Contracts

Agreements between two entities, creating an enforceable obligation to do or to

refrain from doing a particular thing.
Variations
There are two main types of variations
i.
ii.

Variations to the scope of works and services

Variations to the terms of contracts itself

The scope of work is defined by the contract commonly by reference to documents

such as plans and specifications.
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An item specifically provided for in the contract is not a variation

When the contract supplies material of better quality than the quality
required by the contract, without any instruction from the principal, it is not
entitled to charge the extra cost as a variation
When the contract does work not called for by the contract and without
instruction. It is not entitled to charge this extra work as a variation.
Indispensably necessary works are not a variation; Work that is necessary for
the completion of the project e.g. a plan shows that the contractor must
construct two doors in a room and the specifications do not specifically refer
to any hinges on those doors, supplying the hinges will be found to be part of
the scope as it is work which is indispensably necessary for the completion of
that work.
Design development might be a variation

Role of a CA
The CAs role will be defined by the relevant terms of the construction contract and
by the common law. In general, the CAs role to administer the contract and ensure
the contractual obligation are performed
Under a traditional construction contract, the CA has two separate and distinct roles
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To act as agent for the client and

To act as an independent certifier.

Acting as agent for client

As an agent for the client, the CA must act in the principals best interests and in
accordance with the contractual obligations on the principal.
Specific functions of the CA when acting as agent include
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Issuing directions to the contractor on behalf of the principal

Approving programs
Approving subcontractors
Controlling employees
Resolving contract document ambiguities
Examining and testing materials

Postponement and suspension of work and

Ordering variation

Acting as a certifier
In this role, the CA must act as a determiner, assessor or valuer under the contract.
The CA must act honestly, fairly, impartially and without bias when certifying any
claims. As the duties of a certifier override the agency obligations the
superintendent owes to the principal, the principal cannot direct the superintendent
how to act as a certifier
Types of issues the CA may be asked to certify include
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Extension of time
Payment of liquated damages
The amount of delay costs payable to the contractor
Payment certificates
Issuing final certificates and certificates of practical completions
Certifying costs incurred by the principal when work is taken out of the hands
of the contractor
disputes

The agreement
The second important element of a contract I shall there must be an agreement
between the parties on the subject matter and terms of the contract. Most
agreements can be broken down into two parts an offer and an acceptance of that
offer.
The offer
Anyone with legal capacity can make an offer, orally in writing or by implication
from counduct, such as gestures. A combination of any form is perfectly valid such
as a telephone conversation which is oral plus a written estimate. Sellers or buyers
may make offers, as may contractors or employers or indeed any type of
contracting party. Who makes the offer has to be assessed in each set of
circumstance in order to determine who may accept the offer
Examples
Will you buy my car for $2,000?, Can I buy your car for $2000?, offering to pay for
goods at the cash deck of the supermarket. Collect 5 tokens form side of packet
and we will give you a free seed dibber.
The person making the offer is called the offeror, and the person to whom the offer
is made is called the offeree
Invitation to treat are not offers
Display of goods in a shop or shop window or a for sale board outside a house are
not offers. They are called invitation to treat and are mere invitations to others to
make an offer. This is shy no one can force shopkeepers to sell goods in their
windows as they are not making an offer. Fisher v Bell 1961

