Contract Law in Business - Features, Benefits and Limitations

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 have 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 organization whether it is related to the construction of business, shall make the project with all the essential elements and those are:-
Parties- when any construction business organization ought to make a contract with the developer, it is very important that parties shall be either 2 or more than 2. No contract shall be made with the party itself. It is always necessary that 2 parties shall be present or more than 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 the party shall not be minor, insolvent, or unsound mind.

Offer- when the developer has an interest in creating a contract with a 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 an offer, no party can enter into a contract. An offer to a contract shows 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, the other party cannot enter into a contract. An acceptance of an offer reflects that the other party has the same intention to enter into a contract. The acceptance of 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 makes any contract with the other party then it must include a lawful consideration in the contract.(Twigg-Flesner, 2013.) A consideration shall be referred to as the exchange of value of one party to another. The consideration of a contract must be lawful in nature. It is very important and essential to a contract. Without consideration, given by the parties no contract shall be formed.
Agreement- an agreement shall be formed prior to making the contract. It is very necessary that before entering into a contract, both parties must carry out an agreement. An agreement to a contract means some terms and conditions of a contract on which the parties have agreed and when any breach occurs in the provision of a contract then a suitable suit shall be brought against them, an agreement to a contract raises certain legal obligations on both parties.

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

JTC is a joint contracts Tribunal that is made of seven members who deal with cases related to the building and construction industries. It represents all the standard forms of contract which have been formed by the parties in the context of building and construction and gives a guidance note on the same. The main purpose of the Joint Contract Tribunal is to establish relief for all those parties who have been suffering from any kind of breach and damages of contract and to diminish all the risk factors of the parties. Joint Contract Tribunal deals with the type of contract which has been made on standard building and design and Build. (DiMatteo, 2013.) The standard 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 the contract. Schedules are also to be added in the formation of a contract which covers 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 the Joint Contract Tribunal, there are two kinds of contracts that the developer and the construction company tend to form that is Design and Build contract and the Standard Building Contract.

A standard building contract is also known as a traditional contract in which the contractor shall not include any kind of design. (Vogenauer, 2013.) The work will be described on behalf of drawings and bills of quantities prepared on behalf of the employer and given to the contractor. When a standard building contract with Quantities is made by the parties then the employer must provide drawings and bills of quantities to specify the quantity and quality of work. The price and payment structure are 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 example, in the given case it has been seen that the contractor and developer had entered into a standard building contract with quantities of 2011. in this case, a property dealer employs a small construction firm, to build a mixed retail and residential development. An excavation has been carried out by the party for a 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 were called to take an investigation on the discovered item. Soon archaeologists found seven vases and packs full of Roman coins. The department dug the area for six weeks before they were fully satisfied that they had unearthed all the antiques they were 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 and there is a possibility of breach of contract on the part of the contract. It is duty of the contractor to finish the work on time so that the developer shall not suffer any kind of damage. (Busch, 2013.)It is his contractual obligation to fulfill the provisions mentioned in the contract. An obligation to a contract arises rights and duties on the party by which if a breach arises then liability shall fall. According to the Standard Building contract with quantities, a contract with permission of the architect shall appoint a subcontractor to finish the work on time. Even the developer or the architect shall bring an action against the contractor if the provisions are not fulfilled as mentioned in the contract. The developer and the architect shall possess the right to bring a claim against the contractor company if the work shall not be completed on time. Such action shall be administered by the Joint Contract Tribunal for breaching the provision of the 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 are likely to delay the completion of the project by up to five further weeks. (Smits, 2013.) According to the standard building contract with quantities 2011, the employer must provide drawings and a 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 afterward, the developer has changed 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 the developer has changed his mind after the contract was made and no alteration can be carried out after a contract was made. (Baum, 2014.) But it has been further seen in the contract that the offer or the change was accepted by the contractor and given consideration to complete work by an extra 5 weeks. In that case, if both the parties agree on the condition of completing the work by an 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.)The guideline which has been narrated by the 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 occurs on the noncompletion of work on the agreed date. The contractor shall be entitled to ask for an extension in order to complete his work delayed due to an event occurring which is at the employer's risk and delays the contract. When a delay in a project occurs due to any act of the 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 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 blueprint of the plan which shall include all the estimated budget. Drawing is one of the important plans to be carried out in designing of building. Without a particular design, no building can be constructed. A perfect design of a building shall decide the quality of work and the amount of labor and material to be used which is why all the companies who have been in the business of constructing the building make drawings and bills from employers so that a quality of work and quantity of labor and material shall be estimated.(Cappelli, Keller, 2013.) When a contract has been signed between the parties regarding the construction of any building then, a drawing shall be carried out by the employer. Such contract shall be entitled as a standard building contract guided by the Joint Contract Tribunal. It is very important to submit all the drawings and bills prior to the making of the building so that the 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 the building. But a situation has been created in the scenario in which both parties have entered into a contract that is not being governed by standards From the Joint Contracts Tribunal.(Christensen, Nikolaev, WittenbergMoerman, 2016.) The contract has been formed on a sketchy set of terms and conditions. The terms and conditions are entirely silent about the steps taken by the client /employer to redefine or attempt 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 conditions in the contract because these terms and conditions are known as implied terms which are inculcated by statute or the government. It is very necessary that the party should specify what shall be a 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 obligations to the party when there is the formation of a contract. Such legal obligation is known as the rights and duties of the party to arise by the contract. When there is a breach in the terms and conditions 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 obligations on to the party. While making a contract the party or the employer should make sure that which part of a contract shall be legally binding. All the terms that have been mentioned in a contract will be in a written contract, or a similar document like a written statement of employment. Such terms and conditions shall be verbally agreed upon by the party. Parties competent to a contract are bound by its terms only. No other statement that has been framed in the pre-contract talk will be taken as a term in the contract. If inducement were promised, they could sit alongside the main contract as a collateral contract. Contracts always contain different types of terms known as conditions which are more important than warranties.(Marotta-Wurgler, 2012.) Sometimes when the contract has been formed then it is possible to have a term that excludes one party's 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 it has been seen in the present case that in the 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 does not clear the terms and conditions of the contract. There are various kinds of terms to be included in the formation of a contract and that are(Bergman, Lundberg, 2013.)

