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Contract Law in Business - Features, Benefits and Limitations

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Contract Law

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Introduction

Its is a very clear fact that half of the world is being governed by business organisation who has been dealing with all kind of business activity. One of the most practised activity in business organisation is signing deal with the other organisation. This is one of the most important activity but it has been observed that many fraud and illegal act has been carried out while signing any deal which is why government has implemented a very important law called law of contract.(McKendrick, 2014.) Contract has various aspects which shall create the layer of protection to all those employee who have been making any contract with any other country. The following project shall aim to reflect various aspects of contract. The purpose of drafting this project is to modify the skill and knowledge about law of contract with reference to business scenario and to portrait benefits and limitation of contract law.

SECTION A

QUESTION (A)

When the contract has been formed by the party then it is very important while making the contract to include all the essential elements.(Poole, 2016. ) The the elements of the contract has not been included while the formation has been taking place then such contract shall be entitled as void contract by which no legal liability or legal obligation shall fall on to the parties. So, any business organisation whether it is related to construction of business, shall make the project with all the essential elements and those are:-
Parties- when any construction business organisation is ought to make a contract with the developer, it is very important that parties shall be either 2 or more then 2. no contract shall be made with the party itself. It is always necessary that 2 parties shall be present or more then 2 parties who have the same interest to create a contract.(Hillman, 2012. ) Such parties who have been entering into a contract shall be competent to it that is the party shall not be minor, insolvent or unsound mind.

Offer- when the developer has a interest to create a contract with construction company then it must propose an offer to the company regarding the contract. It is very important to make an offer to the company from whom a contract has been signed. Without offer no party can enter into a contract. An offer to a contract show that the party has a lawful interest in entering into a contract.
Acceptance- when the offer has been made by one party then the acceptance has to be given by another party. Without acceptance then other party cannot enter into a contract. An acceptance to a offer reflects that the other party has the same intention to enter into a contract. The acceptance to a contract shall be given without any force or undue influence. If any acceptance has been attained by undue influence then such shall not be considered as lawful acceptance.

Consideration- while the party make any contract with the other party then it must include a lawful consideration in the contract.(Twigg-Flesner, 2013.) A consideration shall be referred as exchange of value of one party to another. The consideration to a contract must be lawful in nature. It is very important essential to a contract. Without consideration, given by the parties no contract shall be formed.
Agreement- an agreement shall be formed prior making of the contract. It is very necessary that before entering into a contract, both the parties must carry out an agreement. An agreement to a contract means some terms and condition of a contract on which the parties have agreed and when any breach occur in the provision of contract then suitable suit shall be brought against them, an agreement to a contract raise certain legal obligation on both the parties.

Hence these are some of the essential elements which shall be included in the formation of a valid contract.(Cartwright, 2016. ) But there are certain situation in which the contract which has been formed by the parties get breach result into damages to the party. For an example a contract has been established between a developer and a contract but some of the provisions are altered which has resulted into breach of contract then parties has the right to file a case against the part who had breached contract by contact to JTC.

JTC is joint contracts Tribunal which is made of seven members who deals with the cases related to building and construction industries. It represent to all the standard form of contract which has been formed by the parties in context to building and construction and give a guidance note on the same. The main purpose of Joint Contract Tribunal is to establish a relief for all those parties who have being suffering from any kind of breach and damages of contract and to diminish all the risk factors of the parties. Joint Contract Tribunal deal with the type of contract which has been made on standard building and design and Build.(DiMatteo, 2013.) The standars format which has been carried out in a contract of building and construction is while making the contract, first of all an article and agreement has to be formed by the parties then there shall be indulgement of particular information specific to the provision of contract. It is very important when a contract has been made on building and construction, then the parties must include conditions to contract. Schedules are also to be added in the formation of a contract which cover some of the more commonly used add ons to a construction contract such as insurance option, a design submission procedure and fluctuation.

