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The Design And Construction Contracts Samples For Students .

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Question:

Requires Evidence of the Understanding of the Court Crocess, Risk Involved and Preparation use of Witnesses and The Role of Expert Witnesses in the Court Process ?

 

 

Answer:

Introduction

Most of the contracts that people form are partly oral and partly written primarily in construction and building industry. Parties may agree in writing at first, but due to the demands of the structure or other circumstances, they decide to change some of the terms to cover the arising situations. Such contracts are sometimes efficient, and they provide a quick solution when modes of writing cannot be available at the moment. However, at times they can turn to a game for between a Principal and an Agent, something that raises a question to the validity of the contract. This paper will study a construction contract that was in writing at first between the builder and the architect, and the later the parties amended the contract to suit the drawings of the architect.

Formation of a Contract between Agro Builders engages Ego Architects

In deciding whether there is a contract between the parties or not, this paper shall analyze the elements of the contract as put by the law of contract, and it will then compare with the elements in these parties' contract. Before the rise of the dispute, the parties had a written agreement. Some of the terms of the agreement were that Ego Architects would prepare the drawing, and Agro builders were to pay for the drawings in 3-stages.

The law of contract recognizes the existence of an enforceable agreement if these three elements exist. For one, the offeror should intentionally offer the offeree an offer, and then the offeree must willfully accept the offer.[1]  Also, an offer should have no considerations.[2] Besides, the rules of acceptance state that the acceptance must be communicated to the offeror, and it should not have its conditions.[3] According to the information above, this paper concludes that there was a valid agreement for the formation of the contract.

After the formation of the contract, contract law states that the parties must perform according to their obligations. If one party acts contrary to the terms that were agreed, then the innocent party has the right to rescind the contract. This means that Agro builders had all the right to refuse to pay Ego architects if it found for sure that the drawings were defective, and could no longer be bound by the duty to act in good faith which was an implied term of their contract.[4] By doing this, it could retain the payments until the defects were made.

But still, rather than rescinding the agreement, the parties to the contract can waive the strict reliance on defective drawings or mutually agree to vary the work and use them.[5] In case such happens, the older contract becomes non-existence, and the terms of the new agreement predominate. So when Agro Builders and Ego architects decided to modify the contract so that it can accommodate the defective drawings, the drawings became admissible and therefore it's deemed that Ego architects performed its obligations. So with that, Agro Builders cannot go back to the old contract.

Furthermore, the law of contracts acknowledges that acceptance of a contract can happen through the conducts of the parties.[6] So when Agro Builders used the drawings in the constructions, it impliedly accepted them in the construction, meaning that they were valid. This is sometimes called acceptance by conduct, and Agro builders were supposed to act in good faith as they had demonstrated while accepting the drawings. If there is anything like defects, it’s argued that the builder certifier should examine the structure carefully.[7] So it seems that Agro looked careful and impliedly accepted them though its conducts.  For example, the Court of Appeal held that the contract to the ‘deal demo' was binding to the parties even though they had not signed the agreement as per the requirements of the terms. The contract provided that the agreement won't be binding unless the parties append their signatures, but the court dismissed that clause by stating that the conduct of the parties implied that they had accepted the contract.[8] Similarly, Agro Builders used the drawing with the new terms, and therefore could not go back to the old contract.

 

Modification of a Written Contract by a Subsequent Oral Agreement

The contract law recognizes two types of contracts. That is an oral contract and a written contract. The dominant contract is always the last one that was made before the parties acted. For example, in a case between Tekdata Limited v Amphenol, the court held that Amphenol was the last one to issue its terms, and then the parties started performing their obligation. With this, it then implied that Amphenol's declarations ruled the contract.[9] These kind assumptions are more prevalent in cases where one party commences work before the understanding of the terms, and it applies to both oral and written contracts. So in the case of Agro Builders and Ego Architects, it's true that there was a contract that dismissed the defective drawings. But after that,  the parties went back to change that contract to accommodate the defective drawing, so the new contract would govern future conducts of the parties.  

