Contract Law: The between Atkins vs Secretary of State Transport - Case Study Example

Contract Law By: Professor: Class: University: City: State: Date of submission: Contract Law Introduction Lack of clarity in the contract document might contribute significantly to disputes between the contracting parties. With businesses increasingly becoming complex, the standard form contracts have been evolving as well leading to difficulties in drafting the customized conditions of the project. There are several advantages associated with utilization of the standard forms of contract; nonetheless, customers usually adjust certain clauses for inclusion of certain information or requirement for the project. In this case, Atkins v secretary of State for Transport, Atkins aimed at challenging the pronouncement made by the arbitrator whose findings favoured the Authority in determination of whether of Atkins deserved the claim to supplementary payment for remedying the excessive amount of potholes beyond that initially included as part of the lump sum contract (Eversheds International, 2013). The dispute for the claim in Atkins’ case is centred for the supplementary payment under section 60.1(11) of the Contract. However, the authority disagreed with the claim. Clause 60.1(11) contain different points in bullet forms and the forth one seems relevant to the case. In this case, the provider, Atkins encountered several defects associated with the Area Network, which affected their physical conditions. Based on the judgment of any experienced consultant, the decision would have been made based on the contract date, which is unreasonable for Atkins to allow (Dunnett, 2016). The contract between the two parties made provisions for the adjudication and arbitration as enshrined in the Arbitration Act 1996. The decision made by the judge is considered a rare beast since the dispute emerged from NEC3 form. Reasons for increased case laws on NEC3 ECC Inadequate clarity in the contract documents is the major factor contributing to disputes between the contracting parties. With the evolution of the standard form contracts within the construction industry, there have been difficulties associated with drafting of the bespoke conditions for the project. Large numbers of stakeholders tend to work together for the deliverance of the construction projects. However, the unhindered communication among the parties is vital to ensure the achievement of success (Bell, 2009, 80). Most cases arise due to poor communication of the privileges and obligation of the parties under signed contract. The independent professional bodies or the government develops standard forms of contract for provision of uniformity or play level for both the parties. However, in most cases, the clients tend to modify the clauses with an aim of including their requirements or the specific requirements of the project. The legal scholars caution that such practices might be unintended consequence of the ill modifications, which the non-legally professional undertake. On the other hand, the non-legal practitioners have been criticizing the standard form contracts that it is difficult to understand and read. Such claim has significantly increased the number of cases on the practice. Besides, the fact that most of the people using the documents are engineers and project managers substantiate the claim considering that they lack legal background (Rameezdeen & Rajapakse, 2007, 735). To such end, there have been plea for using plain language free from legalese and complex structures of languages. It is important to note that modifying the clauses within the standard forms could result in challenges associated with readability, which in turn leads to difficulties in understanding. Lack of clarity within the contract document could result in misunderstanding between the parties and disputes. Inability of comprehending to the contract terms cannot be utilized in defence in regards to “duty-to-read doctrine” of the contract. The doctrine assumes that both parties are versed well with the contract terms that they sign. Therefore, the onus is on the parties considered to be signatory to comprehend the contract contents before appending their signatures. Why standard forms of contract are not panacea to dispute Considering the complexity within the construction industry, it is necessary to use lengthy and properly documented standard form contracts devised through professional bodies without interest. The standards forms of contract are important in solving disputes; however, it has several limitations, which makes it not the best for solving the disputes. In research undertaken by Barnes (2007, 135), the study found that the standard form contracts are applicable in many aspects; however, they are hardly ever wholly suitable within a particular situation. Consequently, the clients often resort to modification. The majority of the contracts used in UK are modified heavily to reflect the applicability of the delivery method or the risk profile. There are dangers associated with the modification such as contributing to the unintended problems, which puts both parties in the worse situation. Modification of the standard forms of contract majorly changes allocation of risk balance and forcing the contractor to most of the risks, which gives rise to more disputes. There have been emergences of disputes associated with inconsistencies that occur between the modified areas and other portions of the contract material. Modifications to the standard forms of contract require technical skills than what the average lawyer tends to posses (Pettit, 2012, 8). To prevent the occurrence of the disputes, it is important that modification to the standard form needs implementation for inclusion of the project specific attributes rather than using it for re-allocation of the risks. Even though modifications are inevitable since the contracts have to fit specific attributes of the project, it is important that the resultant document be relevant to the original standard form (Chong & Zin, 2010, 605). Both the technical and legal consequences are easy to manage but not clarity and