Contracts
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Contracts. What is Law. Generally accepted “Rules of Behaviour” Contract Law developed from the need to enforce promises or an undertaking. These promises were enforced by the King represented by the courts

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Contracts

Contracts


What is law

What is Law

  • Generally accepted “Rules of Behaviour”

  • Contract Law developed from the need to enforce promises or an undertaking. These promises were enforced by the King represented by the courts

  • To ensure that every one received consistent justice, decisions were recorded so that future decisions could be based on similar principles

  • The is called Common Law


Sources of law

Sources of Law

  • Common Law – Is law derived from previous decisions on cases of similar merits. Known as Judge made law.

  • Why is this important?

  • To allow for certainty!

  • This system has problems, what are they

  • Contract Law is based on Common Law


Sources of law1

Sources of Law

  • Statute Law

  • Law enacted by parliament

  • Ensure that law will reflect the needs of the community


Source of law

Source of Law

  • Were there is a conflict between statute law & common law

  • Statute Law will prevail

  • This has important ramifications for Contact Law

  • Contract Law has been affected by statute law


Civil court system in nsw

Civil Court System in NSW

Each State will have a similar system

High Court of Australia

Final Court of Appeal

Full Bench Federal Court of Australia

Appeals

Court of Appeal NSW

Federal Court of Australia

Commonwealth Matters

Bankruptcy, Trade Practices

Appeals

Supreme Court NSW

Unlimited

Appeals

Appeals

Appeals

District Court

Cases up to $750 000

CTTT

Cases up to $500 000

Other Tribunals

i.E. Land Environment Court

Appeals

Magistrates Court

Cases up to $40 000


Civil court system in nsw1

Civil Court System in NSW

Binding Precedence

Lower Courts are bound by decisions from a superior court in their jurisdiction

High Court of Australia

Final Court of Appeal

Full Bench Federal Court of Australia

Court of Appeal NSW

Federal Court of Australia

Commonwealth Matters

Bankruptcy, Trade Practices

District Court of NSW is not bound to follow decisions of the Supreme Court of Victoria

Supreme Court NSW

Unlimited

District Court

Cases up to $750 000

CTTT

Cases up to $500 000

Other Tribunals

i.E. Land Environment Court

Magistrates Court

Cases up to $40 000


Contracts1

Contracts

  • What is a Contract ?

  • A legally enforceable promise by one party do something or to refrain from doing something

  • To be legally enforceable the agreement must comply with Common Law requirements for a valid contract


Essentials of a valid contract

Essentials of a Valid Contract

  • Intention for the parties to enter into a legal relationship enforceable by law

  • Offer & Acceptance

  • Valuable Consideration or execution under seal

  • Legal Capacity to Act

  • Genuine Consent

  • Legality of the Objects of the Contract


Intention

Intention

  • Is there an intention to enter into a legally binding agreement

  • Social Agreement are presumed no

  • Business Agreement are presumed yes

  • Intention can be expressly excluded


Essentials of a valid contract1

Essentials of a Valid Contract

  • Intention for the parties to enter into a legal relationship enforceable by law

  • Offer & Acceptance

  • Valuable Consideration or execution under seal

  • Legal Capacity to Act

  • Genuine Consent

  • Legality of the Objects of the Contract


Offer

Offer

  • Offer may be in writing, verbal or implied by conduct

  • Offer must be communicated

  • The Offer can be withdrawn at any time before acceptance (Postal Rule)

  • An offer will lapse if- not accepted with in a stated time- not accepted within a reasonable time- a counter offer is made by the other party


Offer1

Offer

  • Invitation to Tender is not an offer – Invitation to treat

  • Offer will terminate on rejection


Essentials of a valid contract2

Essentials of a Valid Contract

  • Intention for the parties to enter into a legal relationship enforceable by law

  • Offer & Acceptance

  • Valuable Consideration or execution under seal

  • Legal Capacity to Act

  • Genuine Consent

  • Legality of the Objects of the Contract


Acceptance

Acceptance

  • Must be final and not qualified (other wise it is a counter offer

  • Only person who offer has made to can accept

  • Silence is ineffective

  • Conduct can constitute acceptance

  • Once accepted no other negotiations can be conducted

  • Method of Acceptance can be specified (See Postal Rule)


Essentials of a valid contract3

Essentials of a Valid Contract

  • Intention for the parties to enter into a legal relationship enforceable by law

  • Offer & Acceptance

  • Valuable Consideration or execution under seal

  • Legal Capacity to Act

  • Genuine Consent

  • Legality of the Objects of the Contract


Valuable consideration

Valuable Consideration

  • Something of Value – Usually Money

  • Does not have to be a fair deal

  • Simple Contracts must have considerationThis is the fundamental Difference between a contract & a promise


