Basic Requirements of a Contract in English Law - Assignment Example

Construction Law Basic Requirements of a Contract in English Law A contract can be defined as an agreement in which the law recognizes. The parties involved agree to do or refrain from doing some things with the aim of creating a legal connection, which may be enforceable by law. A contract is very important in the business life and other forms of commercial transactions. These commercial transactions may include; the sale of land and goods, insurance, creation and trading of business organizations, employment, and giving of credit (Marsh and Soulsby 2002, p106). Not all contracts are recognized by the law. The law of contract basically gives an outline in which the businesses can operate. Where the agreements are broken with impunity, the English law intervenes and makes the individual who broke it to pay the compensation or damages to the other individual (Marsh and Soulsby 2002, p106). The English contract law will only be enforceable if the agreement has the following requirements; Intention to create legal relations Offer and acceptance Consideration Form Definite terms Legality Intention to Create Legal Relations The requirement checks if the involved parties had the intention of entering into a legal agreement through a contract (Young 2010, p5). Majority of the agreements are plain and the involved parties do not intend to be legally bound and thus no intention to take any issues to a law court. There is a basic assumption that every business agreement intends to form a legal relation. The assumption can be rejected only when there is clear evidence that there was a written contract. In collective agreements such as an agreement between employers and trade unions, the contract may not be legally binding. The agreement between the two is considered to be intentional and thus, the contract is not legally enforceable unless there was a written contract to show that it could be enforced legally (Marsh and Soulsby 2002, p108). Offer and Acceptance For a contract to become legally recognized, certain requirements must be fulfilled. When a party makes an offer to the other party and that party accepts the offer, a contract is created. The individual making an offer must purpose to be legally bound without making any further negotiations. The offer should have the following characteristics; complete, clear and final. It must also be capable of communicating to the offeree (Brunner, Ottley and Salzedo 2004, p1). The party accepting the offer must take the offer without any conditions and qualifications. The acceptance of the offer must be communicated by conduct or by word. Silence cannot constitute acceptance. Not all circumstances can allow the actual communication of an acceptance, for example, where postal rules apply. In such a case, the offer is accepted when the letter of acceptance has been posted or when the telegram of acceptance has been handed in (Brunner, Ottley and Salzedo 2004, p1). If other terms are introduced into the offer other than those in the offer, then the offer becomes a counter offer and it is not valid as an acceptance. An offer lapses when the time limit has been reached as stated in the offer or when there is delay in the offer and acceptance of it or when either of the party dies (Brunner, Ottley and Salzedo 2004, p1). Consideration An English contract of law is not concerned with promises but bargains. The parties involved give each something; that something is what is called the consideration. For example, when a seller promises to deliver a car, it is in the consideration of the buyer’s promise to purchase that car on the agreed price. Consideration in a contract is described as something done in exchange. In other words, the promise made by each party is the cost at which the promise of the seller is bought. Consideration can take two forms; either executory or executed. A promise that has not being fulfilled is said to be an executory consideration. Many contracts start this way and the consideration is executory in both cases. When one part of the bargain is completed, the agreement is said to be an executed consideration. It is mandatory for consideration to exist and have a value; otherwise a contract fails to exist (Marsh and Soulsby 2002, p109). Form This is the method in which the contract was agreed upon; written or oral. Some of the contracts are only valid if they are made on a certain form such as in writing (Marsh and Soulsby 2002, p107). Definite Terms It is important that the parties in agreement understand what is being agreed upon. They must know what certain terms mean. Several things have to be taken care of such as what the parties have agreed, any regular terms between the two and existence of different terms depending on what goods have been ordered (Young 2010, p4). If the terms in the contract are not clear or meaningless, the law fails to identify the agreement. If the parties are not sure of the terms of the contract, a contract between them does not exist. Legality A section of agreements are entirely contrary to the public policy and the law have nothing common with them. For example, when a murderer is hired on contract and the principal refuses to pay the agreed value, the court would not permit the hired murderer to recover the damages (Marsh and Soulsby 2002, p107). Disputes in building and construction industries over contractual terms and procurement arrangements Disputes in building and construction