Advice and Recommendations for WWD - Essay Example

? Advice and Recommendations for WWD Before taking into account the reasons of parting ways by the offeror and the offered, we have to peruse the contents of contract and subsequent betrayals. For the offeror and the offered, it is important to understand the difference of bilateral and unilateral contracts to ink an effective contract. For a better understanding, way may quote here an example of leading case of Carlill v Carbolic1 wherein the competent court of law had effectively addressed the issues.   Accordingly, if an acceptance takes place, binding contract is constituted. The important elements of an agreement is a) it should be in black and white b) it should be in line with the agreed terms c) it should be unambiguous and clear in terms and condition. It is observed that the building projects are seldom completes on the given time due to one reason or the other. Reasons of the delay might be a) delay on the part of contractor b) suspension of work c) non payment to contractor in time and the d) circumstances beyond the control of stakeholders. The contractor as per the agreement, bound to complete the task within the given timeframe. If work is not done within the allocated time, the contractor is obliged to compensate the losses suffered by the employer. In the scenario No.1 where an old cellar was discovered by the Cash ( the contractor) on site which was not identified by Woolley Wilson Developments (WWD)( the employer ) hence, caused extra time and expenses to the contractor, which should be born by the employer. In the scenario No. 2 the contractor had to call in British Gas Company to reposition the main gas pipeline which took near about sixteen days to get the job done, caused a delay of 16 days in the accomplishment of project, therefore, bound to pay compensation to the above said employer. The competent court of law or the arbitrator as the case may be, shall determine the compensatory amount payable to the affected stakeholder keeping in mind the actual losses. Further, the competent jurisdiction or the arbitrator empowers either to increase or to decrease the compensatory amount provided substantial violations of the contract were found. According to UK law, unliquidated damages are determined by the competent court of law provided the loss is proved by the petitioner. Only then claimant shall be entitled for compensation. In the case of Surrey CC v Bredero Homes (1993)2, it was held by the court that damages were not merely awarded on failure of compliance but to the loss suffered. Contrary to that, in the case of Chaplin v Hicks (1911)3, the court of law awarded compensation to the claimant. It transpired from the said judgments that the court even considers those claims where monetary losses are not occurred. In accordance with law, damages are analyzed in order to place the claimant in the same position where they were, if they performed as per the agreed terms. Now the question is how to quantify the damages occurred for the expected losses. Here we found two options to handle the issue a) reason of non performance and b) remedial measures to mitigate the losses. We may refer the cases of Radford v De Froberville (1977)4 and Tito v Waddell (no 2) (1977)5. In referred cases, the court had the diversion views as far as compensation for the damages are concerned. In other words, court of law while deciding the cases of compensation assessed the damages first. Under English law, damages are categorized in two ways a) liquidated damages and b) unqualified damages. As per civil code of conduct, liquidated damages are taken as penalty. In the mentioned situation, liquidated damages clause, if inserted in the contract, is applicable. Breach of a contract attracts compensation under liquidated damages. Provided a) either uncertain or difficult to quantify b) amount of compensation based on actual losses c) adequate remedy e) planted damages. If aforesaid criterions are not fulfilled, liquidated damages clause in the contract has no potential value. Penalty has nothing to do with the actual loss or harm done to the aggrieved party. Penalty is a sort of punishment or deterrence for others. Penalties are applicable where any of the agreed terms has not been complied with. For example, if an employer, as in the above case, does not make payment on the scheduled time, liable to pay the penalty. Therefore, when a contract is drawn, clear terms of expected damages and compensation there against should be incorporated for the benefits of stakeholders whether they are contractor or the employer. Liquidated damages clauses have the several contractual advantages for the contractor and the employer. It mitigates the cost of performance against the cost of breach. Alternatively, liquidated damages can be taken as a source of limited insurance for the signatories. Moreover, by virtue of contractual obligations, parties have the