Essentials of a valid contract4

Essentials of a Valid Contract

  • Intention for the parties to enter into a legal relationship enforceable by law

  • Offer & Acceptance

  • Valuable Consideration or execution under seal

  • Legal Capacity to Act

  • Genuine Consent

  • Legality of the Objects of the Contract


Legal capacity

Legal Capacity

  • Minors generally do not have legal capacity except-Items of necessity-Items that are beneficial

  • Mentally ill do not have capacity

  • An intoxicated person does not have capacity- but on sobering up can affirm the contract

  • Corporations are treated as individual entities and have capacity to contact – beware who you are contracting to

  • Alien Enemies capacity is reduced

  • Convicts have capacity

  • Married Women – Unfortunately are allowed to contract to receive credit cards


Essentials of a valid contract5

Essentials of a Valid Contract

  • Intention for the parties to enter into a legal relationship enforceable by law

  • Offer & Acceptance

  • Valuable Consideration or execution under seal

  • Legal Capacity to Act

  • Genuine Consent

  • Legality of the Objects of the Contract


Genuine consent

Genuine Consent

  • The consent must not be induced by deception of fraud

  • Contract can not be formed under duress

  • Contract cannot be formed by Unconscionable Conduct


Essentials of a valid contract6

Essentials of a Valid Contract

  • Intention for the parties to enter into a legal relationship enforceable by law

  • Offer & Acceptance

  • Valuable Consideration or execution under seal

  • Legal Capacity to Act

  • Genuine Consent

  • Legality of the Objects of the Contract


Legality

Legality

  • The object of the contract cannot violate Statute law- you can not contact to kill someone and then expect a court to enforce payment

  • Illegal under Common Law- Contract to commit a tort- Promote Corruption- Prejudicial to Administration of Justice- Prejudicial to Public Safety


Forms of contract

Forms of Contract

Simple Contracts

  • Can be either Verbal or Written

  • Implied

  • Can evidenced by Written Communication


Forms of contract1

Forms of Contract

Formal Contracts

  • Derived from old law before the Common Law principles of Contracts was developed

  • Method to make promise enforceable

  • Must be written

  • Sometimes referred as Deed


Forms of contracts

Forms of Contracts

Express Contract

  • Normal Type of Contract

  • Conditions & Warranties documented

  • Supporting Documents i.e. Drawings, Spec etc

  • Dispute Resolution Process?

  • Time For Completion

  • Liquidated Damages Spelt out


Form of contract

Form of Contract

Implied Contract

  • Contact constructed by the courts

  • Actions or Inactions by the parties indicate a contract exists

  • Conditions & Warranties to be determined by the court at a later date


Implied contracts

Implied Contracts

  • Builder Contracts to build house on C1 block of land

  • By error Builder builds on C2 land which is next block. C1 is unaware of this.

  • Most evenings C2 has a beer with the builder and has a chat.

  • C2 has an implied contract and must pay the builder. C2 has a duty to stop the builder


Contract terms

Contract Terms

Condition

  • Major requirements of the Contract

  • Fundamental to the contract

  • Breach allows innocent party to either Terminate the Contract or Sue for Damages


Contract terms1

Contract Terms

Warranties

  • Minor Term of the contract

  • Contract is not substantially different

  • Breach allows innocent party to sue for Damages

  • Termination will be a breach of contract and innocent party may be liable for damages


Contract terms2

Contract Terms

Innominate Terms

  • May either be a warranty of Condition(Paint one door the wrong colour v’s the whole building)

  • Is a subjective assessment

  • Most terms will fall in this area

  • Must take care in dealing with these breaches


Operation of contract

Operation of Contract

Privity

  • Only parties to a contract have rights and liabilities under a contract

  • A contracts with b to build a house for C

  • C cannot sue A for any breach


Operation of contract1

Operation of Contract

Assignment of Contract

  • Rights to a contract by be assigned to a third party

  • Novated Lease is an example of this


Discharge of contract

Discharge of Contract

Discharge of Contract - Conclusion

  • By performance

  • By agreement before completion

  • Operation of Law-Bankruptcy - Liquidation-Merger ?-Fraud


Discharge of contract1

Discharge of Contract

Impossibility of Performance - Frustration

  • Absolute Impossibility- contract to renovate house, house burns down

  • Radical Difference – Change of Council or Government Conditions, Court Injuctions

  • Supervening Illegality –Law is Changed after contract is formed to make it illegal?

  • Futility –Where purpose of the contract is no longer valid?


Discharge of the contract

Discharge of the Contract

Time - Unless time is a Condition of the contract a contract will not lapse


Discharge of the contract1

Discharge of the Contract

  • Breach of Contract- Not every breach of contract allows for the termination of the contract

    Before this action is taken legal advise should be sought.

