Business Law Contract Phases - Essay Example

Details of the contract The contract that is to be discussed in this paper is a joint venture agreement that has been entered by two companies, one being an Indian Infrastructure company by name M/s. CORAMANDEL INFRASTRUCTURE PVT. LTD., (CIPL), a Private Limited Company, incorporated under the Companies Act, 1957 and having its Registered office at #101, Plot No. 120, 1st Floor, GK Classics, Srinagar Colony, Hyderabad -500073, Andhra Pradesh, India and the second company being M/s. UNITED GROUP INFRASTRUCTURE PTY LTD, (UGI), a Private Limited Company, Incorporated laws of Malaysia. The agreement was entered together by both the companies for the purpose of the preparation and submission of a tender (hereinafter called “the Tender”) to the Client for construction of the Works. a) Offer and Acceptance phase of a contract – “The first requirement for a valid contract is an agreement, which normally consists of an offer and an acceptance and involves a meeting of the minds - or consensus - between two or more parties. To be effective an agreement must also be certain in all material respects. Thus, an agreement which is vague or ambiguous, incomplete or constitutes a mere agreement to agree will not be enforceable (Clark).” Offer and Acceptance phase of the above mentioned contract - Both the parties of the contract agree to form an unincorporated Joint-venture, the sole object and business of which is to execute the Works to finality as per client specifications. For the purpose of clarification, the Parties agree that no obligations shall arise hereunder unless and until the Tender is accepted. In the event of acceptance by the Client of the Tender and when required by the Client, the Parties will execute such form of contract for execution of the Works as shall conform to the specifications of the Tender as accepted by the Client, and the Contract to be executed and when executed by the JV shall thereafter be taken to constitute the Contract. The Parties shall be jointly and severally liable to the Client for the execution of the Works under the Contract. The rights and obligations of the Parties to each other shall be upon the terms and conditions set forth in this Agreement. b) Subject matter of the Contract - Performance of this Agreement and the Works shall be in accordance with sound commercial, industrial and construction industry practices. Subject to the terms of this Agreement and specifically to Clauses 3.2, 3.3, 3.4 and 9, the undivided percentage interest of each Party as tenant-in-common in the rights (subject to the obligations attaching thereto in respect of such Party) under this Agreement and in all real or personal property of whatsoever kind acquired or created by or on behalf of the Parties pursuant to this Agreement shall be as follows: UGI CIPL The Parties may agree to change the Specified Proportions mutually. “Consideration is the price that is asked by the promisor in exchange for their promise and is an essential requirement in Australia before a contract will be binding (save for agreements made under seal) (Clark).” 3.2 Profits and Losses - Each of UGI and CIPL shall be entitled to the profits derived in respect of or shall bear the losses associate with the UGI Works and the CIPL Works respectively. Where a loss or cost cannot be identified as a loss or cost associated with any one or more of the UGI Works or the CIPL Works, then the Parties shall bear that loss or cost in their Specified Proportions. 3.3 UGI Works - UGI shall be solely responsible for the funding and carrying out of the UGI Works, and all costs, expenses, losses, claims, compensation or damages including liquidated damages for delay incurred by the Parties or either of them, or for which they or either of them may be liable arising out of the UGI Works or any matter or thing in relation thereto and UGI shall indemnify and forever keep CIPL harmless against all such costs, expenses, losses, claims, compensation or damages whether liquidated or otherwise. c) Difference between terms that are conditions and those that are warranties In any contract, the terms that are conditions are basically a set of printed rules of auction and some of the aspects of the Purchase & Sale agreement that are read and distributed to potential buyers (Google) whereas the terms that are warranties refer to “an express or implied promise that something in furtherance of the contract is guaranteed by one of the contracting parties or their representatives (Google).” Conditional Term: Unless terminated in accordance with Clause 9, this Agreement shall continue until all liability and responsibility of the Parties under the Contract has ceased and a certificate is issued in this regard by the parties to the other and no covenant, representation or indemnity shall merge on completion. Clause 9 - If any of the events contemplated in Clause 9.2 occurs in relation to a Party (the “Defaulting Party”) then the other Party (the “Non-Defaulting Party”) may by written notice to the Defaulting Party elect to acquire the Defaulting Party’s interest under this Agreement, in the Contract and the Works effective seven (7) working days following the said notice (the “Transfer Date”) and otherwise on the terms contained in Clause 9.3. Clauses 9.2 & 9.3 - The events referred to in Clause 9.1 are as follows: (a)(breach): A Party commits a substantial breach of this Agreement or of the Contract, which in the latter case shall include causing the issue of a show cause or similar notice by or on behalf of the Client under the contractor’s default provisions of the Contract in respect of that Party’s part of the Works or in respect of events or circumstances relevant or related to that part of the Works and fails to rectify such breach within ten (10) working days following a written notice thereof from the other Party or within one half of the period of time specified in the said show cause or similar notice issued by or on behalf of the Client aforesaid whichever is earlier. (b)(Corporate failure): If in relation to a Party: (i) Notice is given of a meeting of creditors with a view to the Party entering a deed of company arrangement; (ii) The Party enters a deed of company arrangement with creditors; (iii) A controller or administrator is appointed; (iv) An application is made to a court for the winding up of the Party and not stayed within fourteen (14) days; (v) A winding up order is made in respect of the Party; (vi) It resolves by special resolution that it be wound up voluntarily (other than for a members’ voluntary winding-up); or (vii) a mortgagee