The general terms in a construction contract is that after the parties have accepted the terms the contract, both parties have a duty to act fairly and in good.[10] Nevertheless, there is always a battle between oral agreement and written agreement. In most cases, the battle is a question on whether an oral contract can dismiss or modify a written contract. Courts have always enforced oral modifications under different circumstances. For an instance, in one case the court held that "An oral modification may be enforced if there is partial performance by one of the parties”[11] So for Agro Builders and Ego Architect, there is a performance as they both started the construction with the amended contract.

Additionally, Angro had rejected the drawings, but it can be assumed that it later it called Ego to amend the contract. Where one party induces the other to oral amendments, the court stated that "Once a party to a written agreement has induced another's significant and substantial reliance upon an oral modification, the first party may be estopped from invoking the statute to bar proof of that oral modification.”[12] These facts were also explained in by Chew that inducing the other to carry out a task, and that parties performs with reliance upon that assurances, or representation the other party would be obligated to perform as it had promised.[13] Furthermore, the court allows parties to a contract to alter a written contract even where it contains clauses sheltering it from oral modifications.  A useful example is in a case where the Court of Appeal nullified the decision of the High Court's after discovering that the High Court ruling didn’t look at the expressions of the agreement. The Court of Appeal found no weight on a clause that rejected any future oral amendment made orally to the written contract.[14] However, the integration of modifications into the initial contract depends on some factors, comprising of the existence 'shield clause' and whether there was enough authority amounting to the amendment.[15] So since there was enough ground which was modifying the contract to create a room for the new drawings, Agro Builders should understand that even though the alterations were oral; they had the same effects as a written contract. The only thing that weighs here is whether both parties consented to the modification. With that, Agro retaining the money would destroy the sole purpose of the principals retaining the money. It is well clear that money cannot be retained again after there has been completion.[16]

Legal Principles Applicable with the Hierarchy of Contract Documentation

Constructions work always involves a heap of documents, and the vast number sometimes is always a problem when it comes to dispute resolutions. Byrne J stated that construction disputes "involve consideration of an enormous number of documents and due to the availability of modern computerized techniques for document management means that there is now no incentive to limit the number of these documents deployed at trial”.[17] Above all, these documents are part and parcel of a construction contract, and a successful project depends on the use of each document.[18] On the other hand, these documents sometimes become a problem at sometimes of the construction process. The challenges arise from the enormous volume of these papers since they are all part of the contract, and the more they are, the higher the chances of discrepancies of the data. The main problem arises when a solution to an individual problem relies on the provision of one document, causing a need to have one document ruling the others when all the papers provide different information.[19]

Considerably, big projects hold numerous of these contract papers. The project manager arranges all of the papers hierarchically in order, and their layout simply signifies the order that any person using them should follow.  In most cases, the filing starts with the construction contract, then it's followed by the specification document, and the drawings follows as third. Lastly, the bills of quantities or scheduled rates are attached at the bottom of these documents, and any other document following after this may call follow the same order.[20]

Regarding future disputes, it’s very common that the contracts will have a clause designating how the parties would refer a conflict arising from these references to these documents. About this, the most common approach gives more authority to the contract among other papers.[21]

Apart from the provisions of the contract for handling document discrepancies, there are other methods that project managers can consult. Among these are the principles of common law. For instance, the common law suggests that the users can resolve the confliction data by interpreting the document in a reasonable person's thinking when given all the background that the parties have.[22] Another suggestion from the common law is that parties can try analyzing the ambiguities to find a solution.[23] Also, the management can find a solution by looking at the contract document as a whole. And finally, the management can try to remove any literal application if it’s the one leading to the errors or mistakes. Parties can reflect on the application of these common law principles to see whether they can eliminate the ambiguity arising from the reference to the hierarchy.

Egal Effect of stamping the specifications “approved” on any future contractual position

Stamping specifications or authorizing any action in a construction falls under the duties of the engineer or architect. These duties also bestow on the engineer all the liabilities that may come due to defects or negligence that falls within its authority. In most of the constructions, the engineer is responsible for both contractual and legal professional duties owed to the owner. Not only that, but it also owes professional legal duties to the contractors.

