The English Contract Law - Essay Example

International Construction Contracts Section A: Question A The English contract law is a body of laws that regulates contracts within England and Wales. The roots of this body are in lex mercatoria and the judiciary activism during the industrial revolution, which has led to it sharing its heritage with other countries across the commonwealth and United States1. The English contract law is also experiencing gradual changes due to the membership of UK of international organizations and the European Union. Any agreement that can be enforced by the court is regarded as a contract. Since a contract is a voluntary obligation that is voluntary, contrast to paying different compensations for restitution and tort in order to reverse any unjust enrichment, the English law places value on making sure that people truly consent to the deals binding them in court2. In general, a contract is formed when an individual makes an offer that is accepted by another person by communicating their performing or assent terms. If these terms are certain and contracting individuals can be presumed based on their behavior intending that the terms and condition are binding, the agreement is enforced. According to English contract law, contract law works best in situations where an agreement is achieved, and a resource to courts is not needed due to parties understanding their duties and right. Part a: According to the failure to give possession clause, which is Clause 43. 2, states that in case a contractor incurs costs or suffers delay from failure on the employer’s part to give possession according to the terms guided by sub-clause 42.1, the contractor shall, after consultations with the employer, determine the extension of time entitled to him or her according to clause 44, and the cost that shall be added to agreed contract price3. In this case, the contractor incurred additional cost due to delays cause by the employer. The contractor requested for time extension and additional cost to compensate for the cost incurred during the time and that shall be incurred in futures due to the delays. NCG should not to follow the conflict resolution process and accept the 60% offer given. I would advise NCG to avoid any other pursuit for more time and cost because according to the conditions of work contract of civil engineers construction 4th edition, the company is entitled to an extension of time and cost as decided by the engineer. According to this situation, the engineer had determined that the time and cost that the project needed was half of the cost and time. According to the English law, the engineer is the one to decide the extension of time and increase in cost. In this situation, the engineer had already made the decision and NCG received an additional ten percent on the engineer’s statement. NCG should take the offer and continue with the contract. In addition, NCG should follow the legal process to dispute the dispute filed by the employer since they are not to blame for not completing the project according to the time stated. NCG is entitled to time extension from the agreed period due to the delay caused by the employer. Part b: According to conditions of contract for the construction for engineering and building works designed by employers 1st edition, the employer is to take responsibility for any cost incurred caused by him or her. The employer is also supposed to provide for the time lost because of his or her failures4. The amount of money and time increase is supposed to determine by an engineer who survey the condition for the time increase and the increase in expenses. The engineer should be an independent party. The engineer should not influence by the contractor or the employer in the decision he/she makes. According to conditions of contract for the construction for engineering and building works designed by employers 1st edition, I would advise NCG to avoid any further pursuit. My decision to advice the contractor to avoid any further advances is to avoid the withholding of income for the time the dispute will be in progress. Since the law states that the employer should not pay any amount of money until all disputes are resolved, continuing with the dispute may lead to further delays on completion of the contract. Since the engineer made the decision for a 50% increase in time and cost, NCG should accept the 60% offer since the engineer is entitled to making that decision. The company should avoid any further challenges and delays by accepting the stated offer. Project B: Common law is a kind of law that judges developed through court decisions and similar tribunals, as it is opposed to different statutes that are adopted by the legislative process or the regulations that the executive branch issues. A common law system may be defined as a legal system that is able to give great precedential weight to the common law, on the idea that it is not fair to treat facts that are similar in different manners on different occasions5. The precedent’s body is referred to as the common law and binds the decisions that shall be made in future. In situations where the parties involved in a case do not agree on the law, a common law court usually loos into past precedential decisions6. In case a similar dispute has ever been resolved in the past, courts are bound to follow the reasoning that was used in making the past decisions. However, if the court finds out that the dispute at hand is distinct from previous cases, judges have the authority to make laws through creating precedents. Thereafter, the created decision becomes precedent, which will bind the future courts. The common law may be applied in this case in order to reach a fair decision. In this case, the changes