Contracts

1. Contracts

2. 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

3. 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

4. Sources of Law • Statute Law • Law enacted by parliament • Ensure that law will reflect the needs of the community

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. Offer • Invitation to Tender is not an offer – Invitation to treat • Offer will terminate on rejection

14. 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

15. 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)

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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

24. Forms of Contract Simple Contracts • Can be either Verbal or Written • Implied • Can evidenced by Written Communication

25. 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

26. 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

27. 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

28. 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

29. 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

30. 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

31. 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

32. 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

33. Operation of Contract Assignment of Contract • Rights to a contract by be assigned to a third party • Novated Lease is an example of this

34. Discharge of Contract Discharge of Contract - Conclusion • By performance • By agreement before completion • Operation of Law-Bankruptcy - Liquidation-Merger ?-Fraud

35. 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?

36. Discharge of the Contract Time - Unless time is a Condition of the contract a contract will not lapse

37. 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

38. 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

39. Types of Contracts • Depending on the Client and Nature of the works will depend on the type of contract • Refer page 17 & 18

40. 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

41. 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

42. The Agreement • Names Of Owner & Builder • Description of the Works – Tender/Qoute • Drawings/Specifications • Contract Sum • Contract Terms • Signatures

43. 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

44. 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

45. 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

46. Other Factors that may Affect the Contract • Rising Cost– Provision may be made, Rise & Fall Contract against fixed Cost

47. 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

48. 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

49. 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

50. 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