industries over the contractual terms and procurement arrangements are inevitable. The disputes as indicated may arise due to conflicts in contractual terms and procurement arrangements. Competition, functional and dysfunctional conflict are some of the causes of disputes in contracts. Competition arises when two or more parties are striving for the same goal, that is, obtain a contract. The parties have no direct linking with each other and if that happens, conflict arises. Clarification of some things such as the work content, time, and quality is likely to occur and thus requiring some form of dialogue and management criteria to manage it. One party wants this and the other another thing. If the parties involved in the contract are unable to resolve the issues, a functional conflict arises. Dysfunctional conflict arises when the conflicting parties fail to recognize, and respond to the functional conflict or either of the parties assume that the conflict does not exist. It is common for the party with the money to regard themselves as having no problem at all. Thus, before any settlement is done, these issues must be solved (Fenn and Gameson 2005, p44). Disputes have also risen in cases where the court fails to fairly allocate risk. This may be attributed to the fact that courts have failed to take account of the networks properly and courts adoption of more complex approach to the issues. For example, the case of Norwich City Council v. Harvey, the court used the main contract terms to determine the responsibilities of the third party subcontractor. The issue is referred to as the incorporation of terms by reference. In some contracts, the subcontractor is assumed to have known the all the main contract necessities save prices (McInnis 2001, p90). There have been disputes between the contractor and the employer in regard to payment. Other than payment disputes, disputes regarding the procurement chain between the contractor and subcontractor is common. These disputes are discussed in judicial comments such as Dawnays Ltd versus FG Minter Ltd in 1971 and Pegram Shoplifters Ltd versus Tally Wiejl in the United Kingdom in 2003. The 1990 recession revealed money problem in the contractual chain where money was not passed from the employer to the subcontractor and from the supplier through contractor (Speaight 2009, p239). The Latham Report It is also known as the Constructing the Team report. The report was written by Sir Michael Latham in 1994. The document was written for the construction industry. Latham stated in his report that the construction industry either had persistent problems or the industry itself was not fully implemented. The report also gave recommendations and suggestions for the problems facing the construction industry. The report emphasized more of the cooperation than adversary in the construction industry. According to Latham enhanced performance was achievable only in a fresh atmosphere; partnership was viewed as a means to enhanced performance (Langford and Murray 2003, p146). The report contained the personal views of Latham and he acknowledged total responsibility for any recommendations and outcomes in the report. There are 30 recommendations in the Latham report. These recommendations include: 1. Focal Points – Clients Latham recommended that the Department of the Environment (DOE) work closely with Departments of Wales, Scotland and Northern Ireland. The government ought to conduct itself as a best practice client. The private sector clients should be represented and this is to be done through creation of a construction firm. 2. Guide for Clients on Briefing A guide briefing or a check list should be prepared by the Construction Industry Council (CIC). The guide briefing should be also included in the contractual process and the client should be able to sign off the design brief. 3. Code of Practice A construction code of practice (CSCP) should be coordinated and published by the DOE in order to notify and advise the clients. 4. Code of Practice In order for the clients to meet their objectives and get value for their money, a CSCP should be designed. 5. Consultation of the Process Plant Sector The implementation of the CSCP should involve the European Construction. 6. Check-list Designers As a part of reconstituted JCT (Joint Contracts Tribunal) duties, the creation of the check-list or adoption of the existing ones such as British Property Foundation (BPF) and Building Services (BSRIA) should be placed as an urgent task. 7. Coordinated Project Information (CPI) The circumstances of engagement of the designers should include the CPI technique and they should be made a contractual necessity. 8. Allocation of M&E (Mechanical and Electrical) Design Responsibilities Regardless of the procurement system employed by the client, the provision of the design responsibilities between the specialist engineering contractor and the design consulting engineer must follow guidance check list. The specialist engineering contractor should have a separate design agreement. 9. The Joint Contracts Tribunal The principles given in the report should be taken care of when amending the standard ICE and JCT forms. 10. The CCSJC (Construction Contract Standards Joint Committee) A significant change is needed in the structure of JCT and CCSJC. 11. Joint Liaison Committee NEC amendments should be considered by a joint liaison committee. The committee should also build a complete set of documents concerning the amendments. 