Construction contract Law

 

" Discuss how contract express and implied terms can be incorporated into a building contract".

1. How are express terms included into the contract if the contract is entirely in writing? 1.5 mark.
2. What type of express terms can be included in the contract where the contract is part written? 1.5 mark.
3. What are the various tests for the incorporation of terms in a part written part verbal or entirely verbal contract? 6 marks.
4. What is the significance if the contract is signed? 0.5 mark 
5. What type of terms are implied at common law and statutory law?  2. marks
6. Presentation-logical development and headings and expression. 1 mark.
Word guide say 800 words. You need to refer to all relevant cases and statutes.

" Discuss the remedies a party to a construction contract has where the other contracting party commits a breach of contract".
1. Consider the provisions in AS2124-1992 with regard to the dispute resolution processes the principal and or the builder can take. As you know they can decide to also go to arbitration and or litigation. 7.5 marks
2. Consider the common law and equitable remedies if the principal or the builder decides eventually to go to litigation. With regard to equitable remedies you can confine yourself to specific performance and injunctions. 5 marks.

 

A. “Discuss how contract express and implied terms can be incorporated into a building contract".

1.    The parties that involve forming a contract get their rights and obligations by the terms of the contract. Whenever the contractual terms are assessed, it is crucial to note that both the negotiations before the contract along with their conduct after contract may result in non-contractual rights and obligations. Section 18 of the Australian Consumer Law makes it clear that a false pre-contractual statement often results in the liability of contravention. Express terms refer to the terms that the parties have articulated just before concluding their contract. As far as a written contract is concerned, the identification of express terms becomes fairly simple. These terms can be included in the following manner:

•    Pre-contractual statements
•    Terms displayed or delivered
•    Incorporation of terms by course of dealing
•    The effect of signing a written document
•    Extrinsic evidence and the parole evidence rule

2.    The type of express terms that can be included in the contract where the contract is partly written and part oral, then there will be two concluded contracts:

•    The main (normally written) contract
•    The collateral (oral) contract 

Therefore, in order for a representation to constitute the above two points, the following conditions must be satisfied:
•    Any kind of contractual terms require that the statements must have been promissory
•    The statement must not contradict the main contract
•    The statement must not be aimed to form a part of the main contract. In that case, the parol evidence comes into the picture that prevents the statement from becoming a term of the main contract.
•    Consideration must be provided for the promise

3.    The various tests for the incorporation of terms in a part written, part verbal or entirely verbal contract are as follows:

a)    Verbal/Oral statements
The main issue here is whether an oral statement made during negotiations before a contract becomes a term of a contract or remains mere representation or promise for that matter. The following factors test the statements:
i.    Importance of statement: if the gravity of statement is so important that the party or parties wouldn’t otherwise have entered into the contract, then it is likely be viewed as a term.
ii.    Timing of statement: if more time is taking between statement and conclusion of the contract, then the chances are less likely to be held a term of contract.
iii.    Strength of the statement: The more forceful the statement is, the more likely it is to be viewed as a term.

b)    Incorporation of partly written terms
i.    Incorporation must take place prior to the conclusion of the contract
ii.    The manner of occurrence of incorporation is on the basis of signature, reasonable notice, consistent route of dealing as well as a shared understanding of parties.
iii.    Often, it is relatively harder to represent incorporation to be more onerous or unusual in the written clause.
iv.    The extent of the assessment to which the clause is onerous or unusual, one has to focus on the meaning and effect of the clause in question, rather than on the kind or the type of the clause.

c)    Incorporation of partly oral terms 
i.    If the written document is not aimed to set out all the terms that were agreed between the parties, then the extrinsic evidence of other terms are admissible.
ii.    If in case the document is aimed to record earlier oral agreement without accuracy, then evidence of oral agreement is admissible.
iii.    An oral statement can be incorporated even if it is not a term of a written contract, if it turns out to be a collateral contract.

