Contract Claims - Research Paper Example

Contract Claims Task: Contract Claims Introduction Application of contracts is something that happens in our day-to-day life. People involve themselves in signing contracts of a different nature. After these contracts are signed, issues may arise due to misunderstanding or failure to comply by the requirements of the signed contracts. That is when contract claims transpire. It is important to know what contract claims are and how to deal with them. The work below explains them in details and the different types that exist. It gives a solution on how to handle a situation where contract claims raise concern. Contract claims arise in different environments. They take place in institutions like schools and colleges at work places. Claims of contracts exist between employers and employees. This is when one party fails to honor the pledges they made while signing for them. There are consequences facing those who parties and individuals who fail to honor conditions of a contract. Some result in pursuit by law and this may make culprits taken behind bars. Definition of contract claims and more of their types are discussed in this work. There are elements that a valid contract must possess some of which are discussed below. Body According to David, Vincent & John (2005), a claim is defined as the affirmation of a right by a contractor to an extension of the contract duration or payment coming up under express or implied terms of a contract that is being built. Claim can also be used to describe any application by the contractor for payment that takes place other than the normal contract payment provisions. This claim may again be used to mean the time extension that a contractor applies for under a building contract. There are four types of such claims that arise when considering those made by contractors against employees; they include contractual claims, common law claims, quantum merit claims and ex gratia claims (David, Vincent & John, 2005). They will be considered, but contractual claims will be given more emphasis. Common law claims are also called ex-contractual or extra-contractual claims, and they are claims for damages for violation of an aspect of the law. Quantum meruit claims are those that provide a solution where a price has not been agreed upon, and this applies to different situations. The first one is where a work has been carried out under a contract with no price agreed upon, in a place where a work has been done under the contract that is void but believed to be valid. The other situation is where there is an agreement to pay a reasonable sum. There is yet a situation where work is done in response to a requirement by a party but without a contract, (David, Vincent & John, 2005). Ex gratia claims are those that arise out of kindness, where an employer is not under any legal requirement. These claims are presented by contractors even though they are rarely met. The most significant type of claim that is to be regarded is the contractual claim. Contractual claims are now those claims that occur out of express provisions of a particular contract. They take place under some clauses from the Joint Contracts Tribunal Limited (JCT) Standard Forms, as David, Vincent & John, (2005) observe in their book. In Contract Claims, there are words that severally used that need to be defined. They are disputes, claims and user change among others. Dispute is a contractual predicament involving a disagreement between two parties, which has not yet been formalized concerning scope, cost, delay, differing site conditions among others. In Transit Cooperation Program (1998) claim is defined as a progressed dispute that has reached a level of a formal appeal or demand for supplementary money for a lawsuit. Again a dispute may formally become a claim when it is not resolved at an early level, that is the field or project level. It is imperative to note the difference between a claim and a dispute. In their contrast, a dispute is a quandary that is not yet formalized or associated with legal procedures. The third to consider is user change, sometimes referred to as owner change. According to the Transit Cooperation Research Program still, user change is an alteration in the original construction plan prompted by the end user in this case, contract parties. User changes are sometimes contrasted with other contract changes caused by design errors and differing sit conditions, which are internal to the contract requirements. The purpose of the entire process of claiming a contract is to grant guidance to the persons involved in the claims of contract. Again it is to ensure that relevant dispute resolution practices are described. Another outstanding intention of contract claim is to make certain that preventive measures are put into place. These will in turn ensure that litigation risks are reduced whereas effective dispute resolution practices are enhanced. There are three processes involved in resolving contractual disputes as seen in the work done by Defense Contract Management Agency (2010). According to the business law, there are ten elements that are considered essential and that a valid contract must possess. These are given as below: I. Agreement II. Intention to create a legal relationship III. Free and a genuine consent IV. Parties competent to mind V. Lawful consideration VI. Lawful object VII. Agreement not declared void or illegal VIII. Certainty of meaning IX. Possibility of performance X. Necessary Legal Formalities In trying to understand contact claims in depth, it is necessary to know their types and how they are classified. This introduces three chief classification types: validity or enforceability, according to the mode of formation and according to performance, Transit Cooperation Program (1998). In terms of validity, a contract may be considered valid, voidable, void contracts or agreement, illegal or unenforceable. For a contract to qualify to be valid, it has to posses all the essential elements described above, and if any is missing, the contract is considered voidable, illegal, void or unenforceable, Transit Cooperation Program (1998). A valid contract is pretentious when it is affected by flaw like misrepresentation, undue influence, fraud and coercion (Transit Cooperation Program, 1998). According to the mode of formation, a contract may be considered as express, implied or quasi. This type of a contract may have its terms stated in words, and that would be either spoken or written down describing an express contract stated above. An implied contract is the one that has its terms inferred from the parties’ conducts. It may also arise from the situations of the case. The law still implies a contract and the benefitting individual is obliged to repay the other (Transit Cooperation Program, 1998). As Gulshan (2006) indicated in his work, when classifying a contract through performance the manner in which they are executed counts. Consequently, in their mode of performance, contracts fall in two distinct categories: executed & executory or unilateral & bilateral. To begin with, an executed contract is the one that is wholly performed that is relieved of anything owing to the contract. For example, X may contract to buy a sewing Machine from Y for cash; X pays the cash as B does the delivery. An executor contract is the one that is not fully performed, and that has something that is yet to be done. Another type of contract is Unilateral Contract that is shown when at the time the contract is concluded, there exists an obligation to perform on the part of one party. It can be compared to a Bilateral Contract, whereby at the point of its execution, both parties may still have an obligation. Bilateral contract is similar to executory