According to the guideline of Joint Contract Tribunal there are two kind of contract which the developer and the construction company is tend to form that is Design and Build contract and Standard Building Contract.

Standard building contract is also know a traditional contracting in which the contractor shall not include any kind of design.(Vogenauer, 2013.) The work will be described on the behalf of drawings and bills of quantities prepared on the behalf of employer and given to contractor. When a standard building contract with Quantities is made by the parties then the employer must provide drawing and bills of quantities to specify the quantity and quality of work. The price and payment structure is based upon the lump sum with monthly interim payments in a contract. When the party is willing to make any kind of sub contract then a written permission of the architect shall be taken. For an example in the given case it has been seen clearly the the contractor and developer had entered into a standard building contract with quantities 2011. in this case a property dealer employee a small construction firm, to build a mixed retail and residential development. An excavation has been carried out by the party for new development project in which a cache of bronze coins is discovered buried in a set of six Roman amphorae. The work was immediately halted and archaeologists are called to take an investigation on the discovered item. Soon archaeologists found seven vases and pack full of Roman coins. The department dig the area for six weeks before they were fully satisfied that they have been unearthed all the antiques they are likely to find on the site which was relatively small. It has been seen in this case due to the continuous digging of the surface, the work was delayed by which there is a possibility of breach of contract on the part of contract. It is duty of the contractor to finish the work on time so that the developer shall not suffer any kind of damages. (Busch, 2013.)It is his contractual obligation to fulfil the provisions mentioned in the contract. An obligation to a contract arise rights and duties on the party by which if breach arise then liability shall fall. According to Standard Building contract with quantities, contract with permission of architect shall appoint sub contractor to finish the work on time. Even the developer or the architect shall bring an action against contractor if the provision are not fulfilled mentioned in a contract. That i the develop and the architect shall possess the right to bring a claim against contractor company if the work shall not be completed on time. Such action shall be administered by Joint contract Tribunal for breaching the provision of contract made party. It has been further seen the case that work was already delayed by digging of area, developer changed his mind about the layout of the retail space in the development and decided to build a tiny shop. By this contractor estimated that the design changes likely to delay completion of the project by up to five further weeks.(Smits, 2013.) According to standard building contract with quantities 2011, the employer must provide drawings and bill of quantities to specify the quantity and quality of work before the work started but in this case the work has been already delayed and afterwards the developer has change his mind by which if the work didn't get completed on time no suit shall be brought against him. It has been seen clearly from the case that developer has changed his mind after the contract is being made and no alteration can be carried out after a contract was made.(Baum, 2014.) But it has further seen in the contract that the offer or the change was accepted by the contractor and given a consideration to complete work by extra 5 weeks. In that case if both the parties agree on the condition of completing the work by extra 5 weeks and then the contractor shall not be able to complete his work, a suit can be brought against him by the developer and architect or contract administrator as the provision on which the contract has been made is breached by the party.

(Abdi, Aulakh, 2012.)According to the guideline which has been narrated by Joint contract Tribunal, provide a fixed date of completion of work and envisages up front agreement of liquidated damages as an estimate of employer's losses if the contractor does not complete the work by that contractual agreed date. That is, in the agreement an estimate of compensation shall be included by the party of liquidated damages in case any kind of loss occur on the non completion of work on agreed date. The contractor shall be entitled to ask for the extension in order to complete his work delayed due to an event occur which is at employers risk and delays the contract. When the delayed in project occur due to any act of developer then the contractor is not liable to pay any damages nor he is liable to pay any estimated amount of the losses which has been occurred with the breach of contract or with the non completion of work.(Shapiro, Pearse, 2012. )

QUESTION (B)