in law affected the price associated with the contract. The employer refuses to provide for the increased expense, blames it on the contractor, and states that the contractor was experiences and should have foreseen the changes in laws. Part a: According to conditions of contract for the Turkey/EPC projects 1999, the changes in law may affect contract ether positively or negatively, which states that incase of any changes caused by changes in law, the employer is entitled to catering for the additional costs associated with the changes in law7. NCG should not accept to pay for the increased liability. The event was not foreseeable and the contractor may not have been able to know that there would be any changes in the laws. Since the changes were unforeseeable, the liability of the increased expense lied on the employer. The employer should cater for the cost associated with these liabilities. Part b: According to the construction and engineering contract of NEC 3 suite, the employer should settle effects caused to a contract by changes in law. The NEC construction and engineering contract is a system that is formalized and created by institution of civil engineers, which guides drafting of documents on construction and civil engineering projects for purposes of obtaining tender, administering and awarding contracts. According to construction and engineering contract of NEC 3 suite, NCG should not accept liabilities caused by the law unless it was stated in the contract. The employer should be responsible for the increase in expenses caused by changes in law. Question B: The answer provided in question A above would not be different in case the situations were related to Singapore. The reason for the indifference is that Singapore and England use the FIDIC contract guidelines. The laws that govern contracts in Singapore and England are governed by FIDIC. The decision-making processes are controlled by the clauses within the FIDIC clauses, meaning that the decisions made within both of the countries. The conflict resolution process would also be similar for both countries. For scenario A, according to the FIDIC Clause 43.2, in case a contractor incurs costs or suffers delay from failure on the employer’s part to give possession according to the terms guided by sub-clause 42.1, an engineer should determine the extension of time and the cost that shall be added to the agreed contract price entitled to the contractor8. The contractor is entitled to an addition of time and money to the amount stated by an engineer who is entitled to survey the progress of the projects. This decision will remain the same if the project was located in Singapore. The contractor would still have been entitled to the extraction of 50% extension of the time and the additional money. For scenario B, the law of a country may change the contract between two parties. In this case, the changes in law led to an increase in cost associated with the contract assigned to NEC. According to FIDIC laws, the change in law is an unforeseeable risk, which a contractor is not able to predict. Due to the unforeseeable nature of the risk, the employer is supposed to cater for the expenses incurred due to the changes caused by the risk. Since this decision was made within England, whose contracts are governed by FIDIC, the same decision would be made in Singapore since its contracts are governed by FIDIC too. Section B: FIDIC is an international federation for consulting engineers. Three countries founded the organization in the year 1913. These countries were Switzerland, France, and Belgium. Currently, the organization is comprised of seventy-eight member associations. The organization is currently situated in Geneva, Switzerland, inside the World Trade Center. FIDIC usually represents the global consulting engineering industry through promoting business interest of the firms that supply technology-based services for built and natural environments9. The organization is known for drafting standard form contract conditions that people use on higher value projects that are internationally coordinated. Many multimedia development banks have endorsed the conditions that govern contracts. Different organization and companies belong to the FIDIC national member associations. Most of these associations represents other professionals, for example architects. FIDIC in addition has affiliated members, such as insurers and lawyers, interested in its works. FIDIC has set different standards and conditions of contract design, operate, and build. Contracts are legal cornerstones of commercial and business transactions and a legal tool that facilitate exchange of services and goods. There are debates on the nature of contracts hence the debate on the definition of contracts. However, a common definition of contract is the agreement between different parties that binds the parties in law in conducting certain obligations. The contract becomes an agreement that courts can enforce. Once parties are bound by a contract, any violation of the contract may be charged in a law court since the agreement usually generates obligations and right that may be enforced within a court. If any of the parties break their promises, it will have breached the contract. The agreement based definition usually focuses on the package of rights and responsibilities that the contracting parties agreed on to guide and govern the contractual relationship. The conditions for contract according to FIDIC 2008 edition benefits contractors and clients working within the GCC countries in different ways. The FIDIC provides clear guidelines, rules, and regulations that govern international contracting. The FIDIC is able to outline the responsibilities and risks association of the different