12. Clients The use of the NEC by the private and public sector should begin and the phasing out of the bespoke documents should be done simultaneously. 13. Register for the Consultants and Quality/Price Assessment The DOE should keep a register for consultants for the public sector work. Firms willing to do public sector work should also be included in the register. 14. Project Sponsors and Managers There should be a clear definition of the duties and roles of the project sponsor. Sufficient expertise for the government project sponsors is a requirement for effective fulfilment of their roles. 15. Main Contractors’ and Subcontractor List The DOE should keep a list of contractors and subcontractors who seek the work of public sector. They should also develop a quality register of the approved companies (Langford and Murray 2003, p148). 16. Tendering Selective offering of European Union Directives tenders should be accompanied by the specific requirements for the tenders and to be included in the CSCP to all the public sector clients. 17. Interim Arrangements A central qualification list should be set up by the DOE on the basis of contractors and subcontractors seeking the public sector work. The list should be accompanied by the national scheme guidance on quality tender assessment. 18. Selection of Subcontractors Joint code of practice should be written in the selection of subcontractors and it should include pledges to a brief tender list, procedures for fair tendering and the teamwork on site. 19. Partnering Advice on partnering should be provided to the public authorities. The public authorities will be able to experiment on partnering arrangements before they make long term commitments. Unanimously agreed and measurable targets should be included in the partnering arrangements for productivity improvement. 20. Training An urgent examination is needed for the recent proposals that relate to the work of Construction industry Training Board. 21. Image of the Industry and Equal Opportunities The public image of the industry should be improved through the implementation of the recommendations. Much attention is required in the provision of equal opportunities in the industry with the help of the government. 22. Professional Education The CIC is in a better position to put into practice the published suggestions on professional education. 23. Research and Development The clients should be involved in the existing research initiatives. The BUILD type insurance should fund the launch of a new information and research initiative. 24. Productivity Target By 2000, the real cost reduction of the productivity target should be 30 percent. 25. Unfair Conditions NEC and other newly formed amended forms should be given a statutory backing by the introduction of a Construction Contracts Bill. Unfair contract clauses should be removed. 26. Adjudication The legislation should ensure the introduction of a system of adjudication in the standard form of contract. Adjudication should resemble the normal form of dispute resolution. 27. Trust Funds The establishment of a mandatory trust fund for payment in relation to the construction work should be governed by the formal conditions of the contract. 28. Liability Legislation Majority of the recommendations in the working party on the construction liability law should be implemented through the Construction Contracts Bill. 29. Latent Defects Insurance In the Construction Contracts Bill, a provision for compulsory latent defects insurance of 10 years should be included. It should be done before the practical completion of the future new retail, commercial and industrial building work. 30. Possible Delivery Mechanisms The progress should be monitored by the implementation forum and considerations should be made to decide whether there will be creation of a new Development Agency to steer productivity improvements and stimulate teamwork (Langford and Murray 2003, p149). Achievements of the Latham Report There has been a significant change in the culture of the construction industry. The targets were achieved but not within the time frame set. The recommendations in the report achieved their purpose of reducing conflict and litigation, and promote the construction industry performance and productivity. The mode of operation by many clients, contractors and designers has changed in response to the stated actions. The industry has been forced to improve their value for money and thus the need to adapt to new production methods (such as prefabrication) and procurement methods that are innovative such as partnering. A significant achievement has been the shift of courts to adjudication in the resolving of construction disputes. These changes and the variation in the business conditions have led to significant transformation of the construction industry (Langford and Murray 2003, p159). References Brunner, P., Ottley, M. & Salzedo, S. (2004) Briefcase on contract law. London, UK: Routledge. Fenn, P. & Gameson, R. (2005) Construction conflict management and resolution. London, UK: Chapman & Hall. Langford, D. A. & Murray, M. (2003) Construction reports, 1944-98. Oxford, UK: Wiley-Blackwell. Marsh, S. B. & Soulsby, J. (2002) Business law. UK: Nelson Thornes. McInnis, A. (2001) The new engineering contract: A legal commentary. London: Thomas Telford. Speaight, A. (2009) Architect’s legal handbook: The law for architects. Oxford, OX: Architectural Press. Young, M. (2010) Contract law: The basics. Oxon, OX: Routledge-Cavendish. Read More