CONTRACT LAW

ByBabulayi Wilson

University of Botswana

IMPORTANCE OF LAW TO ENGINEERSProfessional involvement in Litigation or ArbitrationAffected by Legal Matters Awareness of the main principles of Law and the Legal SystemUnderstand Framework for Contract LawUnderstand Principles of giving Expert Evidence for Trial or Arbitration

THE LEGAL SYSTEMClassification of the law

Administration of the law

Sources of law

Tribunal System

CLASSIFICATION OF THE LAW (1OF 5)Different Categories (Two Considered)

1. Criminal Law

2. Civil Law

CLASSIFICATION OF THE LAW (2OF 5)Criminal Law Characteristics

the offence is against societythe state prosecutesthe trial is in a Magistrate Courtthe offender is found guilty or not guilty, andthe offender is punishedComplainant often becomes State Witness

CLASSIFICATION OF THE LAW (3 OF 5)Civil Law Characteristics

the dispute is between individuals or Partiesthe Plaintiff sues the Defendantthe trial is in a High Courtthe Defendant is found liable or not liable, and the Plaintiff is compensated

CLASSIFICATION OF THE LAW CONT (4 OF 5)Further Classification of Civil Law

Contract Law - legal binding agreementsTort - civil wrong (origin of Consultancy Contracts)Property recognizes Real & Personal PropertyCommercial Law - business transactions

CLASSIFICATION OF THE LAW (5 OF 5)Family Law - marriage, divorce, custody of children, maintenance and adoptionCompany Law - legal person or artificial person Employment Law special contract law that governs employment or industrial realtions

SOURCES OF LAW (1 OF 10)Two Main SourcesLegislation known as statute law since it involves creation of Acts by Parliamentcodified in Acts of Parl e.g. Sale of Goods Act 1893statutes are more commonly used where social legislation is required e.g. HSW Act 1974 and Trade Union and Labour Relations Act 1974In some areas of law statutes are common (e.g. Criminal law & Revenue law etc)most law is derived from judicial precedent (case law) and statutes are used to revise or adapt legal rules made by courts

SOURCES OF LAW (2 OF 10)Acts of Parliament

Statutes begin life as bills originating from government departmentsIntroduced into Parliament by a government minister

SOURCES OF LAW (3 OF 10)- LegislationSubordinate/Delegated Legislation

drafted by ministries and local authorities etccalled subordinate since it is made by bodies with limited powerssubject to amendment by Act of Parliamentmay also be held invalid by courts unlike statute law (examples are Building Act and Bylaws)

SOURCES OF LAW (4 OF 10)- LegislationInterpretation of Acts of Parliament

Courts have no power to alter/amend Acts of Parliament but

can have an important impact on the application of statutes since they must interpret the words, andapply them to the case consideredthe situation is often that the wording is ambiguous court is assisted by Interpretation Act that provides a number of definitions unless the contrary is shown

SOURCES OF LAW (5 OF 10) - Judicial Precedent Judicial Precedent (Case Law) - decisions of courts made in the course of litigation (apply in subsequent cases by certain courts where the facts are largely the same)

judge must decide in favour of one party & give reasons for his decision (called ratio decidendi)

SOURCES OF LAW (6 OF 10) - Judicial Precedent

decision binds parties in particular dispute but ratio decidendi binds others in similar disputes in future

in the course of judgement the judge makes a number of comments, but not all of which form ratio decidendi (not binding and called obiter dicta (things said by the way)

SOURCES OF LAW (7 OF 10) - Judicial Precedent or Case LawBinding and Persuasive Precedents

ratio decidendi - binding precedent followed only by certain courts (lower ranking)

judges in subsequent cases may be persuaded to follow an argument that is not binding (persuasive precedents)

SOURCES OF LAW (8 OF 10) - Judicial Precedent or Case LawBinding and Persuasive Precedents

the following are particularly important: obiter dicta things said by the wayforeign decisions - similar legal systemsdissenting judgments from other cases

SOURCES OF LAW (9 OF 10) - Judicial Precedent or Case LawLaw Reports

system of recording casesdecisions made in courts must be recorded and publishedreports referred to in shortened hand e.g.