parties involved in a contract. While making contracts under the FIDIC 2008 form, the parties are able to get into a contract having understood the different responsibilities and risks associated with the contract. However, parties need to seek for legal assistance before signing a contract under FIDIC to avoid any unnecessary misunderstandings10. For example, FIDIC provides clear explanations of international contract. FIDIC states that the laws of the country that the contract is carried out shall govern any international contract. There are clear guidelines provided by FIDIC of the laws to be followed. Companies may not blame anyone for not following these laws. It is their responsibility to understand the laws of the contracting company to allow a smooth operation of the contract. In addition, the contracting companies are informed on what to understand before signing a contract. The guidelines provided by FIDIC benefit international contractors and clients and aid in avoiding any form of inconveniences during the contract period. There are other guidelines that FIDIC provides. Some of the guidelines are under different titles such as notice and communications, priority and documents, contract agreement, operating licenses, assignment, supply and care of documents, risks associated by the contract, among other sub headings11. These sub headings are clearly stated and explained, which ensures that clients and the international contractors clearly understand these guidelines. FIDIC has aided in avoiding conflicts between different parties through providing clear guidelines for operation and other contract agreements. Clear guidelines encourage understandability of the contract and other laws that govern contract, which in turn reduces the chances of conflict between parties due to misunderstandings. There are essential elements that should be satisfied for any contract to become valid within the GCC countries according to FIDIC 2008. These elements include an agreement, legal intent, consideration, and capacity. In commercial contexts, capacity and legal intent rarely cause problems. In case of any dispute, it will be on the possible consideration and agreement. The process of reaching an agreement consists of two different parts, which are the contract information and the terms and conditions. Contrary to that, contract formation may be an issue, the distinctive dispute in different commercial practices are mostly about terms of agreement, for example late delivery, extra work, non-payment, insolvency among many other elements. An agreement is usually made when a party offers (quotation, bid, and tender) and another party accepts this offer. Most of the model conditions usually include an “agreement form” that when it is signed creates the contract. Within the GCC, there are different rules and regulations governing the offerings and acceptance. The parties making the offer should have intentions of being accepted and the party making the acceptance must be unconditional, unambiguous, and certain. It is important for any party within the GCC to make an offer with a positive intention of being accepted and the accepting parties should be unbiased, unconditional, unambiguous, and certain in their acceptance12. The agreement reached between these parties creates the contract. The contract is an indication that the parties have agreed to work together and any party that breaches the contract may be charged in a law court. According to FIDIC 2008, the relationship between a contractor and a client and between a subcontractor and a contractor is contractual. Therefore, the broad law of contract usually applies within the GCC. The general law has basis in the countries within the GCC’s legal jurisdiction or system of each of the countries. The four families of the legal systems, which are the sharia and Islamic law, socialist law, civil law, and common law, apply in contracts. These laws apply in the context of making contract and a bridge of any of the laws can be charged in the law courts within the GCC. The most known form of contracting in FIDIC is the silver book, the yellow book, and the red book. The layout and structure of these 1999 contracts are largely the same. The similarities aid in familiarity within these contract clauses across different contracts. Construction and engineering works from across the world use the 1999 red book, which is the most widely used standard contracting form. Employers need to design most, or all, of the engineering and construction according to the 1999 red book. FIDIC, as a broad risk profile, has historically been allocating risks on the basis of the party that is best placed in assuming that risk. For example, the employer, according to the yellow book and the red book, takes on different risks such as the unforeseeable forces of nature, unforeseeable conditions of the ground, force majeure such as terrorism, war, and natural disasters, changes in law, environmental and planning permits, among other unforeseeable risks13. The party that prepared the design, on the other hand, is responsible for any defects associated with the design. Contrary to this approach in drafting, the 1999 silver book form adopts an approach that is more market practice by placing the majority of the risks associated with contracts to a contractors, to primarily include the design as well as design co-ordination. Parties that contract on FIDIC forms are supposed to seek for reputable legal advice because there are different “traps for the unwary,” which may arise from the use of these forms. There are different examples for such situations. For example, one of the main features within the 1999 red book edition is the recognition of the different contracting forms into what is, certainly, a more logical format. The eighth clause deals with all topics that relate to commencement of work, delays, programming, and suspension during the contract course. Clause 8. 