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

Innominate terms- there are certain terms that are not included in either condition or in the warranty to a contract, such terms shall be referred to 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 where the innocent party is substantially deprived of the whole benefit. Hence, it can be concluded for the above case that if the terms and conditions mentioned in a contract are silent then no action could be brought against either of the parties 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 performance of singing as an opera singer. She became ill five days before the opening night which is why she was not able to perform opera for 4 nights. Spiers who hired an opera singer replaced her with another opera singer. It was held in this case that Madame Poussard was in breach of the condition that had been mentioned in the contract she entered into. And Spires was entitled to end the contract with her. She missed the opening night which is considered to be one of the important nights in those 5 days as all the criticism 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 conditions or agreement or bargained exchange by one or more than one party competent to contract by not performing the condition of the contract or interfering with the other party's performance. When the parties enter into a contract then there are certain contractual duties over them that are necessary to fulfill if the party does not fulfill 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.) A breach in a contract can be of many types for example when there is substantial performance in the contract then it shall be known as a partial or immaterial breach by which the party cannot sue for any specific performance but can sue for the actual damage. (Armbruster, 2013.) On the other hand, a material breach is when there is failure occurs in a particular act in which the performance of the other party is dependent then it shall be known as a material breach. Fundamental breach refers to any fundamental condition that has been breached by the party which shall result in damages. In the above case, it has been seen that the work was not completed by the contractor on time and there was a breach of a contract. It is to be given according to the law of contract that whatever conditions are mentioned in the contract shall be fulfilled by the party if such conditions are not fulfilled then it shall amount to a 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 a breach in the contract then legal obligation shall rise. Legal obligation is rights and duties arising out of a contract that results in a legal liability. When there is a breach in the contract then parties have the right to bring suit against the parties in which they can ask for compensation for the damages that 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 the contract and can claim damages suffered as a result of the breach.(Clauwaert, Schomann, 2012.) When there is a breach of warranty in a contract then the party has the right to claim damages directly from the 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 can be awarded in the practical circumstances of the case. In some cases of breach of contract, damages will be an inadequate remedy an application can be filed for alternative remedies, for example, specific performance or injunction. The general rule for the damages occurring 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 is a breach of contract then parties have the right to bring a suit or claim against others for seeking damages or compensation whether the breach occurred 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 contracts that have been formed between an employer and contractor then such shall be governed by the Joint Contract Tribunal. A standard Building contract by quantities 2011 is a kind of new concept that has been made in reference to contractors and explained under this project. There are various kinds of consequences that can be brought by breach of contract like arising of damages, which is also explained under this project.

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• Different Types of Contracts & their Impact on the Parties
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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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