To build any kind of building it is very important to make a blue print of the plan which shall include all the estimated budget. Drawing id one of the important plan to be carried out in designing of building. Without a particular design no building can be construct. A prefect design of a building shall decide the quality of work and the amount of labour and material to be used which is why all the company who has been in the business of constructing the building make drawings and bill from employer so that a quality of work and quantity of labour and material shall be estimated.(Cappelli, Keller, 2013.) When a contract has been signed between the parties regrading constructing of any building then, drawing shall be carried out by the employer. Such contract shall be entitled as standard building contract guided from Joint contract Tribunal. It is very important to submit all the drawings and bills prior to the making of building so that contractor can make up his mind and bring out the plan to do the work. While the contract has been made a particular date is to be decided on which work shall be completed and such completion depends upon the design of building. But a situation has been created in the scenario in which both the parties have entered into a contract that is not being governed by standard From Joint contracts Tribunal.(Christensen, Nikolaev, Wittenberg‐Moerman, 2016.) The contract has been formed on the sketchy set of terms and conditions. The terms and conditions are entirely silent about the steps taken by client /employer redefine, or attempts to redefine the scope of contract works in circumstances. According to law when the contract is being formed between the parties then there are certain terms and conditions which are to be included in the formation of a contract. It is very important to include all the necessary terms and condition in the contract because these terms and conditions are knowns as implied terms which are inculcate by statute or the government. Its is very necessary that the party should specify that what shall be condition of a contract prevailing over the party.(Bar-Gill, Ben-Shahar, 2014.) A condition to a contract shall define the legal obligation of the party. There are certain obligation on to the party when there is formation of a contract. Such legal obligation is known as the rights and duties of the party to be arise by the contract. When there is breach in the terms and condition of the contract then legal obligation shall fall on to the party. Terms and conditions are referred to as the legal part of the contract which shall raise legal obligation on to the party. While making a contract the party or the employer should make sure that which part of contract shall be legally binding. All the terms which has been mentioned in a contract will be in written contract, or asimilar document like a written statement of employment. Such terms and conditions shall be verbally agreed by the party. Parties competent to a contract are bound by its terms only. No other statement which has been framed in pre contract talk will be taken as term in the contract. If inducement were promised, they can sit alongside the main contract as a collateral contract. Contract always contain different types of terms known as conditions which are more important then warranties.(Marotta-Wurgler, 2012.) Sometime when the contract has been formed then it is possible to have a term that excludes one party responsibility, but the courts generally view exclusion clauses as unfair. Conditions are so important that without them one party cannot enter into a contract so it is very important that these conditions shall be made in a particular form like wise it has been seen in the present case that in case of particular terms and conditions, a sketchy set has been given in which terms and condition to a contract are silent by which many consequences can occur. If the terms and conditions are not clear in the contract then no suit can bring against the party if the contract is breached. No liability shall be brought against the party who doesnot clear the terms and condition of contract. There are various kinds of terms to be included in a formation of a contract and that are(Bergman, Lundberg, 2013.)

Conditions- a condition to a contract shall referred to major term of the contract which goes to the root of contract. Condition raise legal obligation on to the party so that if there is a breach in the condition then innocent party shall be entitled to pay compensation for the damages occurred.
Warranty- warranties shall be referred as minor terms of the contract which shall not be centralised to the existence of the contract. Id any party breach the warrant mentioned in contract then innocent party may claim damages but cannot end the contract

Innominate terms- there are certain terms which are not included in either condition nor in warranty to a contract, such term shall be referred as innominate terms. All those terms which are not known as warranty or condition either are known as innominate terms. Their approach looks to the effect of the breach and questions whether the innocent to the breach was deprived of substantially the whole benefit of the contract. Only were the innocent party was substantially deprived of the whole benefit. Hence, it can be concluded for the above case that if the terms and condition mentioned in a contract are silent then no action could bring against either of the party if any breach arise in the contract.

CASE LAW: Poussard v Spiers (1876) 1 QBD 410

facts in this case that Madame Poussade entered into a contract for the perfromace of singing as a opera singer. She became ill by five days before the opening night which is why she was not able to perform opera for 4 nights. Spiers who hired opera singer replaced her another opera singer. It was held in this case that Madame Poussard was in breach of condition which has been mentioned in the contract she entered into. And Spires were entitled to end contract with her. She missed the opening night which is considered to be one of the important night in those 5 days as all the critics and publicity was based on the performance of that day.