4.    Significance of signed contract: a signature is an important element of a contract as it makes it difficult for any of the signatories to successfully argue that the written terms of the agreement do not represent what they had agreed upon. Therefore, a party readily accepts the responsibility to pay the account when they sign the agreement.

5.    At common law, terms are often implied whenever it is necessary to provide full effect to the parties’ intentions. As an example, when the parties are needed to do as whatever is necessary to enable the contract, then common law will imply a term. Sometimes it is on the part of the courts to ask whether or not the parties agreed to the term, while considering an issue at the time of entering into their contract. While in some of the other cases, courts will imply standard terms without knowing actual intent of the parties.At statutory law, the Australian Consumer Law gives statutory guarantees which are almost similar to the previously implied. As a matter of fact, they are no longer the terms implied into contract they do not result into contractual remedies. 

B. “Discuss the remedies a party to a construction contract has where the other contracting party commits a breach of contract".

 

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1.    In the situation of any dispute arising between a contactor and a principal with regards to the contract, also including a dispute that concerns a direction being given on the part of Superintendent, then either of the parties are needed to deliver by hand or send through certified mail to the other party along with the Superintendent a legal notice regarding dispute in writing, properly identifying as well as providing the details of the dispute. 
 
As per the law, despite the existence of a dispute, the principal and the contractor shall continue to work according to the contract , which is subject to Clause 44. Also, the contractor will have to continue with the work under the contract and the principal, which is for the compliance with Clause 42.1.
A claim in tort, under statute or for restitution based on unjust enrichment or for rectification or frustration, may be included in an arbitration.

Required Steps before Proceedings

Alternative 1
It is required that within 14 days after serving of a notice of dispute, the parties shall provide at least once, along with the agreement and presence of superintendent and at the option of either party, to attempt to resolve the dispute. Also, if they are failed to resolve the dispute, it would be made possible to agree on methods of resolving the dispute by other means. In the case of any such scenario, each of the parties shall be allowed to represent itself by an authorized person to agree to a resolution of the dispute.
In the event of dispute being unable to be resolved or if at any point in time, either party considers the other party is not putting reasonable efforts to resolve the dispute, then again either party is required to deliver by hand or sent by certified mail to the other party and the dispute be referred to arbitration or litigation.

Alternative 2
If the party that has been served with a notice regarding dispute can give a written response to the notice to the other party along with the superintendent within 28 days of the receipt of the notice. 
Within 42 days of the serving of notice to the superintendent regarding dispute or within 14 days of the receipt on the part of superintendent, whichever is earlier, he is required to give each of the parties his written decision regarding the dispute along with the reasons.
If in case either party is dissatisfied with the decision of superintendent, or if the superintendent fails to provide decision regarding the dispute within the stipulated time under Clause 47.2, then the parties are given the opportunity at least once to attempt to resolve the and failing which, they will be allowed to explore all the possible ways and means as to how the dispute be resolved. Again, at any such a scenario, each party shall be represented by a person having authority to agree to a resolution of the dispute. 
So, in case any dispute is unable to be resolved or if at any point in time after the decision being given by the superintendent, either party considers that     the other party is not making proper efforts so that the dispute could be resolved. Then the dispute could be referred to arbitration or litigation.

2.    Arbitration  is the process where parties involved in the dispute, present their points of view as well as facts to an independent person called arbitrator, who then gives decision based on those facts. In case of arbitration:
•    There is greater need for the parties to produce evidence
•    There may be one or more than one arbitrators
•    The arbitrator’s decision must be binding and enforceable
Now in case of a single arbitrator who is effecting the arbitration, is required to be nominated by the person who is named in Annexure A or in case no person is named, shall be nominated by the Chairperson for the time being of the chapter of the Institute of arbitrators Australia in the State or Territory named in Annexure A. Such an arbitration will be held in the State or Territory defined in Annexure A.
Unless the parties are agreed in writing, even if any of the person agreed upon by the parties in order to resolve the dispute pursuant to Clause 47.2 would not be allowed to be appointed as an arbitrator. Nor may that person be called as a witness by either party in any proceedings.
Despite Clause 42.9, the arbitrator may award whatever interest the arbitrator considers reasonable.If one party has overpaid the other, whether pursuant to a Superintendent's certificate or not and whether under a mistake of law or fact, the arbitrator may order repayment together with interest.