SOURCES OF LAW (10 OF 10) - Case Law (Law Reports)HEDLEY BYRNE & CO LTD v HELLER 7 PARTNERS LTD 1964 AC 465 was a House of Lords Appeal Case, and is found on page 465 of 1964 reports

the first named party brings an action against the second,

R v Someone indicates the Crown (state) brought the case, and Re Someone means the other partys name is being withheld

Note that Tribunal system including Arbitration, Adjudication Cases are not reported, so no precedent is or can be set by Arbitration

Application of Contract Law in Construction

This is the source of most Conditions of Contract (FIDC;ICE: JBCC)

Knowledge of Contract Law is Essential in Contract Procedures

The Structure of Contract LawCreation of a Contract

Defects in a Contract

Discharge of a Contract

The Parties to a Contract

Creation of a ContractIntroduction

A contract is an agreement that the parties have voluntarily entered into and which is legally binding and enforceable in law providing certain requirements have been complied with.

Creation of a Contract Requirements (1 of 4)Offer - contractor offers a price against a proposal drafted by engineers (clients agent). You need to understand that which is offered.

Communication MediaPostal rulesTelegramTelephone/TelexFax

Creation of a Contract -Requirements (2 of 4)Acceptance - Client accepts a price quoted against a schedule of pricing (e.g. BOQ). Sufficiency & Correctness of Tender Price & Rates is crucial at this stage; agree upon scope of contract and expectations.

Consideration - Elements of value (contractor expects payment for work that meets input specification & client expects product that is fit for purpose - shall be real & sufficient)

Executed Consideration - exchange at time of agreementExecutory Consideration - promise to give in future

Creation of a Contract -Requirements (3 of 4)Intention to create legal relations - agree to sue each other under the contract

Capacity - Finance, Expertise, Plant & Equipment, Reputation, human resources (contracts with incapacitated parties are voidable the other party may rescind at a future date)

Avoid contracting with impecunious contractors by employing a systematic tender evaluation and contractor selection strategies

Creation of a Contract -Requirements (1 of 3)Purpose -Validity of the contract (legality and observation of public policy) Illegal contracts are void (deemed to have never existed)

TERMS, CONDITIONS, WARRANTIES AND REPRESENTATIONSTerms

Expressed Terms - stated in some way (contract documents - Form of Contract, Specs, Drawings, etc)

Implied Terms -(implied by fact, law, or custom) - has to be there for the contract to work (e.g. Health and Safety at work)

CONDITIONSConditions - when express terms are of fundamental importance to the purpose of the contract (e.g. time for contract completion, cost and quality); some conditions are implied by e.g. legislation, i.e., protection of environment, HSW

Breach of conditions (repudiatory breach) a breach of a condition of contract entitles the injured party to repudiate/terminate the contract

WARRANTIESWarranties - when express terms are less important (or subsidiary) to the purpose of the contract (e.g. employment of local labour, design requirement for contractor these are called secondary objectives)

However, some subsidiary terms are Government Policies that have to be implemented (citizen contractor preference)

Breach of warranties - claim for damages only

DEFECTS IN CONTRACTS

DEFECTS IN CONTRACTSMISTAKE AND MISREPRESENTATION (Consensus Ad Idem (Real Agreement)

Sometimes a contract may appear valid in that there is an offer, which is accepted, consideration ,and an intention to create legal relations but in reality there is no real agreement between the partiesThis is often because one party is induced to enter into the agreement by a misrepresentationAt times one or both parties are mistaken about some essential element relating to the contract.

DEFECTS IN CONTRACTSMistake

The general rule is that mistake does not make a contract invalid. This rule even applies where the seller is aware of the buyers mistake providing the seller has not misrepresented the truth of the buyer

DEFECTS IN CONTRACTSCategories of Mistake

Mistake as to the Existence of the Subject MatterWhere both parties contract in the mistaken belief that a particular thing is in existence when in fact it has ceased to exist (fundamental mistake)

Mistake as to the Identity of the other PartyIt is sometimes pleaded by one party that there is no valid contract because he was mistaken as to the identity of the other party to the agreement and he would never have entered into the contract if he had been aware of the other partys true identity.

DEFECTS IN CONTRACTSMistake as to the Identity of the other Party (conti.)

Such a claim will only succeed if it can be shown that:-

The identity of the other party