Contract Practice

Question 1

What is a contract?

Answer 1

A contract is an agreement giving rise to obligations which are enforced or recognised by law.

Question 2

What is the basic contract law?

Answer 2

1. Offer
2. Acceptance
3. Consideration
4. Intent

Question 3

What is meant by an Offer?

Answer 3

• An offer is an expression of willingness to contract, made with the intention that it is to be binding once accepted by the person to whom it is addressed
• An invitation to treat does not turn into a contract; it is merely a stage in negotiations, inviting the other party to make an offer.

Question 4

What is meant by Acceptance?

Answer 4

• An acceptance is a final and unqualified expression of assent to the terms of an offer.
• Acceptance must be unconditional (e.g. a signature on a contract of employment, email)
• Negotiations are counter-offers, not acceptance
• Silence is not acceptance, unless it is clear acceptance was intended (as substantiated by that party’s conduct)

Question 5

What is meant by Consideration?

Answer 5

• A promise is not, as a general rule, binding as a contract unless it is supported by consideration (or it is made as a deed).
• Parties must exchange something of value for a contract to be binding (e.g. Min £1)
• Consideration must be sufficient, but need not be adequate
• Consideration must not be from the past
• Consideration must move from the promisee
  Traditionally, a person to whom a promise was made can enforce it only if he himself provided the consideration for it. However, where the
  conditions of the Contracts (Rights of Third Parties) Act 1999 are met, a third party may be able to enforce rights created in his favour by a contract which
  he was not a party to.

Question 6

What is meant by Intent?

Answer 6

An agreement, even if supported by consideration, is not binding as a contract if it was made without an intention to create legal intentions.

• An agreement which is made “subject to contract” (typically, agreements for the sale of land) or a “letter of comfort” is generally unenforceable.

Question 7

The Capacity of the parties

Answer 7

• All parties must have the ability to understand the terms of and any obligations under the contract.
• Consent to the contract must be freely given (force, fraud, misrepresentation, inebriation renders the contract void)
• People under 18, under the influence of drugs or those suffering from mental health conditions generally lack the capacity to enter into contracts.
• THE CLIENT/COMPANY MUST HAVE THE CAPACITY TO BE ABLE TO DELIVER THE WORK/PAY FOR THE WORK e.g. I do not have the capacity to enter into a Contract to deliver a £100m scheme because I am one person with £0 capital, no labour etc

Question 8

Form of Contract

Answer 8

The general rule is that contracts can be made informally; most contracts can be formed orally, and in some cases, no oral or written communication at all
is needed. Thus, an informal exchange of promises can still be as binding and legally valid as a written contract.

-Few exceptions exist.

Question 9

The Terms of the Contract

Answer 9

• Express

- Implied

Question 10

Express Terms

Answer 10

Express terms are ones that the parties have set out in their agreement.

Question 11

Implied Terms

Answer 11

A contract may contain terms which are not expressly stated but which are implied, either because the parties intended this, or by operation of law, or by
custom or usage.

Question 12

End of a Contract

Answer 12

There are essentially four ways in which a contract can be brought to an end:

1. EXPIRATION
2. TERMINATION
3. VITIATION
4. FRUSTRATION

Question 13

What is Expiration?

Answer 13

This refers to a contract which comes to an end in accordance with its terms, either because it has a fixed expiry date or because there is a right to terminate contained in the contract

Question 14

What is Termination?

Answer 14

1. Breach - A breach of contract is committed when a party, without lawful excuse, fails or refuses to perform what is due from him under the contract, or performs defectively, or incapacitates himself from performing.
2. Anticipatory Breach - An anticipatory breach occurs when, before performance is due, a party either
   repudiates the contract or disables himself from performing it.
3. Termination for Breach - Termination is the remedy by which one party (the injured party) is released
   from his obligation to perform because of the other party’s defective or non-performance.

Question 15

What is Vitiation?

Answer 15

There are situations where the parties have reached agreement but the question arises whether the existence or non-existence of some fact, or the
occurrence or non-occurrence of some event, has destroyed the basis on which that agreement was reached so that the agreement is discharged or in
some other way vitiated.

• Misrepresentation
• Mistake

Question 16

What is Frustration?

Answer 16

Under the doctrine of frustration, a contract may be discharged if, after its formation, an unforeseen event occurs which makes performance of the contract impossible, illegal or essentially different from what was contemplated.

Question 17

What is Damages/Remedies?

Answer 17

Damages are intended to compensate the injured party for the loss that he has suffered as a result of the breach of contract.

Question 18

What is a contract executed under seal?

Answer 18

Contracts executed under seal are:

• signed by the parties,
• witnessed
• and most importantly made clear that it is executed as a deed

Question 19

What is a contract executed under seal?

Answer 19

Contracts executed under seal are:

• signed by the parties,
• witnessed
• and most importantly made clear that it is executed as a deed
• The limitation period for a contract under seal is 12 years.
• A contract under seal does not have to be supported by valuable Consideration.

Question 20

What is a contract executed under hand?

Answer 20

A ‘simple contract’ that is just signed by the parties.

• An action founded on a simple contract cannot be brought after six years from the date on which the cause of the action accrued.
• A valuable Consideration must support a simple contract.

Question 21

What is the Housing Grants, Construction and Regeneration Act 1996?

Answer 21

• The HGCRA 1996 is also known as the Construction Act
• Applies to all Contracts for “Construction Operations” (incl consultants).
• Intended to ensure payments are made promptly throughout the supply chain and that disputes are resolved swiftly
• Response to the Latham Report (1994)

Question 22

What provisions does the HGCRA 1996 include?

Answer 22

• The right to be paid in interim, periodic or stage payments.
• The right to be informed of the amount due, or any amounts to be withheld.
• The right to suspend performance for non-payment.
• The right to adjudication.
• Disallows “pay when paid” clauses.

Question 23

What happens when contracts fail to comply with the HGCRA?

Answer 23

The Scheme for Construction Contracts applies.

Question 24

Why was the HGCRA Amended in 2011?

Answer 24

• To close loop holes within its provisions
• The act now applies to construction contracts including those that are not in writing.
• It is no longer allowable to define within a contract who should bear the cost of adjudication
• Adjudicators have the right to correct errors in their decisions within 5 days of delivering that decision.

Question 25

What specific changes did the 2011 Amendment make?

Answer 25

• The dates for payments must be set out in the contract.
• The client (or specified person) must issue a payment notice within five days of the date for payment, even if no amount is due. Alternatively, if the contract allows, the contractor may make an application for payment, which is treated as if it is the payment notice.
• The client (or specified person) must issue a pay less notice if they intend to pay less than the amount set out in the payment notice, setting out the basis for its calculation.
• The notified sum is payable by the final date for payment.