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					Contracts
                What is Law
• Generally accepted “Rules of Behaviour”

• Contract Law developed from the need to enforce
  promises or an undertaking. These promises were
  enforced by the King represented by the courts

• To ensure that every one received consistent
  justice, decisions were recorded so that future
  decisions could be based on similar principles

• The is called Common Law
              Sources of Law
• Common Law – Is law derived from previous
  decisions on cases of similar merits. Known as
  Judge made law.

• Why is this important?

• To allow for certainty!

• This system has problems, what are they

• Contract Law is based on Common Law
                Sources of Law
• Statute Law

• Law enacted by parliament

• Ensure that law will reflect the needs of the
  community
               Source of Law
• Were there is a conflict between statute law &
  common law

• Statute Law will prevail

• This has important ramifications for Contact
  Law

• Contract Law has been affected by statute law
                Civil Court System in NSW
                                                        Each State will have a
Full Bench Federal Court of   High Court of Australia   similar system
         Australia             Final Court of Appeal
                              Appeals
                              Court of Appeal NSW
Federal Court of Australia
 Commonwealth Matters         Appeals
   Bankruptcy, Trade           Supreme Court NSW
        Practices                   Unlimited
                                Appeals
             Appeals                                        Appeals
                                 District Court
                              Cases up to $750 000
          CTTT
  Cases up to $500 000                                      Other Tribunals
                                Appeals
                                                        i.E. Land Environment
                                 Magistrates Court               Court
                                Cases up to $40 000
                Civil Court System in NSW
                                                        Binding Precedence
Full Bench Federal Court of   High Court of Australia
         Australia             Final Court of Appeal    Lower Courts are bound
                                                        by decisions from a
                                                        superior court in their
                              Court of Appeal NSW       jurisdiction
Federal Court of Australia
                                                        District Court of NSW is
 Commonwealth Matters
                                                        not bound to follow
   Bankruptcy, Trade           Supreme Court NSW        decisions of the Supreme
        Practices                   Unlimited           Court of Victoria


                                 District Court
                              Cases up to $750 000
          CTTT
  Cases up to $500 000                                      Other Tribunals
                                                        i.E. Land Environment
                                 Magistrates Court               Court
                                Cases up to $40 000
                 Contracts
• What is a Contract ?

• A legally enforceable promise by one party do
  something or to refrain from doing something

• To be legally enforceable the agreement must
  comply with Common Law requirements for a
  valid contract
    Essentials of a Valid Contract
• Intention for the parties to enter into a legal
  relationship enforceable by law
• Offer & Acceptance
• Valuable Consideration or execution under
  seal
• Legal Capacity to Act
• Genuine Consent
• Legality of the Objects of the Contract
                   Intention
• Is there an intention to enter into a legally
  binding agreement
• Social Agreement are presumed no
• Business Agreement are presumed yes
• Intention can be expressly excluded
    Essentials of a Valid Contract
• Intention for the parties to enter into a legal
  relationship enforceable by law
• Offer & Acceptance
• Valuable Consideration or execution under
  seal
• Legal Capacity to Act
• Genuine Consent
• Legality of the Objects of the Contract
                     Offer
• Offer may be in writing, verbal or implied by
  conduct
• Offer must be communicated
• The Offer can be withdrawn at any time
  before acceptance (Postal Rule)
• An offer will lapse if
  - not accepted with in a stated time
  - not accepted within a reasonable time
  - a counter offer is made by the other party
                      Offer
• Invitation to Tender is not an offer – Invitation
  to treat
• Offer will terminate on rejection
    Essentials of a Valid Contract
• Intention for the parties to enter into a legal
  relationship enforceable by law
• Offer & Acceptance
• Valuable Consideration or execution under
  seal
• Legal Capacity to Act
• Genuine Consent
• Legality of the Objects of the Contract
                Acceptance
• Must be final and not qualified (other wise it
  is a counter offer
• Only person who offer has made to can accept
• Silence is ineffective
• Conduct can constitute acceptance
• Once accepted no other negotiations can be
  conducted
• Method of Acceptance can be specified (See
  Postal Rule)
    Essentials of a Valid Contract
• Intention for the parties to enter into a legal
  relationship enforceable by law
• Offer & Acceptance
• Valuable Consideration or execution under
  seal
• Legal Capacity to Act
• Genuine Consent
• Legality of the Objects of the Contract
        Valuable Consideration
• Something of Value – Usually Money
• Does not have to be a fair deal