Generally, the supervising authority gives the Architect a professional control and management. Plus it also vests all the liabilities including those that may arise from their negligence. For instance, a poor interpretation of misconception of the figures can lead to defective construction, and all these liabilities would fall on the engineer. Likewise, the engineer cannot blame the contractor or the owner over any figure that's found on the construction documents. To some extent, the liability of the architect is not limited within his/her expressed terms; sometimes it can go outside the stipulated duties. For instance, an engineer would be held liable of authorizing defective drawing that the contractor or owner brings to the site. For example, the court held that the engineer was liable for damages that occurred out of his failure to inform the owner of the errors made by the contractors.[24]

Also, whenever an architect stamps the construction specifications, it implies that he/she accepts all damages that may arise as an outcome of his/her authorization. In simple, stamping documents gives the architect an obligation to review the plans and eliminate all errors that may cause some damages. The court made the same remarks as "the responsibility of an architect may be similar to that of a lawyer or a physician: the law requires the exercise of ordinary skill and care common to the profession."[25] Additionally, the responsibilities of the architect for reviewing construction documents can arise even after completion of the construction. For example, a judge ruled against the architect after a boy fell from the diving platform out of Architects recommendations. In the in the ruling, the judge stated that architect owes a duty to any person who lawfully resides within the premises.[26]

Furthermore, the architects' overall authorization doesn’t bequeath them the authority to shift the burden to the owner. For example, sometimes an engineer may follow his/her own conscious and modify the contract adding more burden to the owner or the contractor. If such a thing happens, the court will always overturn such decision and award damages to the afflicted party.[27]  In general, project documents such as plans and specifications work together to define the end results of the construction. The drawings graphically illustrate the work results expected. If an engineer missed any of these, the entire construction would have some defects, and such may cause accidents in future. All these will heavily come down to the architect.

 

Formulated Procedures for Avoiding Amendment Problems In the course of Construction

Ariation Management

The contract documents for a typical construction project consist of the Agreement itself, the General Conditions, Technical Specifications, and numerous Drawings. Additionally, some provisions are covered by reference to another document. Unfortunately, contract documents often fail to adequately describe, define, or delineate the work to be performed. This generates some of the so-called “scope-of-work” disputes. Such disputes center on the nature and extent of the performance obligation. The most frequent cause of such disputes is the lack of detail in drawings or lack of specifics in specifications. The problem with drawings is most common on small projects where design costs, and therefore the number of drawings, are held to a minimum. If the drawings lack sufficient detail, the contractor will have to rely on what it understands is expected. This may or may not coincide with the intentions or expectations of the owner or designer. Specifications problems usually result from lack of attention during the specification process. The widespread use of “canned” or “off-the-shelf” specifications and manufacturer’s specifications is another large contributor to the number of disputes occurring. Errors of omission or ambiguity are frequent and, unfortunately for the owner, are generally interpreted in favor of the contractor. Specifications and drawings, as well as construction documents, should be correct, complete, clear, and concise. Problems also occur when specifiers resort to broad, subjective generalities (e.g., “in accordance with highest industry standards”) rather than describing the work objectively and in detail. Avoiding Scope-of-Work Problems The best but most difficult way to avoid scope-of-work problems is outlined in the following guidelines: 1. Provide adequate budget for drafting specifications. 2. Work with a set of carefully prepared, carefully coordinated front-end documents. 3. Place control of each set of project specifications in the hands of a single, qualified specifications engineer or require that all specifications be subject to his or her review and editorial control. 4. Do not mark up previous job specifications to create another set of job specifications; always work from the same set of master specification documents for every job. 5. Update the master specification at least annually to keep current with industry standards, codes, and laws affecting construction. 6. Use the same set of front-end documents on all projects to minimize contract administration problems and to ensure that there has been no contractual variation in the owner’s risk posture. 7. Front-end documents should not be edited by project engineers. All changes to front-end documents should be subject to review of both legal and construction management personnel with specific experience in construction contracts management. While the foregoing will go a long way toward improving the specifications product, it is important that every office either establish a specifications department or at the very least designate a Specifications Engineer to control specification standards and policies.