(Dou, Hope, Thomas, 2013.)A breach of contract is a kind of legal action in which the terms and condition or agreement or bargained exchange by one or more than one parties competent to contract by not performing the condition of contract or interference with the other party's performance. When the parties are entered into a contract then there are certain contractual duties over them which are necessary to fulfil if the party does not fulfil his contractual promise or has given information to the other party for not performing the contractual promise then the person shall be said in breach of contract.(Schepel, 2012.) Breach in a contract can be of many type for an example when there is substantial performance in the contract then it shall be known as partial or immaterial breach by which the party cannot sue for any specific performance but can sue for the actual damage.(Armbruester, 2013.) On the other hand a material breach is when there is failure occur of a particular act in which performance of other party is dependent then it shall be known as material breach. Fundamental breach referred to any fundamental condition which has been breached by the party which shall result into damages. In the above case it has been seen that the the work is not completed by the contractor on time by which there was breach in a contract. It is to given according to the law of contract that what ever condition are mentioned in the contract shall be fulfilled by the party if such condition are not fulfilled then it shall amount to breach of contract. In the present case the work was already delayed by the contractor by which terms and conditions were breached. If there is breach in the contract then legal obligation shall rise. Legal obligation is rights and duties arising out of contract which result into legal liability. When there is breach in the contract then parties have right to bring suit against the parties in which they can ask for the compensation of the damages occur. When there is a repudiator breach of contract then the party who is innocent in nature shall possess the right to terminate performance related to contract and can claim damages suffered as result of the breach.(Clauwaert, Schomann, 2012.) When there shall be breach of warranty in contract then party has the right to claim damages directly from breach. The contract as a whole remains in place. Equitable remedies are also awarded to the party who has been suffering from the breach of contract.(Cotterrell, 2012.) These are known as civil remedies that be be awarded in the practical circumstances of the case. In some cases of breach of contract damages will be an inadequate remedy an an application can be filed for the alternative remedies for an example specific performance or injunction. The general rule for the damages occure out of breach of contract states that an award shall be given to the innocent party . A claim for more more than nominal damages will be subjected to the ordinary rules of remoteness, mitigation and penalties.(Lumineau, Henderson, 2012.)
Hence it can be seen from the above discussion that when there shall be breach of contract then parties have the right to bring a suit of claim against other for seeking damages or compensation whether the breach occur out of not completion of work.

CASE LAW:- Hadley v Baxendale [1854] EWHC J70

Conclusion

It shall be concluded from the above project that all the contract which has been formed between a employer and contractor then such shall be governed by Joint Contract Tribunal. A standard Building contract by quantities 2011 is a kind of new concept which has been made in reference to contractor and explained under this project. There are various kind of consequences which can be brought by breach of contract like arising of damages, is also explained under this project.

References

  • Abdi, M. and Aulakh, P.S., 2012. Do country-level institutional frameworks and interfirm governance arrangements substitute or complement in international business relationships?. Journal of International Business Studies,
  • Armbruester, C., 2013. PEICL-The Project of a European Insurance Contract Law. Conn.
  • Bar-Gill, O. and Ben-Shahar, O., 2014. Exit from contract. Journal of Legal Analysis,
  • Baum, H., 2014. Public vs. Civil Law: The German Controversy About the Interaction Between Capital Market Regulation and Contract Law. Hikakuhō Zasshi,
  • Bergman, M.A. and Lundberg, S., 2013. Tender evaluation and supplier selection methods in public procurement. Journal of Purchasing and Supply Management,
  • Busch, C., 2013. Towards a European Contract Law for E-Commerce and Digital Content: A Report on the European Law Institute’s Projects Conference 2013. Journal of European Consumer and Market Law.
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