CONTRACTS ANALYSIS 1

Contracts Analysis

Institutional Affiliation

Students Name.
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Contracts Analysis

1.0 Introduction

This paper entails the key directions for analyzing and recommending the best contract system

to be utilized to when carrying out construction projects by Foodco. The report is intended to

acknowledge the board members of Foodco on the best contract system for a successful construction

projets. The paper also entails the payment methods for the contracts, construction laws and regulation,

late payments, program analysis, dispute resolution and payments method for the expansion of Foodco

through the establishment of twenty five brand new stores for their new brand Cheapco. The board

members though uncertain are considering NEC4 ECC to be the most efficient contract system for the

projects. Without conducting accurate estimations and empirical consideration when selecting the best

contract system, can lead to significant challenges that can disrupt success. Through much

determination, the paper will address the key factors involved with contract systems and knowledge on

the difference between different contract systems. This will help the board members on decision-

making based on facts highlighted in this paper on contract systems.

The main Foodco will be at the center of the other well dispersed Cheapco in effort to increase

their collaboration hence facilitating flexibility. This project will cost approximately 39 million pounds

each of the twenty five construction projects making a total of 975 million pounds for the overall

expansion of Foodco. The contracts will be awarded after conducting a legal tender process. The period

of the construction project is estimated to be about 1.6 years. Since this expansion project attracts

contractors with diverse knowledge and methods, there is pressing need to explore and understand the

aspects of contract systems so as to meet the obligations and rights of the contractors in accordance to

the law. The pressing motive of this report is to advise the Chief Executive Office (CEO) Foodco on

the right and efficient contract system including intensive analysis on the subject. However, this paper
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will focus on the NEC4 ECC contract system as the preference in comparison to other available

contract system.

2. The general principle of laws and regulations governing constructions contracts

A contract as binding agreement that grants rights and create duties between two parties that

and it is enforceable in court. In general, a contract involve two parties whereby one party makes an

offer which is accepted by the other party if they both agree on the terms of the offer (Smith 2006). The

contract is therefore enforceable if the terms of the contract are certain and that the two parties were of

clear and sound mind when coming into a contractual agreement. The contract can be written or partly

written, oral or partly oral or even entirely implied from the behavior of the involved parties.

There are many available contract systems that can be utilized to meet the purposes and needs

of the various construction projects. The construction projects may be different in various ways such as

the payment method applied in the project or the kind of construction works. Applying the best type

contract system will ensure that both the client and the contractor will have their expectation and

concerns specified. This will reduce the chances for misunderstandings and disruption of our expansion

projects in the case of Foodco. The many kinds of construction contracts come in varied forms and

through customization they can suit any kind of different projects or products. Moreover, types of

construction contracts can be defined by: project directives, quality expectations, the period of the

project, and the method in which compensation will be made (Thomas and Wright 2016). These types

of construction contracts includes; the Lump Sum contract, Integrated Project Delivery Contract,

Design-Build Contract, Guaranteed Maximum Price Contract, Incentive Contract, Cost Plus Contract,

and Unit Price Contract.

2.1 Formation of Contract

 Invitation to treat.

When someone advertise something on a poster or in a newspaper, the advert will not be
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seen as an offer but rather an invitation to treat indicating that one or both parties are

ready to negotiate a deal. It is a deal invitation package sent to the contractor by the

client inviting him for a deal.

 Offer.

This is the tender package sent by the contractor to the client which demonstrates the

contractors willingness to accept and bind with the proposed terms and conditions of the

contract which are usually provided in the Invitation to treat (Klee 2015). The period of validity

for this offer is usually dictated by the contractors.

 Acceptance:

This is the agreement or acceptance of all available terms of this offer unconditionally. If the

terms and conditions may change over time then negotiation as allowed be the signing of the

contract (Thomas and Wright 2016).

 Capacity:

This the legal capacity that the involved parties must attain before entering into a legal contract.

For example, both parties must be have attained the legal age, and they must be of sound mental

state when signing a contract.

 Intent:

If one or both parties do not have the intentions to bind the contract legally then the contract

should be considered invalid. The contract would not be accepted by the governing law if the

offer is not seriously intended or logically accepted.

 Form:
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During constructions, the client and the contractor must enter into a contract to demonstrate the

intention to carry out the construction project. The Formalities of the project may change in

case there is change in the payment methods, procurement routes or else the project location.

 Execution:

This is a process that involve “attestation” which is the process of signing the contract by the

two or more parties involved to bring it to effect.

2.2 Certainty

A binding and legal contracts must be certainly completed. If any conditions such as prices are

uncertain and unclear then a way to clarify them should be provided in the contract. Incomplete

agreement is not constituted in a contract and failing to agree on the key aspects such as safety and

prices may compromise the entire contract.

2.3 Terms of the contract (Implies and expressed)

The rights and duties of both parties should be determined on the basis of the terms and

condition. The basic basic terms and conditions are expressed terms which can be in writing or oral and

failure to observe the terms and conditions by any party will be regarded to be a breach of contract

which is punishable by law (Smith 2006). On the other hand, the implied terms are not expressed or

stated clearly in the agreement since they are too obvious.

2.4 Letter of Intent

This is referred to the intentions by both parties to start executing the work before the formation

of the contract, which gives both parties a green light to start performing their roles. If the a dispute

arises before the formation of the contract then a payment can be conducted based on the work already

done.

2.5 Tort
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Under the tort both parties have duties and obligations towards each other which attract for

compensation if one party violates the rights of the other due negligence regardless of the existence of a

contract.

2.6 Ending the contract

The discharge of the contract occurs only upon the existence of the following circumstances:

 Discharge by performance: this is when all the involved parties has effectively performed their

duties and obligations within the contract.

 Discharge under condition:

This happens when changes occur leading to replacement of the new contract by the old one,

and one or both parties are not capable executing the work.

 Discharge by renunciation:

This occurs when one of the parties fails to perform its duties which will leads to the discharge

of the contract by the defaulting party and the other party must get payment on the basis of the

already done work.

 Discharge by new agreement:

This is necessary when one party fails to follow the implied and expressed obligations within

the contract.

 Discharge by Frustration:

This is where the contract is discharged due to arising situation hindering the completion of the

contract like occurrence of natural disaster or change of legislation.

 Determination of the Contract:

This is where the contract allows for a party to withdraw its commitments to the contract due to

the occurrence of expressed conditions of the contract.

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Reference List

Smith, H., VDN Inc, 2006. Construction contract bidding. U.S. Patent Application 11/198,582.

Klee, L., 2015. International construction contract law (No. s 1). Wiley-Blackwell.
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Thomas, R.W. and Wright, M., 2016. Construction contract claims. Macmillan International Higher

Education.