Business Procurement and Contractual Practice Discussion 2022

Running head: BUSINESS PROCUREMENT AND CONTRACTUAL PRACTICE
BUSINESS PROCUREMENT AND CONTRACTUAL PRACTICE
Name of the Student
Name of the University
Authors Note

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Introduction
Construction contracts are a mutually or legally binding arrangement between two
parties, based on documents established policies and conditions. According to section 104 of the
Housing Grants, Construction and Regeneration Act of 1996 (HGCRA 1996), a construction
contract is an arrangement with an individual to execute, organize, or carry out construction
operation. One or more owners and one or more contractors belong to the two parties concerned.
The nature of building contracts are complex and belong to the few forms of contracts that need
to be written. The developer has the power to determine what form of contract can be used to
create a particular construction and in a contractual arrangement define legal requirements1. A
building contract is a crucial document that defines both the contractor and the owner’s scope of
operation, risks, obligations and legal rights. Construction contracts include agreements on
architecture, design or analysis and building-related consultancy agreements. Contracts between
the parties to execute each project individually are usually concluded. However, standard
contracts were implemented to increase the efficiency of the industry2. This paper mainly focuses
on the discussion of the procurement contract, civil wrong related to construction projects, and
various forms of contracts for handling delay. While discussing the same it also sheds light on
the discussion relating to golden principles of FIDIC, principles of NEC contracts, and the
contribution of the Donoghue and Stevenson to the civil wrong of negligence.
1 Thomas, Reginald William, and Mark Wright. Construction contract claims. (Macmillan International Higher
Education, 2016)
2 Levin, Paul, ed. "Construction contract claims, changes, and dispute resolution." American Society of Civil
Engineers, 2016.

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Discussion
Before starting the discussion on the most appropriate procurement method, it is
important to discuss the management and types of the procurement contract. Contract
management is the method of handling contract that is undertaken as part of the legal paperwork
for forming working arrangements with clients, suppliers or even partners. Contract management
requires negotiation of the terms and state of affairs in contracts. This also certifies that the terms
and conditions are complied with and records and decides to any modifications by all parties to
the agreement. Therefore, it is considered to be a procedure of handling, implementing, and
examining the supervision of a contract competently3. In this given scenario the issue to be
discussed is the most appropriate procurement method and types of contracts to be adopted in
this project.
A project can only become successful if the procurement method will be selected
effectively. There are several factors need to be considered before selecting a suitable
procurement method. The factors include client understanding, customer goals evaluation,
project constraints defining including risks and how the design and development are coordinated.
Adriaanse (2016) said that these goals and priorities will emerge from the procurement method
that is important to the overall alignment of objectives and customer expectations for each
project. As a guide for choosing the correct procurement method, there are a variety of
procurement assessment criteria, such as time, quality, risk, complexity, cost and flexibility.
Possibly the most common procurement method in the UK is the traditional system which
is often referred to as a method of ‘design-bid-build’. The traditional route divides the obligation
3 Naoum, Shamil, and Charles Egbu. "Critical review of procurement method research in construction
journals." (2015) Procedia Economics and Finance 21.1: 6-13.

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of the project design from construction during a ‘tendering’ phase. In these methods, the design
and cost control consultants along with the contract management consultants are appointed first.
Once the design has been completed, this tendering stage starts by naming a contractor with two
stages of tenders or negotiations. The contracting firm then works directly with the customer and
is responsible for the project design and execution. This method usually involves a lump sum
fixed price to complete the proposed project. The cost depends upon the design of the proposed
project. Generally, this method takes some time to complete because almost in all the cases it has
been observed that the design is tough. The traditional method is considered to be the slowest
procedure. However, it is a fact this method ensures the quality and the standards are met always
by the constructors4.
In this given scenario, Jim Akis Khan wanted to develop a four-unit building into his land
which is situated as South East London. He intends to rent the three units of the house and live in
one. He is a busy person and does not have too much experience regarding construction but at
the same time, not a novice one. He is also ready to bear a reasonable amount of risk but also
wants a reasonable amount of involvement in the project. He takes interior decoration very
seriously and for this reason, he has secured a loan from the bank which he wants to repay by
renting the house. He does not say that he has an urgency to complete the house and also he is
ready to invest money but need a good quality building with good interior decoration. Thus,
being a senior Commercial Manager and legal Advisor my suggestion regarding the most
appropriate procurement method to him is the traditional procurement method.
On the other hand, contracts are used for commercial transactions and alliances in the
world of industry. The types of contracts used for company commitment typically differ
4 Chen, Qing, et al. "Choosing appropriate contract methods for design-build projects." (2016) Journal of
Management in Engineering 32.1: 04015029