readability, which also increases the cases. Therefore, to reduce the disputes, the contract forms should not posses any form of ambiguity. Examination of Atkins’ Claim According to the judge, there was normal understanding of clause 60.1(11) which the extra amount of potholes argument that Atkins advanced failed to fall within the neither clause terms nor relevant with the wide notice and various requirements of the contract. Based on commercial interpretation, it is clear that both Atkins and the Authority took a great risk to accept a lump sum contract. In such case, if the actual pothole numbers is found to be lower, then Atkins makes profit. Considering the reasoning of Atkins, if compensation claim were allowed for the extra claim, then it would be a win/win situation for both parties (Watson Burton LLP, 2014). It is important to note that the risk associated with lump sum contracts lies within the mechanism used in pricing the risk and taking on to the jaw if the pricing proves to be inadequate. Nothing is considered unfair or unusual commercially between the parties taking these risks (Bunni, 2003, 142). Even though there is no new law that emerged from the case, it reminds the commercial parties on the risks associated with assuming the adoption of lump sum contracts. There is great association with NEC3 contract interpretation considering their rear appearance before the courts. In addition, such contracts are designed with an aim of identifying and tackling the risks before escalation to insurmountable problem that require formal dispute resolution. Arbitrator’s Decision in the Case The case involved complex questions associated with interpretation of contracts. While issuing the judgment, Justice Akenhead cited that “there are some siren or other voices which criticise these Conditions for some loose language, which is mostly in the present tense, which can give rise to confusion as to whether and to what extent actual obligations and liabilities actually arise." Regardless of such, the court never had trouble to interpret the provisions of compensation outlined within the NEC3 form. Instead, the court applied the essential principles associated with interpretation of contract (Harrison Clark, 2013). While the judge saw the fit of repeating some of the criticism from the NEC3 form, in the practice, the judge did not appear to have any interpretational challenges within the contract especially the language used: in the present tense. The made application of the NEC3 without comment the basic principles of contract. However, it is clear to note that the NEC3 raise important points associated with loose language (Cheung & Yiu, 2006, 460). Until efficient and simple language becomes the subject of the court decisions, the meaning is likely to remain elusive. To solve the case, the parties could consider alternative dispute resolution, which is a method besides the court hearing process that could be used in solving legal problems. The parties could consider mediation by an independent person or agency to come up solutions that touches on the needs of both the parties. Conclusion The report focused on the case between Atkins v Secretary of State Transport. With businesses increasingly becoming complex, the standard form contracts have been evolving as well leading to difficulties in drafting the customized conditions of the project. The dispute for the claim in Atkins’ case is centred for the extra payment enshrined in clause 60.1(11) of the Contract. However, the authority disagreed with the claim. However, the unhindered communication among the parties is vital to ensure the achievement of success. Most cases arise due to poor communication of the privileges, obligations, and rights of the parties involved in contract. The standard form contracts are applicable in several aspects; however, they are hardly ever wholly suitable within a particular situation. Consequently, the clients often resort to modification. While the judge saw the fit of repeating few criticisms from the NEC3 form, in the practice, the judge did not appear to experience the challenges associated with interpretation of the terms especially in the language. References Barnes, W. R. (2007). Toward a fairer model of consumer assent to standard form contracts: In defence of restatement subsection 211(3). Washington Law Review, 82(1), 227-274. Bell, M. (2009). Standard Form Construction Contracts in Australia: Are Our Reinvented Wheels Carrying Us Forward? SSRN Electronic Journal, 25(2), 79-93. Bunni, N. G. (2003). Risk and insurance in construction. London: Spon Press. Cheung, S., & Yiu, T. (2006). Are Construction Disputes Inevitable? IEEE Transactions on Engineering Management, 53(3), 456-470. Chong, H., & Zin, R. M. (2010). A case study into the language structure of construction standard form in Malaysia. International Journal of Project Management, 28(6), 601-608. Dunnett, N. (2016, January 26). Atkins v Secretary of State for Transport - Designing Buildings Wiki. Retrieved November 17, 2016, from https://www.designingbuildings.co.uk/wiki/Atkins_v_Secretary_of_State_for_Transport Eversheds International. (2013, October 23). Health ebriefing: The Courts consider the NEC form of agreement- Publications - Eversheds International. Retrieved November 17, 2016, from http://www.eversheds.com/global/en/what/articles/index.page?ArticleID=en/Healthcare/court_consider_NEC_form Harrison Clark. (2013, May 24). NEC Contracts in the News - Harrison Clark Rickerbys. Retrieved November 17, 2016, from https://www.hcrlaw.com/blog/nec-contracts-in-the-news-2/ Pettit, D. (2012). Effect of the New Australian Consumer Law on the Use of Standard-Form Contracts within the Australian Construction Industry. Journal of Legal Affairs and Dispute Resolution in Engineering and Construction, 4(1), 1-9. Rameezdeen, R., & Rajapakse, C. (2007). Contract interpretation: the impact of readability. Construction Management and Economics, 25(7), 729-737. Watson Burton LLP. (2014, January 17). features: NEC Contracts - Case Law Update. Retrieved November 17, 2016, from https://www.watsonburton.com/knowledge/article.cfm?ARTICLEID=2054 Read More