• Simple Contracts must have consideration

 This is the fundamental Difference between a
 contract & a promise
    Essentials of a Valid Contract
• Intention for the parties to enter into a legal
  relationship enforceable by law
• Offer & Acceptance
• Valuable Consideration or execution under
  seal
• Legal Capacity to Act
• Genuine Consent
• Legality of the Objects of the Contract
                  Legal Capacity
• Minors generally do not have legal capacity except
       -Items of necessity
       -Items that are beneficial
• Mentally ill do not have capacity
• An intoxicated person does not have capacity
       - but on sobering up can affirm the contract
• Corporations are treated as individual entities and have
  capacity to contact – beware who you are contracting to
• Alien Enemies capacity is reduced
• Convicts have capacity
• Married Women – Unfortunately are allowed to contract to
  receive credit cards
    Essentials of a Valid Contract
• Intention for the parties to enter into a legal
  relationship enforceable by law
• Offer & Acceptance
• Valuable Consideration or execution under
  seal
• Legal Capacity to Act
• Genuine Consent
• Legality of the Objects of the Contract
           Genuine Consent
• The consent must not be induced by
  deception of fraud
• Contract can not be formed under duress
• Contract cannot be formed by Unconscionable
  Conduct
    Essentials of a Valid Contract
• Intention for the parties to enter into a legal
  relationship enforceable by law
• Offer & Acceptance
• Valuable Consideration or execution under
  seal
• Legal Capacity to Act
• Genuine Consent
• Legality of the Objects of the Contract
                  Legality
• The object of the contract cannot violate
  Statute law
  - you can not contact to kill someone and then
  expect a court to enforce payment
• Illegal under Common Law
  - Contract to commit a tort
  - Promote Corruption
  - Prejudicial to Administration of Justice
  - Prejudicial to Public Safety
            Forms of Contract
Simple Contracts

• Can be either Verbal or Written

• Implied

• Can evidenced by Written Communication
           Forms of Contract
Formal Contracts

• Derived from old law before the Common Law
  principles of Contracts was developed

• Method to make promise enforceable

• Must be written

• Sometimes referred as Deed
            Forms of Contracts
Express Contract

•   Normal Type of Contract
•   Conditions & Warranties documented
•   Supporting Documents i.e. Drawings, Spec etc
•   Dispute Resolution Process?
•   Time For Completion
•   Liquidated Damages Spelt out
            Form of Contract
Implied Contract

• Contact constructed by the courts
• Actions or Inactions by the parties indicate a
  contract exists
• Conditions & Warranties to be determined by
  the court at a later date
           Implied Contracts
• Builder Contracts to build house on C1 block
  of land
• By error Builder builds on C2 land which is
  next block. C1 is unaware of this.
• Most evenings C2 has a beer with the builder
  and has a chat.
• C2 has an implied contract and must pay the
  builder. C2 has a duty to stop the builder
             Contract Terms
Condition
• Major requirements of the Contract

• Fundamental to the contract

• Breach allows innocent party to either
  Terminate the Contract or Sue for Damages
                Contract Terms
Warranties
• Minor Term of the contract

• Contract is not substantially different

• Breach allows innocent party to sue for Damages

• Termination will be a breach of contract and
  innocent party may be liable for damages
              Contract Terms
Innominate Terms
• May either be a warranty of Condition
  (Paint one door the wrong colour v’s the
  whole building)
• Is a subjective assessment

• Most terms will fall in this area

• Must take care in dealing with these breaches
         Operation of Contract
Privity
• Only parties to a contract have rights and
  liabilities under a contract
• A contracts with b to build a house for C
• C cannot sue A for any breach
         Operation of Contract
Assignment of Contract
• Rights to a contract by be assigned to a third
  party
• Novated Lease is an example of this
        Discharge of Contract
Discharge of Contract - Conclusion
1. By performance
2. By agreement before completion
3. Operation of Law
    -Bankruptcy - Liquidation
    -Merger ?
    -Fraud
         Discharge of Contract
Impossibility of Performance - Frustration
1. Absolute Impossibility- contract to renovate
   house, house burns down
2. Radical Difference – Change of Council or
   Government Conditions, Court Injuctions
3. Supervening Illegality –Law is Changed after
   contract is formed to make it illegal?
4. Futility –Where purpose of the contract is
   no longer valid?
       Discharge of the Contract
Time - Unless time is a Condition of the contract
  a contract will not lapse
       Discharge of the Contract
• Breach of Contract- Not every breach of
  contract allows for the termination of the
  contract
Before this action is taken legal advise should be
  sought.
• A court will determine whether the breach
  was substantial enough
• Innocent party may be liable for damages
                  Damages
• Unliquidated
  - Determined by Court
• Liquidated Damages
  - Genuine Estimate of loss agreed to in
  contract
• Penalty
  - if loss is not Genuine classed a penalty and
  will be reduced to genuine loss
           Types of Contracts
• Depending on the Client and Nature of the
  works will depend on the type of contract

