CONTRACT

“An agreement enforceable under law. The agreement legally binding between two parties or more, provided that certain conditions are observed” (Contract Act, 1976)

Types of contract:◦ Simple contract◦ Special contract

INTRODUCTION TO THE LAW OF CONTRACT

A contract will exist when:

◦ the parties involved reached an agreement

◦ legally recognized rights, responsibilities that arise from that agreement.

Constituted by an offer made by 1 party (offeror) and its acceptance by the other party (offeree) supported by consideration.

SIMPLE CONTRACT

OFFER

ACCEPTANCE

SUPPORTED BY CONSIDERATION

Back in 90’s, most of the construction law is a simple contract

Simple contract can be form by:◦ Written◦ Verbal◦ Action by parties involve (offer and acceptance)

Validity for 6 years

SIMPLE CONTRACT

SIMPLE CONTRACT

A document signed, stamping and given to all the parties involved

Start widely used in the Government Sector Need to be in form of written Validity for 12 years

SPECIAL CONTRACT

OFFER

ACCEPTANCE

SUPPORTED BY CONSIDERATION

SPECIAL CONTRACT

GENERAL PRINCIPLES OF THE LAW OF CONTRACT

ELEMENTIN A

CONTRACT

OFFER&

ACCEPTANCE

INTENT

CONSIDERATION

FREE WILL

CAPACITY

LEGAL

SPECIFIC

INTENT - Both parties wish to make the contract and ready to face the consequence if the contract breach

FREE WILL – All agreement & discussion is made on free will. There are no blackmail or treats involved

CAPACITY – Both parties involved is eligible & capable to be in a contract

LEGAL – all the contract need to follow common law

SPECIFIC – all information in the contract need to be specific. There is no room for ambiguity & unclear item

ELEMENT OF CONTRACT

OFFER & ACCEPTANCEOFFER

(OFFERER)ACCEPTANCE

(OFFEREE)

1. Must be firm, certain & communicated to the offeree

2. Valid if described as an estimate (Crowshaw v Pritchard, 1899)

3. Maybe withdrawn at any in before acceptance (Routledge v Grant 1828)

4. Withdrawal of an offer takes place when notice received by offeree (Routledge v Grant 1828)

5. Maybe made to specific person, group of people or even public (Carlill v Carbolic Smokeball Co., 1893)

1. Must be unconditional and must be communicated to the offerer

2. Must be made within a reasonable reason/time

3. Manner of acceptance must correspond with the manner prescribed by the offer

4. Cannot be withdraw without the consent of the offerer (Routledge v Grant 1828)

5. If the offeree inserts new terms, then it is counter offer (destroy the original offer) (Davies & Co. Shopfitters Ltd v Wiliam Old, 1969)

6. A request for further info doesn’t count as counter offer (original offer remains)

“Some right / interest / profit or benefit accruing to one party or some forbearance /detriment / loss / responsible given, suffered or undertaken by the other”

In forms of:◦ Thing/goods◦ Service/performance of work◦ Payment

Williams v Roffey Bros, 1990

CONSIDERATION

CONTRACTOR

CLIENTPAYMENT

SERVICE

Davies Shopfitters v Wiliam Old, 1969

COUNTER OFFERContractor ask quotation from

supplier

supplier give Quotation to contractor

Offer by supplier to contractor

Contractor ask quotation from

supplier

supplier give quotation to contractor

Contractor amend some ofthe quotation and return back

to the supplier

Counter offerby contractor

to supplier

All contents in a contract describes rights and obligations of parties under the contract

“The court doesn’t make the contract for the parties. The parties made for themselves. The court function is to interpret and apply the contract to the parties involved”

Two types of terms:◦ Express◦ Implied

CONTENTS OF A CONTRACT(EXPRESS & IMPLIED TERMS)

Contract sometimes have been reduced from pure sentences to any kind of forms.

Anything that expressly stated & incorporated in the contract.

Examples:◦ Appendix◦ Drawings◦ Schedules◦ Specifications◦ Bills of Quantity

Davis Contractors v Fareham, 1956

EXPRESS TERMS

“Not expressly stated (in writing or verbally) at the time the contract is made but are implied in law”

Examples:◦ The contractor will do the work in a workmanlike manner (with

proper skill and care). He will proceed with reasonable diligence and complete within agreed time with good and proper materials

◦ The client will give possession of the site and will supply all necessary details within reasonable time. He will not obstruct the contractor works and will pay reasonable sum for the progress of works

Trollope & Colls v NWMRHB, 1973

Lynch v Thorne, 1956

IMPLIED TERMS

STANDARD FORMS OF CONSTRUCTIONS

CONTRACT

A printed form of contract containing standards conditions

Example:◦ PAM 2006◦ PWD 203, 203A, DB◦ CIDB◦ FIDIC

It can be amended in any way the parties choose

Comprises of :◦ Articles of Agreement◦ Condition of Contract◦ Appendix

STANDARD FORM OF CONTRACT

Advantages (Wright, 2004):◦ Well known & widely used◦ Save time & effort in negotiating, drafting new

conditions◦ Can be tailored to match the project ◦ Mistakes maybe avoided

Disadvantages (Wright, 2004):◦ Designed for a standard situation◦ Every contract is different◦ We can make mistake over and over again

STANDARD FORM OF CONTRACT

Sets out:◦ Names of the parties to the contract◦ Location & scope work◦ Express agreement by contractor & client◦ Persons who carry out respective functions:

Architect Engineer Qs

Space for attestation (for signatures of parties & witnesses)

STANDARD FORM OF CONTRACT (ARTICLES OF AGREEMENT)

Sets out:◦ The normal performance required from each party◦ Rules and procedures for conduction the contract◦ Rules on dealing with problems or disputes arise◦ Terms of payment to the contractor

Important to ensure there are no conflicts with others documents the contracts

STANDARD FORM OF CONTRACT (CONDITIONS OF CONTRACT)

It is a summary of facts of the contract:◦ Contract Period◦ Completion Date◦ Defect Liability Period◦ Rates of The Liquidated Damages

STANDARD FORM OF CONTRACT (APPENDIX)

CONTRACT FORMATION

OFFER

ACCPTANCE

CONTRACT

OFFER

COUNTER OFFER

ACCEPTANCE

CONTRACT

INVITATION TO TREAT

OFFER

ACCEPTANCE

CONTRACT

NO. 1

NO. 3

NO. 2