 

Use of Experts

Expert determination is a resolution method where the third party with expertise in a particular field brings the disputing parties to an amicable decision.[28] In engineering or construction projects, disputing parties may use an expert determination to issue a valuation or of work completed. The expert may assess the quality of work delivered, or a determine other facts or legal issues in dispute. For example, a contract administrator can act as a third party, in verifying the value of work completed by the contractor. In that case, such an administrator would be acting in the capacity of offering expert determination. When an expert determination is used to solve disputes, it's usually perceived as holding grand benefits over both litigation, and arbitration.[29] So in our concerned case, the parties can also call the help an expert to help Agro and Ego settle their case.

Substantiating the Claim Over Incomplete Specifications

For any party looking to acquire a relief from a breach of contract, that party must substitute their claim. In reality, the weight of the case matters with how individuals substantiated their evidence. In other words, the party that brings most reliable documentation to the court always gets the expected winning.  The problem comes when the innocent party doesn't know or have the necessary files. In such cases, the court may either dismiss the case or rely on the little evidence provided.

For Agro to get the most out of its case, it must provide the court with documents such as the correspondence files.  Bringing these files to the court will help the judge to understand how the dispute unfolded starting from the time when there was no project. In other words, the judge will first need to look at the contract since it's the one that brought the parties together. Also, within the correspondence files, it would be good to have daily reports of what was happening during the development of the agreement. Such a report would help in understanding the lineup of events, progress, and costs of the project. Other documents that can also support the case are the payroll records or the delivery Receipts. Also, it would be good to bring the project schedules to show the execution plans. Lastly, pictures of the development would be good to help the judge to understand the situation practically.

To some situations, the parties may need to bring in the evidence from the expert witness. However, judges value different factors when deciding on the admissibility of the expert evidence. In determining whether the evidence would be acceptable or not, the judge may first check whether it's possible to test its technicality. Simply, this checks whether the techniques used in acquiring the evidence were prone to realistic errors and whether the technique had a reasonable rate of mistakes.[30] If there are present, the court would also look to see whether there are principles applicable for limiting such technical errors.  Also, in claims trials, expert evidence is admissible only if it brings the judge a picture of the problem or helping the jury understand the errors.

Comparatively, if the evidence is not coming from a satisfactory foundation, it is no doubt that the court will reject it.  On the same token, the court will dismiss any expert testimony if the expert relied on speculations, or if the expert used his or her assumptions that had unsatisfactory factual grounds. For example, the court dismissed evidence that failed to show all the variables comportment on the practical facts.[31]

Other than those reasons for dismissing expert witness, there are some instances where such evidence becomes a problem rather than a help.  For example, when experts involve themselves too much in the project, they might develop some interest leading to biased evidence. Coupled with that, an expert witness can sometimes become too expensive.[32]

Bringing a Claim a Claim within the Scheme of the Building Industry Security of payment Act (Victoria).

The 'Building and Construction Industry Security of Payment Act (SOP)' helps people to secure their payments made in a construction job or people who supply goods and services to a building contest. In making a successful claim, this acts illustrates some standards that every claim should follow.  For example, the law set that each payment claim must be served on the respondent. The claim should have the earliest date. That is the date when the claim was made.[33] And, it should have both reference date and the latest date that the claim can be served.

While making a claim, the claimant should claim for the unpaid amount by the reference date, and the amount should reflect the price agreed in the contract. If the contract doesn't mention the price, the claimant can do a valuation of the completed work and claim the calculated price.   The act illustrates various types of dates. In particular, there is the periodic progress payment, final payment or a single payment. Parties to a contract are free to specify the reference date and the latest date. When it comes to a periodic progress, the should wait for three months after the reference date.  Also, a periodic progress payment allows the lapse of not less than three months and one day before serving a payment claim.  After making an application for a final payment, there should be no further claims.

While making periodic progress claims, it's good for the claimant to understand that contract providing for a single payment would be exempted from this application. The rest contracts allow periodic claims as the contract proceeds. At the same time, the contract can set dates for making periodic claims.  If no such provision, the claimant can make a claim after 20 business days counting from the date the work commenced. For a final payment claim, the Act allows the parties to a contract to prescribe the dates for making a claim. If no date, then the contract should provide for a final certificate, with the earliest date being the date following the final claim.