opportunity to settle their issues out of the court on mutually agreed compensatory amount since knocking at the court for a viable decision takes reasonable time and costs. Over the years, Enforcement of liquidated damages clauses has been improved to take care of the interest of either side. We may refer the cases of Lynnfield v. Sloan (1989)6 and Shapiro v. Grinspoon (1989)7, wherein competent jurisdiction allowed liquidated damages against the actual damages occurred due to breach of contract. Since then several courts honored the liquidated damages provided they are equal to the actual damages. In the referred situation, Cash (the contractor) has to suffer extra expenses and expected delay in completion of project if further time is not allowed by the employer. This has happened due to change in initial building plan relating to ground floor to accommodate the tenant’s requirement. Again in the mentioned scenario, the contract, the court and the arbitrator has to play its due role in deciding the claims of damages.   It is a general notion that litigant is entitled to have compensation against substantial damages as enumerated in the contract for breach of contract. It is reflected in the statement of Lord Diplock in the case of Albazero (1977)8. “The general rule of English law is that a party to a contract apart from nominal damages can only recover actual loss that sustained." The judges Parke B. in Robinson v. Harman (1848)9 and Lord Blackburn in Livingstone v. Rawyards Coal Co. (1880)10 endorsed the above statement. In the said cases neither judges were concerned on the condition in which a party contracts a contract to recover the actual damages from the defendant as a result of breach of contract. Since no authority cited in the case of Lord Diplock, therefore, it may be taken as an exceptional case. It is a visible defect in the English law where if A enters into a contract with B and B should carry out the assignment for the benefit of C, A may not have the remedy for the expected losses against B if B’s performance is not up to the required standard. Take the cases of building contracts, Linden Gardens Trust Ltd. v. Lenesta Sludge Disposals Ltd.11; St. Martin's Property Corporation Ltd. v. Sir Robert McAlpine Ltd (1994)12. The case in point is St. Martin's Property Corporation Ltd. it started construction on site in the city of Hammersmith. Said corporation entered into an agreement with the local government, according to which on completion of the project, Corporation would qualify for one hundred and fifty years lease. In the year 1970, property interests of corporation under the said agreement had been transferred to another company of the same group. At this stage the question has raised that whether the Corporation could be in a position to recover substantial damages from McAlpine on breaching the building contract, wherein the interest of the Corporation had been transferred to another party. McAlpine was of the view that Corporation before any breach of contract disposed of all its interest that relates to the property where building works carried out, had not suffered any loss as far as damages are concerned which could be recovered. McAlpine cited the example of The Albazero13. The majority of distinguished judges were against McAlpine as far as the exceptions to the general rule are concerned referred to by His Lordship Diplock in The Albazero. He had taken the so called rule in Dunlop v. Lambert14 case. In his considered opinion supported by other members of the Appellate Jurisdiction, Lord Browne Wilkinson held that: "In my judgment the present case falls within the rationale of the exceptions to the general rule that a plaintiff can only recover damages for his own loss. The contract was for a large development of property which, to the knowledge of both Corporation and McAlpine, was going to be occupied, and possibly purchased, by a third party and not by Corporation itself. Therefore it could be foreseen that damage caused by a breach would cause loss to a later owner and not merely to the original contracting party, Corporation. As in contracts for the carriage of goods by land, there would be no automatic vesting in the occupier or owners of the property for the time being who sustained the loss of any right of suit against McAlpine. On the contrary, McAlpine had specifically contracted that the rights of action under the building contract could not without McAlpine's consent be transferred to third parties who became owners or occupiers and might suffer loss. In such a case, it seems to me proper, as in the case of carriage of goods by land, to treat the parties as having entered into the contract on the footing that Corporation would be entitled to enforce contractual rights for the benefit of those who suffered from defective performance but who, under the terms of the contract, could not acquire any right to hold McAlpine liable for breach. It is truly