C. "Discuss the estates in land, interests in land and how they can be owned (title)"

1.    ‘Estate in land’  refers to the degree, quantity, nature as well as extent of interest which a person carries in land or in real property. In other words, it can be defined as an ownership interest in a physical part of land that has a set geographic location.
The owner of a real estate has the rights similar to owner of personal property, i.e. the right to possess it, control it, use it, and exclude it from others along with the right to dispose it by selling, gifting, abandoning or bequeathing it (alienation). 
However, ownership or possession of real estate property is lot more complicated than what happens with personal property. A large number of these real estate interests have arisen out of their devisement in wills, whenever the testator needs many heirs to get advantage from the realty. Much more complex forms of ownership, such as a life estate are allowed to be applied to real estate rather than applying to personal property. This is because realty has two attributes that personal property does not:
i.    land is basically indestructible, and
ii.    land is not consumed in its use
In a freehold estate the duration of ownership is indeterminate, meaning it could be for a lifetime of an owner or an unlimited duration. 
A leasehold estate, on the other hand, lasts for a definite time duration. The holder in this case doesn’t have power to alienate the property. Only the interest of the holder can be transferred if it is allowed by the lease. Leasehold estates include estate for years, estate at will, and estate at sufferance.  
Free Simple Estate: the free simple estate refers to the absolute ownership of the property and confers the owner all the rights that are only restricted by laws and applicable provisions such as zone ordinances.
In a free simple defeasible estate, the duration of ownership is subject to some conditions and caveats. 
Life Estate: a life estate is a kind of freehold estate where ownership is restricted to the duration of the particular person’s lifetime. Even if the holder of the estate is the life tenant or other designated person. The owner has most of the rights of ownership, in that he can profit from it, possess it, or lease it, but those rights end when the life estate ends. 
The next is the conventional life estate that ends when life tenant dies. The ownership is then either reverts back to the previous owner or passes on to another designated individual having a future hold in the interest of the property. 

2.    The Interest in Land can be defined as the right which a person has over another’s land. There are two types of interests which are inherently different from each other but a common feature is that they are proprietary rights in land.
a)    Legal interest in land 
It includes easements i.e. the right to use the land of another in some way or the other or prevent it from being used for different purposes, such as rights of water and light. It also includes the rights to take anything from the land of another such as fish, wood or grazing rights.
In order for the rights to be legal, they must be held either for an indefinite time or equivalent to a term of years.
A rent-charge is the condition that someone gives the owner the right to a periodical sum of money being secured on land independently of any lease or mortgage.
Rights of entry exercisable over or in respect of a legal term of years absolute annexed, for any purpose, to a legal rent-charge.
b)    Equitable Interests in Land
The equitable interests include:
•    The interest of a beneficiary under a trust. A trust is said to be existing when the legal estate in the property is held by an individual called trustee upon trust for another called a beneficiary. This is either because an express trust is created or because equity recognizes that a trust exists on account of circumstances. 
•    The interest that arises under a contract which relates to a legal estate or legal interest, such as an agreement to buy a land. 
•    Restrictive covenants: it refers to a contract which is contained in a dead body because of which one person promises not to do anything on his land. 

3.    The co-ownership is the situation where there are two or more than two owners who have simultaneous rights and responsibilities over a piece of land. 
There are two types co-ownership:
•    Joint tenancy: under the rule of joint tenancy, the co-owners are regarded as a single entity owning the whole estate. The law sees the owners as a single entity.
•    Tenancy in common:in this situation only possession of the property is required. Each of the tenant has a separate share of the property, however, it is an undivided share, so one tenant cannot exclude another from a certain part of the land.

D.    "Discuss the processes that some standard form of contracts may use (commercial and domestic building contracts)".?