Progress payments also cover single or one-off time payment claim. In most cases, this type of payment works on short job contracts which have specified sum. Also, it includes instances where the claimant should receive the payments before work the job is carried out.

 

Conclusion

Construction disputes are very popular despite the many documents. The only thing to understand is that whatever the number of documents they parties, have, the court will always give the contract more priority. The court recognizes that the contract gave birth to all the other documents, and hence it should rule them in the times of disputes.

 

References

Brudner A, The Unity Of The Common Law (2nd edn, OUP Oxford 2013)

McKendrick E, Contract Law (11th edn, Palgrave Macmillan 2015)

Andrew C, 'Alliancing In Delivery Of Major Infrastructure Projects And Outsourcing Services In Australia - An Overview Of Legal Issues.' (2004) 21 The International Construction Law Review <https://trove.nla.gov.au/version/90365263> accessed 11 May 2017

Jenkins J, The American Courts (11th edn, Jones and Bartlett Publishers LLC 2011)

Stone R, The Modern Law Of Contract (11th edn, Routledge 2015)

Ulbrick D, Tradies And The Trade Practices Act ( 2009) 25 BCL 8

Byrne D, The Future of Litigation of Construction Law Disputes, Speech delivered at the Reception to Announce His Honour’s Appointment as the Patrol of the Construction Law Program (University of Melbourne, 5 September 2007)

Klinger M, and Susong M, The Construction Project (3rd edn, Tort Trial and Insurance Practice Section, American Bar Association 2006)..

Davison R and Mullen J, Evaluating Contract Claims (2nd edn, Wiley-Blackwell 2009)

Pickavance K, Construction Law And Management (1st edn, Taylor and Francis 2013)

William J Chambliss, Courts, Law, And Justice ( Sage 2011).

Cases

Adelaide City Corp v Altermann (1987) 46 SASR 186

Ambassador Baptist Church v. Seabreeze Heating and Cooling Co., 184 N.W.2d 568, 28 Mich. App. 424 (Ct. App. 1970).

CJP Builders Limited v William Verry [2008] EWHC 2025 (TCC).

Fenice Investments Inc v Jerram Falkus Construction Ltd [2009] EWHC 3272 (TCC)

Francisco v. Manson, Jackson & Kane, Inc., 377 N.W.2d 313, 145 Mich. App. 255 (Ct. App. 1985).

Globe Motors and RW Lucas Varity Electric Steering Ltd. [2016] EWCA Civ 396

Green v. Millman Brothers, Inc., 151 N.W.2d 860, 7 Mich. App. 450 (Ct. App. 1967)

Heart Research Institute Ltd v Psiron Ltd [2002] NSWSC 646

Hyundai Motor Company, Ltd. v. Duncan, [2015] 766 S.E.2d 893, 289 Va. 147

Jones V. City Of Albertville, Civil Action No. Cv-12-S-96-NE (N.D. Ala. Oct. 28, 2014).

Keane Telecom Consulting, Llc V. Manhattan Telecom. Corp., 2013 N.Y. Slip Op 32261 (Sup. Ct. 2013).

Kerry, Inc. v. Angus Young Assocs., Inc., (Wis. Ct. App. 2005) 694 N.W.2d 407

Lewis Construction (Engineering) Pty Ltd v Southern Electric Authority of Queensland [1976] 50 ALJR 769

Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70 210 CLR 181.

Reveille Independent LLC v Anotech International (UK) Ltd [2016] EWCA Civ 443

Scientific Elec. Co., Inc. v. ADG Park Constr. Group, LLC, 2013 N.Y. Slip Op 31251 (Sup. Ct. 2013).

Tekdata Interconnections Ltd v Amphenol Ltd [2009] EWCA Civ 1209

Pratt Contractors Ltd v. Transit New Zealand (New Zealand) [2003] UKPC 83

Legislations

Building and Construction Industry Security of Payment Act 2002 (Victoria)

[1] Alan Brudner, The Unity Of The Common Law (2nd edn, OUP Oxford 2013).

[2] Ewan McKendrick, Contract Law (11th edn, Palgrave Macmillan 2015).