a case in which the rule provides 'a remedy where no other would be available to a person sustaining loss which under a rational legal system ought to be compensated by the person who caused it.”15 With reference to common law, only the stakeholders of a contract could enforce the contract. The rule is very much clear in terms of its rationality and understandings. It includes doctrine of consideration. Practicably it creates great problem in commerce and in the domestic issues. The parties entered into an agreement have the enforceable rights. The rule of law precludes the rights to enforce, hence fail to give effect to the intending contracting parties. In the presence of aforementioned problems which lead to a number of exceptions to the rule and its ultimate abolition by the Contracts Act 1999. Attached please find herewith the report on the pros and cons of a contract being faced by the Contractor and the Employer during execution of the projects. We have discussed threadbare about the laws in force, case laws and the available remedy if any one of the stake holder deviates the path of agreed terms and conditions. In order to enforce the rights of the stake holders, contract should be transparent addressing all issues and its available remedy so that any of the stakeholders will not knock at the door of the competent court of law for justice and fair play which definitely adds up the professional costs of solicitors, court fees and other expenses. Further, it will also be a time consuming exercise. There can not be two opinions that Construction projects rarely completes on the given time due to one reason or the other. Hence, it may cost more than the agreed price by the executors of the project. The common claim of a contractor relates to belated amendments in the project, lack of proper designing and late payments. The common claim of an employer against a contractor is defective work, spent more time and money than the agreed time and money. To address all such issues, Standard form of contract should be in place which allows completion date to be adjusted by way of more time. Sometimes it would be difficult for the stakeholders to fix the responsibility on account of the completion of the project. However, if it is proved that the fault lies on the part of contractor, the employer shall claim liquidated damages from the contractor. The liquidated damages clause are utmost important on the part of employer if the contractor completes its project beyond scheduled time. The cited clause may exercise as an effective tool for the liquidated damages. Usually the employer contracts consultant for building construction, engineering contracts with an engineer. In many projects it was observed that employer put in place project manager, quantity surveyor or the administrator to administer the contract. Professional consultants have to render their services strictly in accordance with professional code of conduct. Therefore, they are ( the Contractor / the Consultant ) accountable for poor performance in connection with a) failed to design works to be carried out b) failure to supervise the works efficiently c) failed to ensure construction work as per the approved plan d) defective construction. On the above negligence, an employer shall claim compensation from the executor of a contract in shape of liquidated damages. In view of the above, it is advised to the employer (WWD) and the contractor (Cash) that they should be very careful in drafting a contract/subcontract. They should check each and every clause before signing the document. Once the document is signed they are bound to strictly adhere to the terms of a contract. Failing which they are liable to pay compensation to the claimant in accordance with law in vogue. The aggrieved party may lodge its claim through arbitrator or through competent court of law provided all out efforts to settle the claim outside the court proved futile / exhausted. Bibliography Barnett, Hilaire (2008-07-21). Constitutional & Administrative Law. London: Routledge-Cavendish Brizzee, David. 1991. "Liquidated Damages and the Penalty Rule: A Reassessment." Brigham Young University Law Review1991. Calamari, John D., and Joseph M. Perillo. 1987. Contracts. 3d ed. St. Paul, Minn.: West. Carlill v Carbolic Smoke Ball Company [1893] EWCA Civ 1 Chaplin v Hicks (1911) 2 KB 786. Dunlop v. Lambert. (1839) 7 E.R. 824. Livingstone v Rawyards Coal Co (1880) 5 App Cas 25. Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1993] UKHL 4. Lord Browne-Wilkinson [1994] 1 A.C. 85. Lynnfield, Inc. v. Sloan 870 F.2d 761. Robinson v Harman (1848) 1 Ex Rep 850. Shapiro v. Grinspoon, 27 Mass. App. Ct. 596. Slapper, Gary; David Kelly (2008). The English Legal System. London: Routledge-Cavendish. St Martins Property Corporation v Sir Robert McApline & Sons Limited [1994] 1 AC 85. Surrey County Council v Bredero Homes Ltd. [1993] 1 WLR 1361. The Albazero [1977] AC 774. Read More