  • A court will determine whether the breach was substantial enough

  • Innocent party may be liable for damages


Damages

Damages

  • Unliquidated- Determined by Court

  • Liquidated Damages- Genuine Estimate of loss agreed to in contract

  • Penalty- if loss is not Genuine classed a penalty and will be reduced to genuine loss


Types of contracts

Types of Contracts

  • Depending on the Client and Nature of the works will depend on the type of contract

  • Refer page 17 & 18


Types of contracts p 20

Types of Contracts P 20

  • Lump Sum

  • Cost, plus a fee

  • Cost plus a percentage

  • Schedules of Rates

  • Labour Only

  • Do and Charge

  • Design & Construct


Building contracts basic structure

Building ContractsBasic Structure

  • Contract Period- Specified Time for Contract to be completed- Builder has Control of Site

  • Practical Completion- The works have reached a stage that is suitable for use by the client- Transfer of Works to client- Insurance by Client


The agreement

The Agreement

  • Names Of Owner & Builder

  • Description of the Works – Tender/Qoute

  • Drawings/Specifications

  • Contract Sum

  • Contract Terms

  • Signatures


General conditions

General Conditions

  • Form of the Agreement

  • Specifies the operation of the contract-Dispute Resolution- Payment Schedule-Access by Client- We will be look at a HIA Contract


Status of owner type of contract

Status Of Owner – Type of Contract

  • Government – will have there own form or may use standard form with their own terms

  • Statutory Bodies – generally use government conditions

  • Large Companies – Will have their own terms

  • Smaller Companies – Standard Form Contracts


Other factors that may affect the contract

Other Factors that may Affect the Contract

  • Lending Authorities – Payment Schedule, May appoint Quantity Surveyor/ Clerk of Works, Architect

  • Type of Works – New Building, Renovation, Civil Works

  • Time Influences – May require contract to start before full documentation is complete –FAST TRACK


Other factors that may affect the contract1

Other Factors that may Affect the Contract

  • Rising Cost– Provision may be made, Rise & Fall Contract against fixed Cost


Definition overheads

Definition - OVERHEADS

  • Cost that are incurred that are not directly attributable to the construction process.

    Insurance – Overhead

    Office Costs – Overhead

    Bricks/ Bricklayers – Construction Cost

    Foreman – Overhead

    Carpenters – Construction Cost

    Workers Compensation - Overhead


Types of contracting arrangements

Types Of Contracting Arrangements

  • Lump Sum – Builder agrees to complete the documented works for an agreed price. Agreed price can only change by agreement i.e. variation


Types of contracting arrangements1

Types Of Contracting Arrangements

  • Cost Plus Fee – Builder is paid for all material, labour and subcontractor costs.

  • In addition the builder receives a predetermined fee to cover overheads + profit


Types of contracting arrangements2

Types Of Contracting Arrangements

  • Cost Plus Percentage – Builder is paid for all material, labour and subcontractor costs.

  • In addition the builder receives a set percentage of costs to cover overheads and profit


Types of contracting arrangements3

Types Of Contracting Arrangements

  • Schedule of Rates – A schedule of rates for construction items is agreed.

  • Agreed rates include profit & overhead

    Brickwork Supply & Install $2.50 per brick

    Wall Framing 2.4h Supply & Install

    Supervised Carpenter $65 per hour


Types of contracting arrangements4

Types Of Contracting Arrangements

  • Labour Only – Agreement is to provide labour only at an agreed rate for each trade.The agreed rate covers the builders overheads & profit.

  • Clients usually provides materials


Types of contracting arrangements5

Types Of Contracting Arrangements

  • Do and Charge – Agreement has no fixed price.

  • Builder charges what they think is the value of works

  • Usually leads to disputes


Types of contracting arrangements6

Types Of Contracting Arrangements

  • Package Deal Design and Construct – Builder is responsible for design and construction based on parameters set by the client.


Standard printed contract forms

Standard Printed Contract Forms

  • Australian Standards

  • MBA

  • HIA

  • Department of Fair Trading


Definition subcontractor

Definition – Subcontractor

  • Contract Between the Builder and other specialised organisations used to complete the works that relate to the Head Contract.Care should be taken to ensure that the same terms are included as the “Head Contract”

  • Good practice would be to use contracts from the same organisation


Definition head contract

Definition – Head Contract

  • Contract Between the Client & BuilderBuilder is called “Head Contractor”.

  • This definition has applications outside the contract.

  • OH&S Law requires that Head Contractor provide a safe work place.


Hia contracts

HIA Contracts


Hia contracts1

HIA Contracts


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