[3] Jeffrey A Jenkins, The American Courts (11th edn, Jones and Bartlett Publishers LLC 2011).

[4] Chew Andrew, 'Alliancing In Delivery Of Major Infrastructure Projects And Outsourcing Services In Australia - An Overview Of Legal Issues.' (2004) 21 The International Construction Law Review <https://trove.nla.gov.au/version/90365263> accessed 11 May 2017.

[5] Lines MacFarlane Marshall Pty Ltd v Fletcher Construction Australia Ltd (2000) VSC 358

[6] Richard Stone, The Modern Law Of Contract (11th edn, Routledge 2015).

[7] David Ulbrick, Tradies And The Trade Practices Act ( 2009) 25 BCL 8

[8] Reveille Independent LLC v Anotech International (UK) Ltd [2016] EWCA Civ 443

[9] Tekdata Interconnections Ltd v Amphenol Ltd [2009] EWCA Civ 1209

[10] Pratt Contractors Ltd v. Transit New Zealand (New Zealand) [2003] UKPC 83

[11] Scientific Elec. Co., Inc. v. ADG Park Constr. Group, LLC, 2013 N.Y. Slip Op 31251 (Sup. Ct. 2013).

 

[12] Keane Telecom Consulting, Llc V. Manhattan Telecom. Corp., 2013 N.Y. Slip Op 32261 (Sup. Ct. 2013).

 

[13] Andrew C, 'Alliancing In Delivery Of Major Infrastructure Projects And Outsourcing Services In Australia - An Overview Of Legal Issues.' (2004) 21 The International Construction Law Review <https://trove.nla.gov.au/version/90365263> accessed 11 May 2017

[14] Globe Motors and RW Lucas Varity Electric Steering Ltd. [2016] EWCA Civ 396

 

[15]   Green v. Millman Brothers, Inc., 151 N.W.2d 860, 7 Mich. App. 450 (Ct. App. 1967).

[16] David Ulbrick, Tradies And The Trade Practices Act ( 2009) 25 BCL 8; “Retention moneys and Part IVA of the TPA”

[17] David Byrne, The Future of Litigation of Construction Law Disputes, Speech delivered at the Reception to Announce His Honour’s Appointment as the Patrol of the Construction Law Program (University of Melbourne, 5 September 2007)

[18] Marilyn Klinger and Marianne Susong, The Construction Project (3rd edn, Tort Trial and Insurance Practice Section, American Bar Association 2006).

[19] Fenice Investments Inc v Jerram Falkus Construction Ltd [2009] EWHC 3272 (TCC)

[20] R. Peter Davison and John Mullen, Evaluating Contract Claims (2nd edn, Wiley-Blackwell 2009).

[21] CJP Builders Limited v William Verry [2008] EWHC 2025 (TCC).

[22] Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70 210 CLR 181.

[23] Lewis Construction (Engineering) Pty Ltd v Southern Electric Authority of Queensland [1976] 50 ALJR 769

[24] Kerry, Inc. v. Angus Young Assocs., Inc., (Wis. Ct. App. 2005) 694 N.W.2d 407

[25] Ambassador Baptist Church v. Seabreeze Heating and Cooling Co., 184 N.W.2d 568, 28 Mich. App. 424 (Ct. App. 1970).

[26] Francisco v. Manson, Jackson & Kane, Inc., 377 N.W.2d 313, 145 Mich. App. 255 (Ct. App. 1985).

[27] Tomlinson v Ashland County (1919) 173 NW 300, 170 Wis 58.

[28] Keith Pickavance, Construction Law And Management (1st edn, Taylor and Francis 2013)

[29] Heart Research Institute Ltd v Psiron Ltd [2002] NSWSC 646

[30] Jones V. City Of Albertville, Civil Action No. Cv-12-S-96-NE (N.D. Ala. Oct. 28, 2014).

[31] Hyundai Motor Company, Ltd. v. Duncan, [2015] 766 S.E.2d 893, 289 Va. 147

[32] William J Chambliss, Courts, Law, And Justice ( Sage 2011).

[33] Building and Construction Industry Security of Payment Act 2002 (Victoria)

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