contracts in so many ways, (Gulshan, 2006). There exist again contracts that are considered void and illegal. These are contracts that have got different consequences even though there is not much distinction. An illegal contract is considered to be wholly void, and, on the other hand, a void contract is void only in regard to the offending clause. It is essential to keep records in any contract claims. Similar to the way Max Abrahamson (1990) realized in his book, if there is a dispute between parties, records are vital to keep. He laid a strong emphasis on record keeping, something that is incredibly essential. In an event, where a contractor is needed to provide a detailed account clause in written form, if there were no records kept, there will be a great problem. Many a time contractors may make mistakes while claiming contracts. For instance, a contractor entitled to additional payment may fail to send a detailed account, and a written notice was required by clause. In turn, a dispute may result as to whether there was adequate up to date evidence to satisfy the prerequisite of the fall back position. If it seems that the contemporary record is missing, and a contractor is not proving sufficiently convincing, no payment would be merited. Research done by Longworth Worldwide Consulting Limited (2009) supports these. It is even worse when the verbal evidences can neither convince nor amount to the contemporary records that are adequate. Critically proving, lack of satisfactory records will make the contractor lose and in any case they fail to comply with the conditions, their rights to payment would be lost. To be precise, everything hangs on the substance of the available contemporary records. A research was carried out at a renowned university showed certain causes of claim. Some of them were due to various sources that included contract practices, contract document, contract awards, contract agency practices and personal factors among others as seen in the research by Transit Cooperation, (1998). As described below, the lists of the alleged causes are numerous and seemingly endless. Causes of Claims Claims may be caused through Contractor Practices where there is: Insufficient investigation before bidding Unbalanced bidding Bidding below cost and over optimism Use of wrong equipment Poor planning Failure to pursue certified procedures Causes of claims owing to Contract Documents include: Exculpatory clauses Obligatory notice requirements Finality of engineer’s decision Changed condition clause Out of date specification Claims may also be caused due to Contract Awards. This may be justified in the diversity of state contract award procedure and in how bid mistakes are entirely treated. Considering the diverse nature of the state, claiming a contract may also need some different award trends to realize a perfect bid. In making these contract bids, a few mistakes may come into place. What is essential is how the made mistakes would be taken care of. If they are rectified in an appropriate way, it would be better. Yet again, claims can be caused in regard to Contracting Agency Practices which are as highlighted as follows. Specification changes Insufficient information for bid Inadequate time for bid preparation Very narrow interpretation of plans and specs Restrictive specifications Contract requirements for socioeconomic objectives Unrelated to the construction process In terms of Personal Factor, incompatible personalities and undesirable attitude can be viewed as causes of claims. Considering adverse attitude, a contractor may not have similar thoughts as the other party and this would for sure cause disputes between them. It is the lack of Double coincidence in a people’s thoughts must exist in order to successfully achieve a valid claim of a contact. Mismatched qualities may rise to contract claims as was seen in the research study previously conducted. Institutional Factors that result in may result in a claim are complex construction, lengthy performance period, high quality requirement. Complex construction may be extremely difficult to deal with because of its user unfriendliness. If a contract is assigned too much time to be executed, it may result in a strong strife amongst the parties that may have formerly had different opinions. An issue may also arise due to some set standards that seem to be extremely high. When a contract is required to be of high quality, one party may not be able to meet this hence resulting in contract claims. Claim Settlement Practices in itself may be a cause of claim in the following ways: it may encourage project level settlement, delegation of settlement authority and effectiveness of field consultation. Contract claims are found to be arising from different avenues, and one of them is when their settlement at the project level is promoted. Again, so much contract claim may result when the authority to settle it is entrusted to another party. This is entrusting that the other party who may not be as conversant with the duty as previously assumed. The last part falling under settlement practice is the efficacy in field consultation. When, at a point, there is insufficient relay of information required to solve a claim, a contract claim would come up. Therefore, there should be adequate consultation in the field where contracts have been signed. Another cause of claim may be due the Contract Administration. In this coordination, interpretation of policy, inspection of standards and administrative styles are entailed. Found here again are documentations, funding schedule and political consideration (Transit Cooperation Program, 1998). As depicted in Longworth Worldwide Consulting (2009), contract claims should be as defining as possible so that any other disputes that may arise should be dealt with appropriately. Conclusion Contract claims is a wide area that entails a lot to be considered. There should be no assumptions in the methods of claiming the contracts. As earlier mentioned, record keeping is extremely vital, as it act as reference points. These records, however, should be up to date, containing sufficient written notices. In doing this, no rooms for excuses or mistakes will be created. Elements of a good contract have been explained above. It is significant to consider and follow them in totality. What brings about contract claims are contractor practices as earlier discussed. It is for that reason that considering ethics in our places of work or institution that will help in avoiding contractual claims. Where a contract provides a procedure to be followed, and a contractor or a subcontractor proposes to claim additional payment, failure to comply will eventually result to a loss of entitlement. For someone to be safe with their parties of contracts it is better to consider good contractor practices which include good planning, use of good equipment, balanced bidding of contracts and sufficiently investigating a contract before signing for it. It is, therefore, of immense importance to follow the procedures of contract claims considered above. References David, C., Vincent, P. & John, S. (2005). Building Contact Claims. New York, NY: Wiley- Blackwell Publishers. Gulshan, S. S. (2006). Business Law Including Company Law. New Delhi, ND: New Age international Limited Publishers. Longworth Consulting Worldwide Limited. (2009). Records, record, records-importance for contract claims. Retrieved from http://www.longworthconsulting.co.uk/news%20construction%20contract%202.htm Max, W. A. (1990). Engineering Law and the I.C.E Contracts. New York, NY: Taylor and Francis. The Federal Transit Administration. (1998). Transit Cooperative Research Program: Managing Transit Construction Contract Claims. Washington, DC: National Academy Press. Read More