Articles from the Silver Shemmings Ash Team on contractual matters, recent case law changes and items of interest in the construction and property world
July 22, 2015 | Silver Shemmings
A contract is defined by the Collins Dictionary (on line) as a “formal agreement between 2 or more parties”.
However a contract can be formal or informal – buying a cup of coffee is a contract, as is signing a document agreeing for building works to be carried out.
For there to be a contract there must be the following elements:
There must be at least 2 parties – usually the offeror and the acceptee i.e. one who makes an offer and the other who accepts that offer. However, in more complex projects especially those in the construction industry, there will be other parties to the contract such as funders/guarantors. However, there must always be someone who is offering to do something and another accepting that offer
An offer is the proposal to do something whether it is to sell a cup of coffee for a price or for building works to be carried out to a specific design for a specific price.
An acceptance is the agreement by one party to the other party’s offer.
This is the price that is agreed for one party to carry out what was agreed ie the price of the cup of coffee or the cost of the building works.
Intention to create legal relations
This means that the parties agree that the contract between them is legally binding.
All of this sounds so simple but as is the way, especially in the Construction industry, trying to decide whether a contract has been entered into has led to some very lengthy court cases and equally lengthy judgments when the judges have tried to decide what exactly were the terms of the contract and whether this was what the parties meant to agree to – sometimes completely different matters! This is true for construction contracts.
Construction contracts are very complex documents and set out in detail how the contract between the parties is to work. Standard forms of contract set out how payment is to be made and when, how the contract terms can be varied, how the contract works can be changed from that originally agreed to and what happens when the parties fall out. However, one size will not fit all and it is when amendments are made that problems arise, especially if there are linked subcontracts and professional contracts. Not all of these every time dovetail together.
However, contracts can be formed inadvertently and equally, whilst the parties think they are in contract, they may not be because one of the above elements is missing.
Contract law, whilst seemingly simple, is and can be very complex especially construction contracts and are traps for the unwary.
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