1.    Alternative Dispute Resolution (ADR) : the term alternative dispute resolution is often referred to a wide variety of dispute resolution procedures that provide alternatives to the full scale court processes. The mechanisms include anything from facilitating settlement negotiations with which disputants are provided the opportunity to negotiate directly with each other prior to some other legal process. Processes designed to manage community tension or facilitate community development issues can also be included within the rubric of ADR. 
In Australia, there is presently no comprehensive or uniform legislative framework in order to carry out the ADR. Therefore, a number of different laws govern the operation of ADR in various jurisdictions in Australia. ADR processes may be facilitative, advisory, determinative or, in some cases, a combination of these. 

a)    Mediation: mediation is the most recognized and most frequently utilized form of ADR. It can also be termed as neutrality assisted negotiation. In this process the parties involved in the dispute choose a mutually accepted independent third party, i.e. the mediator who will help them arriving at an acceptable solution to their dispute. The mediator, in the process of a typical mediation, discusses the problem with the parties, both in open and separate sessions. 
In commercial and domestic building contracts cases, the mediator’s training and experience should allow him or her to utilize all the tools and lateral thinking to help the parties in focusing on underlying real interest and needs. As the mediator plays a vital role, he must be carefully selected. Mediation may be voluntary, court ordered, or required as part of a contract or external dispute resolution arrangement

b)    Arbitration: it is the formal dispute resolution process being governed by the Commercial Arbitration Act 2010, in which two or more parties refer their dispute to an independent third person or party for its determination. Commercial arbitration in Australia has become the preferred procedure for parties seeking a binding determination of their dispute and an alternative to Court based litigation. 

2.    Litigation Law : the litigation law constitutes the rules, guidelines and practices that are involved in resolving disputes in the court of law. It is often seen as equivalent with tort cases. However, litigation can be used for all kinds of cases from divorces to eviction proceedings. In the same breath, most people think of litigation as synonymous with trial work but its process begins well before the first witness comes to testify. The best way to understand litigation law is to become familiar with the basic stages of a lawsuit. 
a)    Domestic building contracts: the significant points and purposes of the domestic building contracts act are: 
i.    Regulation of contracts for carrying out of domestic building work
ii.    Providing the resolution of the domestic building disputes and other matters
iii.    Requiring builders to carry out domestic building work and which should be covered by insurance in relation to that work
iv.    According to the act, "architect" means a person who is registered as an architect under the Architects Act 1991 and builder means a person who, or a partnership which— carries out domestic building work;manages or arranges the carrying out of domestic building work.
b)    Commercial Building Contracts: A Commercial Building Contract is a lump sum contract for major commercial work, to be used where there is no architect administering the contract. It is a contract between a contractor and the owner.       

References

Barkley P and Barlowe R, 'Land Resource Economics: The Economics Of Real Estate' (1986) 68 American Journal of Agricultural Economics
Bradbrook A, MacCallum S and Moore A, Australian Real Property Law (Law Book Co 1991)
'Cases And Case Notes' (2005) 1 European Review of Contract Law
'Estates In Land' (http://thismatter.com/, 2016) accessed 2 June 2016
Friedland P, Arbitration Clauses For International Contracts
Goetz C and Scott R, 'The Limits Of Expanded Choice: An Analysis Of The Interactions Between Express And Implied Contract Terms' (1985) 73 California Law Review
H. F, 'Contracts. Illegality. Collateral Contract' (1917) 27 The Yale Law Journal
HAYASHIDA K, 'Book Review: Thomas J. Miceli, MorikiHosoe, Economics Of The Law —Torts, Contracts, Property, Litigation—' (1998) 29 SiRS, SRS
Nolan-Haley J, Alternative Dispute Resolution In A Nutshell (Thomson/West 2008)
Parks J, Huffcut E and Woodruff E, 'Selected Cases On The Law Of Contract' (1926) 26 Columbia Law Review
Woltz C, 'Commercial Law' (1969) 55 Virginia Law Review


 

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