme which he does not anticipate will be required for completion of the contract works. Fluctuations: Adjustments to the contract sum to take account of increases or decreases in the cost of the works. Global claims: A method of calculating a contractor's loss and expense by allocating a single sum to all the factors of delay rather than assessing accurately the loss attributable to a particular delay. Liquidated and ascertained damages: A 'genuine preestimate' of loss which will be occasioned by a particular breach of contract. Found in standard form building contracts to compensate the employer for the contractor's inability to finish building works during the contract period. Mitigation of loss: The obligation on a party who has suffered a breach of contract reasonably to reduce as much as possible financial losses caused by breach of contract
Glossary (Contd.) Preliminaries: The costs resulting from work, materials or facilities ancillary to but not necessary for the carrying out of the contract works. Quantum meruit: A reasonable valuation of work undertaken. It generally applies when a payment or the method for calculating it has not been specified or there is no contract in existence but the circumstances demand that a fair valuation is carried out. Set-off: Set-off takes a number of forms but it can be generally described as a method by which a defendant seeks to reduce a claim against him by bringing into account monies owed to him by the plaintiff.
Sources / References Focus on Construction Contract Formation By Peter Aeberli Riba Enterprises Legal and Contractual Procedures for Architects Bob Greenstreet and David Chappel Architectural Press Legal series