Contract practice Flashcards
What is a contract?
A contract is a legally binding promise (written or oral) by one party to fulfil an obligation to another party in return for consideration.
A basic binding contract should comprise four key elements: offer, acceptance, consideration and intent to create legal relations.
Please define ‘express terms’?
Express terms are the terms of the agreement which are expressly agreed between the parties.
Ideally, they will be written down in a contract between the parties but where the contract is agreed verbally, they will be the terms discussed and agreed between the parties.
Please define ‘implied terms’?
A contractual term that has not been expressly agreed between the parties but has been implied into the contract either by common law or by statute.
What is tort?
A tort is a civil wrong.
Part of the civil law.
A claim in tort is concerned with loss or harm.
How do statutory provisions and contract provisions differ?
Statutory provisions are set out by law & must be complied with regardless.
Contract provisions relate to the contract in question & therefore only apply to a specific project.
What is your opinion of oral contracts?
Whilst they are legally binding, the difficulty lies in proving the specific terms and conditions of the agreement. Having a written contract is always the preferred opinion.
What is a breach of contract?
A breach of contract occurs when one party in a binding agreement fails to deliver according to the terms of the agreement. A breach of contract can happen in both a written and an oral contract.
What is the Local Democracy, Economic Development and Construction Act 2009?
October 201 1 - the Local Democracy, Economic Development and Construction Act 2009 (the “2009 Act”) came into force in England and Wales.
The Act amended the Housing Grants Construction and Regeneration Act 1996 (the Construction Act)
The Act changed the way construction contracts are entered into and in particular, introduced an amended regime for payment and adjudication.
What are the key provisions under the Act? LEDC
Contracts
Payment
Payment notices : Contractual requirements
Payment notices: Payee’s notice in default of payers notice
Pay less notice
Suspension of performance for non-payment
What is a letter of intent?
Typically used to describe a letter from an employer to a contractor (or from a main contractor to a subcontractor) indicating the employer’s intention to enter into a formal written contract for works described.
The letter of intent typically asks the contractor to begin those works before the formal contract is executed.
What information is typically included in a letter of intent?
Detailed description of the work to be completed.
Contract sum (if agreed).
Date for possession.
Date for completion.
Insurance provisions required.
Method of payment.
Expiry date of letter.
Typically states employers’ right not to award the main contract for whatever reason.
ADR method.
What are the advantages of a letter of intent?
Allows work to commence (or place orders) before the main contract is agreed/signed.
What are the disadvantages?
LOI
May lead to complacency and disincentivise both parties from signing the main contract.
Contractually less robust than the main contract.
The employer loses incentive in negotiations of the main contract.
Who issues the letter of intent?
The employer.
In what circumstances might a letter of intent be used?
Where the employer needs to commence works before a certain date.
Where materials have long lead in times and early procurement would aid the programme.
Starting construction works might trigger early founding.
Who signs it? - LOI
Both the employer and the contractor
What would you say if the client asked you to draft a letter of intent?
It is a legally binding agreement like a contract; therefore, we would NOT draft those.
What are the different types of letters of intent?
Comfort Letter,
Instruction to proceed with consent to spend,
Recognition of contract
Are you aware of any case law relating to letters of intent?
Ampleforth Abbey Trust v Turner & Townsend.
he defendant project managers were retained by the T rust in relation to a project to build new accommodation at a school. The defendant’s retainer included obligations ‘facilitating, assisting and being involved in the procurement of the building contractor and the building contract’. The contractor never signed the building contract and the whole of the works (which were completed late) were procured using letters of intent. The effect of this was that the Trust was not able to claim liquidated damages under the building contract for the late completion of the works. HHJ Keyser QC held that the defendant had been negligent in failing to take the steps reasonably required of a competent project manager for the purpose of finalising the building contract between the Trust and the contractor.
What is a parent company guarantee?
A parent company guarantee (PCG) is a form of security that may be required by clients to protect them in the event of default on a contract by a contractor that is controlled by a parent company (or holding company). Typically, such a default might be caused by the insolvency of the contractor.
In what circumstance may a PCG be required?
Parent company guarantees can be particularly useful where a small contractor is part of a large, financially stable group of companies. The guarantee is given by the parent company to the client and in the event the contractor defaults on their obligations, the parent company is required to remedy the breach, meeting all the contractor’s obligations under the contract (and I or covering loss and expense incurred by the client).
Are there any Acts which govern third party rights?
Contracts (Rights of Third Parties) Act 1999.
What is the overarching purpose of the Act?
Contrats (Third party rights) ACT 1999
The Act allows third parties to enforce terms of contracts that they are not a party to, but which benefit them in some way, or which the contract allows them to enforce.
It also gives parties access to various remedies if those contract terms are breached.
What are the advantages of third-party rights?
Time and costs,
Certainty,
Subcontractors