Intentions only are not offers

An announcement of an intention to sell or merely giving someone a piece of
information concerning something is not an offer. So, if a person asked you, If you
were going to sell your car, how much do you think you will get for it?, your reply
$1000 merely amounts to the giving of information, and there is no offer. Therefore
he cannot accept your offer as it is not an offer in law. If he then said, Alright, Ill
give you $1000 for it, you are then in the positon of being able to accept or reject
the offer, as he is now making the offer to you: Harris v Nickerson 1873, Harvey v
Facey 1893
Invitations for tenders
One often sees advertisements in trade papers containing the words invitation for
tenders. In these, a prospective employer invites contractors to put forward tenders
for a particular job. Invitations for tenders are thus merely invitations to treat and,
on their own, should not create contractual relations. Occasionally, the terms of
such an invitation could give rise to contractual obligations in special
circumstances. This happened in Blackpool..Fylde Aero Club v. Blackpool BC 1990.
Here the Council owned and managed the local airport. It decided that, when the
Clubs concession to run pleasure trips came up for renewal, it would invite tenders
from seven parties, including the Club. In the invitation document, the Council
stated that the Council do not bind themselves to accept all or any part of any
tender. No tender which is received after the last date and time specified shall be
admitted for consideration. Because of a Council employees failure to open the
post-box until after the deadline, the Clubs tender was not considered, being too
late. The Club sued the Council for breach of contract and negligence. The Court of
Appeal agreed with the Queens Bench decision that the Council was liable for both
and was liable in damages. In other words there was a contract in relation to the
dealing with the tenders and there was negligence also
Communications of offers essential
Offers must be communicated to the offerees. Otherwise, how can a person know of
the existence of the offer and be capable of accepting it. Any method of
communication is acceptable, from a letter to phone, telephone to telex, sign
language to gesture; Taylor v. Laird 1856
Tenders
An invitation for tenders is an invitation to treat. However, the tender itself is an
offer which, if accepted, forms the contract. Preparing the tender can be a costly
business. Obviously the cost of preparation should be taken into account when
making the tender and be absorbed into the contract price. The unsuccessful
builder must write off the cost. If there is a request to the builder to prepare
additional designs, working drawings or plans etc. and if no payment for doing so is
mentioned, it may be implied that a reasonable sum should be paid. In Maarston
Construction Co ltd v Kigass Ltd 1990, following a fire, a contractor was invited to
tender to design and build a new factory. At a meeting between the parties, the

contractor was informed that he would be awarded the contract but that no contract
could be entered into until and after the insurance monies were forthcoming.
Additional design work was required which the contractor prepared. No indication
was given to the contractor that the client would meet the costs.
Tendering
Tendering is a process for clients to seek competitive offers for the supply of work,
services or goods from potential contractors
A request for a quotation or an invitation to negotiate are not tendering process
because they may end up using contracts that have not been prepared or controlled
by the client
Aunctions
Each bid at an auction is an offer which may or may not be accepted
Termination of offers
An offer, once made, does not go on for ever. It may be brought to an end in a
number of ways
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Revocation

Here the offeror retracts his offer and communicates this to the offeree before a
valid acceptance can be made. If the offeree hears from another source that offer
no longer stands because, for example, the goods have been sold, he cannot then
accept the offer: Byrne v. Van Tienhoven 1880; Dickson v. Dadds 1876
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Lapse

An offer will lapse if not accepted within a reasonable time or if a time is specified
within the contract. Reasonableness depends on the subject-matter of the contract.
For example, offers concerning perishable goods such as ready mixed concreted
must be accepted without delay: Ramsgate Hotel v. Montefiore 1866
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Rejection

This may be a flat rejection or it may be a counter offer e.g Yes, but Ill only pay
$950
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Death
If either party dies before acceptance, the offer ends.

Distinction between offer and invitation to treat

HARVEY vs. FACEY (1893)
FACTS:

The case involved a dispute over the sale of a property (in Jamaica) and an alleged
agreement made via telegram correspondence.
Plaintiff: Will you sell us Bumper Hall Pen? Telegraph lowest cash price
Defendant: Lowest price for Bumper Hall Pen $900
Plaintiff: We agree to buy Bumper Hall Pen for the sum of nine hundred pounds
asked by you
ISSUE:
The court had to determine whether there had been an offer and acceptance of that
offer
HELD:
The Court decided that in the initial exchange of telegrams: the plaintiff was asking
questions about the property and clearly not making an offer to buy the property
and defendant was simply answering the second part of the plaintiffs question. The
defendant entered into a discussion but did not commit. So the defendants first
telegram contained an invitation to treat not an offer.
KODAK (2001)
FACTS:
In December 2001, Kodaks Web site offered a digital camera package for $100. It
was advertised as a special deal and within days thousands of customers placed
orders online and provided their credit card details for payment. They received an
automated online confirmation that urged them to keep the message both as proof
of purchase and for claiming under warranty.
Then Kodak discovered that the price of $100 was an error. The price should have
been $329.
Kodak initially claimed that the orders for cameras had not been accepted so no
contract was formed. It said the confirmatory email was only sent to follow industry
practice and was not an acceptance of offer.
An offer is distinguished from an invitation to treat because the latter
lacks that intention to be legally bound.
When the customer filled out the order form and giving credit card information, the
customer responded by making an offer to buy the package. The automated
response suggested that the orders had been accepted.