• Refer page 17 & 18
          Types of Contracts P 20
•   Lump Sum
•   Cost, plus a fee
•   Cost plus a percentage
•   Schedules of Rates
•   Labour Only
•   Do and Charge
•   Design & Construct
           Building Contracts
            Basic Structure
• Contract Period
  - Specified Time for Contract to be completed
  - Builder has Control of Site
• Practical Completion
  - The works have reached a stage that is
  suitable for use by the client
  - Transfer of Works to client
  - Insurance by Client
               The Agreement
•   Names Of Owner & Builder
•   Description of the Works – Tender/Qoute
•   Drawings/Specifications
•   Contract Sum
•   Contract Terms
•   Signatures
           General Conditions
• Form of the Agreement

• Specifies the operation of the contract
  -Dispute Resolution
  - Payment Schedule
  -Access by Client
  - We will be look at a HIA Contract
Status Of Owner – Type of Contract
• Government – will have there own form or
  may use standard form with their own terms

• Statutory Bodies – generally use government
  conditions

• Large Companies – Will have their own terms

• Smaller Companies – Standard Form Contracts
 Other Factors that may Affect the
             Contract
• Lending Authorities – Payment Schedule, May
  appoint Quantity Surveyor/ Clerk of Works,
  Architect

• Type of Works – New Building, Renovation,
  Civil Works

• Time Influences – May require contract to
  start before full documentation is complete –
  FAST TRACK
 Other Factors that may Affect the
             Contract
• Rising Cost– Provision may be made, Rise &
  Fall Contract against fixed Cost
        Definition - OVERHEADS
• Cost that are incurred that are not directly
  attributable to the construction process.

Insurance – Overhead
Office Costs – Overhead
Bricks/ Bricklayers – Construction Cost
Foreman – Overhead
Carpenters – Construction Cost
Workers Compensation - Overhead
         Types Of Contracting
            Arrangements
• Lump Sum – Builder agrees to complete the
  documented works for an agreed price.

 Agreed price can only change by agreement
 i.e. variation
          Types Of Contracting
             Arrangements
• Cost Plus Fee – Builder is paid for all material,
  labour and subcontractor costs.

• In addition the builder receives a
  predetermined fee to cover overheads + profit
          Types Of Contracting
             Arrangements
• Cost Plus Percentage – Builder is paid for all
  material, labour and subcontractor costs.

• In addition the builder receives a set
  percentage of costs to cover overheads and
  profit
          Types Of Contracting
             Arrangements
• Schedule of Rates – A schedule of rates for
  construction items is agreed.
• Agreed rates include profit & overhead
Brickwork Supply & Install $2.50 per brick
Wall Framing 2.4h Supply & Install
Supervised Carpenter $65 per hour
         Types Of Contracting
            Arrangements
• Labour Only – Agreement is to provide labour
  only at an agreed rate for each trade.

  The agreed rate covers the builders overheads
  & profit.
• Clients usually provides materials
          Types Of Contracting
             Arrangements
• Do and Charge – Agreement has no fixed
  price.
• Builder charges what they think is the value of
  works
• Usually leads to disputes
         Types Of Contracting
            Arrangements
• Package Deal Design and Construct – Builder
  is responsible for design and construction
  based on parameters set by the client.
 Standard Printed Contract Forms
• Australian Standards

• MBA

• HIA

• Department of Fair Trading
      Definition – Subcontractor
• Contract Between the Builder and other
  specialised organisations used to complete the
  works that relate to the Head Contract.

  Care should be taken to ensure that the same
  terms are included as the “Head Contract”
• Good practice would be to use contracts from
  the same organisation
      Definition – Head Contract
• Contract Between the Client & Builder

  Builder is called “Head Contractor”.
• This definition has applications outside the
  contract.

• OH&S Law requires that Head Contractor
  provide a safe work place.
HIA Contracts
HIA Contracts

				
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