1 states that, unless particular conditions state otherwise, the date of commencement is forty two days after the letter of acceptance is received by the contractor. The engineer is supposed to give the contractor not less than a seven-day notice for the commencement date. Therefore, the red book proceeds from assuming that a project is competitively tendered and the employer will send an acceptance letter that relate to the accepted tender. Through the contract contain a tender proforma letter, there is no such acceptance letter. It is assumed by the contract that the letter that is the employer has signed will be an absolute acceptance of a tender. Contractors assume that contractual relations, which exist between the parties, should have been created before signing of the contract, by the acceptance letter. However, in practice, most contracts are usually negotiated with no tendering or else there may be significant post-tender negotiations. Such a contract may be easily amended but it would be simpler if FIDIC followed models of other construction form standards and introduce the date of commencement as an agreed date inserted into the particulars of the contract. The most controversial FIDIC’s innovation within the 2008 red book is claim notice requirement that is under the clause 20. 1 that is a condition standard to any claim for the extension of time or any additional costs. References to Clause 20. 1 elsewhere within the contract make the contract plan that if a contractor does not observe Clause 20. 1, he or she forfeits the entitlement to any time or cost extension no matter what the circumstances may be14. According to this clause, it is clear that the contractors should be alert in giving notice as soon as possible within the contract period. The only area where a contractor may be given any leeway is in case he or she could not be aware of a circumstance or event that that may give rise to entitlement of extra cost or time, such as weather conditions. It is not the fault of a contractor in case the weather conditions interrupt the normal operations within the construct period. There are circumstances where constrictors may not be able to control some activities of natural occurrences. In such a case, a contractor is entitled to asking for time extension and/or cost additions15. For example, some of the constructions may require the weather to be sunny for material to dry and for normal operations to proceed. In such a case, in case the weather suddenly become rainy and the materials take longer to dry or the normally operations are interrupted, the contractor is entitles to time extension or an increased cost because he could not control the natural occurrence. Time extension and commencement time are two examples of potential traps that should be considered before signing of contracts. Consequently, it is important for constrictors to seek for professional help in relation to using the FIDIC contracting forms. The Middle East construction and real estate team has significant experience of providing advice to all FIDIC related contracts across different projects within the GCC region and Bahrain. The Middle East construction and real estate team is an example of a company that may be used by new entrants into the construction industry who may be seeking legal advice on how to work under FIDIC. FIDIC has set different standards and conditions of contract design, operate, and build. FIDIC usually represents the global consulting engineering industry through promoting business interest of the firms that supply technology-based services for built and natural environments. The organization is known for drafting standard form contract conditions that people use on higher value projects that are internationally coordinated. Many multimedia development banks have endorsed the conditions that govern contracts. According to FIDIC, the relationship between a contractor and a client and between a subcontractor and a contractor is contractual. Therefore, the broad law of contract usually applies within the GCC. The general law has basis in the countries within the GCC’s legal jurisdiction or system of each of the countries. The four families of the legal systems, which are the sharia and Islamic law, socialist law, civil law, and common law, apply in contracts. The conditions for contract according to FIDIC 2008 edition benefits contractors and clients working within the GCC countries in different ways. The FIDIC provides clear guidelines, rules, and regulations that govern international contracting. The FIDIC is able to outline the responsibilities and risks association of the different parties involved in a contract. While making contracts under the FIDIC 2008 form, the parties are able to get into a contract having understood the different responsibilities and risks associated with the contract. The FIDIC provides clear guidelines, rules, and regulations that govern international contracting. The FIDIC is able to outline the responsibilities and risks association of the different parties involved in a contract. While making contracts under the FIDIC 2008 form, the parties are able to get into a contract having understood the different responsibilities and risks associated with the contract. However, parties need to seek for legal assistance before signing a contract under FIDIC to avoid any unnecessary misunderstandings. Has provided sufficient guidelines to govern international contracts and reduce the number of misunderstandings in international contracting. 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