of any property of the Party takes possession of that property. Terms those are warranties: Upon the occurrence of an event of default referred to in Clause 9.2 which the Defaulting Party has not rectified and notwithstanding service of a notice under Clause 9.2, the Non-Defaulting Party shall be entitled to: (a) Employ and pay other persons to carry out the necessary work to complete the Defaulting Party’s part of the Works; (b)use all the Defaulting Party’s temporary buildings, plant, tools, equipment, software, goods and materials intended for use, or delivered d to or placed on or adjacent to the Works; (c)the possession of all such drawings, working drawings, manuals, plans, programmes and software brought into existence by the Defaulting Party for the purposes of executing its part of the Works; (d) Have assigned to it without payment the benefit of any agreement entered into by the Defaulting Party for supply of materials or goods for the execution of its part of the Works, And the Defaulting Party shall do all acts and things and sign all documents necessary for that purpose and with the object of complying with the purpose under the following Clause: If the Non-Defaulting Party takes possession of the Defaulting Partys temporary buildings, plant or other things referred to in Clause 9.6(b) or (c), subject to Clause 9.3.4, on completion of the Works, the Non Defaulting party shall return such of them as are surplus. The Defaulting Party shall immediately return to the Non-Defaulting Party all confidential information, proprietary information and other assets held by the Defaulting Party that are owned by the Non-Defaulting Party. d) Dispute Resolution – In order to avoid any disputes or fraudulent practices, some contracts require essential terms to be recorded in writing and signed.  These requirements generally derived from the Statute of Frauds 1677 (which still applies in WA) and were principally designed to reduce fraudulent contractual claims.  In some cases more modern statutes impose formalities to protect consumers by ensuring that they receive copies of their contract and all its terms or to make proof of certain contracts easier (Clark) according to Australian laws.” (Law Council of Australia) According to the contract that is being discussed as part of this paper, clause 17 of the contract deals with the dispute resolution part. 17. DISPUTE RESOLUTION 17.1 Mediation First - If a dispute (other than a dispute in relation to clause 9) is not resolved by the Executive Committee, neither Party may commence any proceedings relating to the dispute (except where the Party seeks urgent interlocutory relief) unless it has first complied with Clauses 17.2 and 17.3. 17.2 Notice of Dispute - A Party claiming that the Executive Committee has failed to resolve a dispute must give written notice to the other Party specifying that it is a notice under this Clause 17.2 and the nature of the dispute. 17.3 Institute of Arbitrators and Mediators Australia - If the dispute is not resolved within seven (7) working days after the notice referred to in Clause 17.3 is given, either Party within the next two (2) working days may invite the Chairperson for the time being of the Chapter of the Institute of Arbitrators and Mediators Australia in the State or Territory referred to in Clause 12 to appoint a mediator to mediate and thereby settle the dispute and mediation shall take place accordingly. 17.4 Litigation - If the dispute is not resolved pursuant to Clause 17.3 within a further fourteen (14) days after the appointment of a mediator, the dispute may be referred to litigation. 17.5 No Disruption Notwithstanding the above the Parties recognise that no dispute can be permitted to prevent the timely completion of the Works and the Parties shall take no action (or conversely, omit to do an act that it is obliged to do) which may have the result of adversely affecting the completion of the Works in accordance with their contractual obligations. Should any dispute arise that has the effect of disrupting the delivery of the Works, the Project Manager shall be entitled to make decisions and to do such things as he or she in good faith believes is appropriate to deliver the Works in accordance with the Parties contractual obligations and no Party shall have any claim against the Project Manager or his or her employer for any decision they have taken in good faith to ensure completion of the Works. The Parties agree that both Parties have an economic and reputation incentive to ensure any dispute is avoided or resolved expeditiously. The Parties will use their best endeavours and act in the utmost good faith so as not to allow a dispute to jeopardise the due and proper performance of the Joint Ventures obligations. e) Effective Contract Management Practices In order to effectively implement or support the contract, the parties shall enter into terms which safeguard the security of the performance of the agreed contract. Both the parties shall enter into and furnish or cause to be furnished to the Client any bond or bank undertaking required by the Client as security for performance of the Contract within the time required by the Contract. In addition to this, The Parties shall provide to any insurance company or bank furnishing such bond or bank undertaking to the Client such security as the insurance company or bank may require such security to be provided by the Parties in their Specified Proportions. Premiums and other costs payable in connection with the issue of insurance policies required by the Contract to be effected by the contractor (other than those referred to in Clause 3.7) shall be borne by the Parties in their Specified Proportions. Clause 3.7 - Each Party shall insure against liability for death of or injury to persons employed by that Party in performance of that part of the Works which is the responsibility of that Party including liability by statute and at common law. The insurance shall be in the amount and of the duration required by the Contract and shall be extended to indemnify the Client for the Client’s liability if any to persons employed by that Party. Each Party shall ensure that every subcontractor to it is similarly insured. Each Party shall be responsible for insuring any motor vehicle and any plant item used by it in performance of its part of the Works. Bibliography 1. Clark, Julie. Australian Competition Law. 2008. 27 August 2008 . 2. Google. Terms and conditions - Definitions. 27 August 2008 . 3. —. Warranty - Definition. 27 August 2008 . 4. Law Council of Australia. Publications. 21 May 1999. 27 August 2008 . Read More