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according to the type of job and the complexity of the industry. The contract is essentially a well-
designed arrangement between two or more parties. In exchange for anything supplied by other
parties (client), one or more parties may provide products or services. The type of contract is the
main relation of the parties involved in the transaction and the type of contract defines the project
risk5. Among different contract types, the following are used all over the world concerning
construction, such as:
i) Fixed price or Lump sum contract is the easiest form of contract. The words are very
plain and easy to comprehend. In simple terms, for a limited time, the service
provider agrees to offer a given service and the customer agrees to pay a set sum of
money. This form of agreement will identify specific milestones both for the
deliveries and for KPIs (Key Performance Indicators). The contractor may also have
identified acceptability requirements for the milestones and the final execution. The
key benefits of this kind of contract are that before the project begins the contractors
know the overall cost of the project6.
ii) This model divides the project into units and determines the cost for each unit,
therefore it is called the Unit price contract. One of the most flexible solutions
compared to fixed-price contracts is the implementation of this form of agreement.
After the request, the whole project may be given to the same service provider or
diverse units may be assigned to various service providers, depending on the request
5 Hughes, Will, Ronan Champion, and John Murdoch. Construction contracts: law and management. (Routledge,
2015).
6 Smith, Adrian J. Estimating, Tendering and Bidding for Construction Work. (Macmillan International Higher
Education, 2017).

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volumes and qualifications of the buyers. This is a successful approach when multiple
project units require specific expertise7.
Therefore, in this project both of these contracts can be adopted because the first type of
contract is very easy to understand and before starting the project the contractors know about the
overall cost of the project and as the client does not have many ideas about the construction of a
building, so he can use this type of contract. The second one is also helpful for the client as he
wanted a four-unit building and the second type of contract is helpful for a multiple unit
building.
A tort is a set of recourses in civil law allowing a person in cases of violation of a duty or
responsibility imposed by statute to recover any harm incurred by acts, omissions or statements
of another person. In cases of civil wrong, duties and responsibilities are set by common law
courts that have fallen into three separate categories based on the previous authority, such as
Negligence. Nuisance, trespass and occupier’s liability.
The negligence is a violation of an obligation to look after. A plaintiff must prove to
succeed in a negligence action that:
i) The defendant had a civil and lawful duty of care towards the plaintiff;
ii) The duty has been violated by the defendant; and
iii) Loss has been suffered by the plaintiff due to that violation from the end of the
defendant8.
7 Yan, Yunkai, and Yisheng Liu. "Analysis and prevention of construction contract risk management based on the
contractors' interests." 2016 International Conference on Logistics, Informatics and Service Sciences (LISS). (IEEE,
2016).
8 Purshouse, Craig. "Liability for lost autonomy in negligence: Undermining the coherence of tort law?." (2015).

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The foregoing legal duty of care exists separately from a statutory provision and even in
the absence of any arrangement. The Courts have made a lengthy series of rulings over several
years to determine whether or not a duty of care exists on specific evidence. In Smith vs. Eric S
Bush [1990] UKHL 1 case the valuation report prepared for a construction company by the
accused surveyors which were presented to the applicant buyer with its information. By relying
on the information, the property has been purchased by Mr Smith. The court found that the
defendant had a care obligation to the plaintiff as the advice may reasonably be requested. The
negligence liability includes damages imposed by the court for individual injuries, property
harms and related costs incurred by another person’s negligence. Even if a plaintiff has decided
that the defendant is obliged to the plaintiff, violates that obligation, and causes the defendant’s
injury in the immediate vicinity, the defendant by applying some defence can still minimize or
delete his responsibilities. Contributory negligence, comparative negligence and the assumption
of risks all are included in these defences.
Nuisance is unfair interference regarding the use of land by another party. Public
disturbance affects people’s identities and maybe a felony. The instances of public nuisance road
blockage or water supply pollution. The right for a single person to use or enjoy land is impaired
by the private nuisance9. An individual has no private interest to suffer nuisance. Building work
is a potential source of nuisance. Nonetheless, construction is considered to be a very important
activity and in the case of Andreae vs. Selfridge & Co. [1938] Ch 1, the court held that if fair
and sufficient measures are taken to ensure that no unwanted inconvenient occurs for neighbours,
whether for noise, dust or some other cause, as regards operations of this sort, such as the
demolition and construction, neighbours will put them in place. If the right of a person to use and
9 Farber, Hillary B. "Keep out: The Efficacy of Trespass, Nuisance and Privacy Torts as Applied to Drones." (2016)
Ga. St. UL Rev. 33: 359.

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enjoy a property has been violated by the wrongful conduct of another person then the plaintiff
will be entitled to get compensation or stay order or both.
Trespass is the infringement of the right of an individual to the protection of their body,
property or land. Construction inactivity generally refers to intrusion on land owned by someone
else without permission or legislation. The civil wrong of trespass is actionable even without
suffering damage. An injunction can only restrict trespass and damages can be sought if injuries
are caused10. The Ds mined from their property to P's property in Bulli Coal Mining Co vs.
Osborne [1899] AC 351. This was deemed to be trespass to the subsoil. The defences of trespass
are license and rights of entry.
The role of the occupiers includes the duties owed to the protection of people entering the
land of the occupiers. The Occupiers Liability Act of 1957 defines the responsibility to care for
visitors. Defences available against occupier liability claims are contributory negligence,
consent, illegality, and exclusion. If the right of a visitor for entering into property has been
violated by the wrongful conduct of the occupier then the plaintiff will be entitled to get
compensation or stay order or both11. In Tomlinson vs. Congleton Borough Council [2003]
UKHL 47 case, the occupier has to protect the visitor by the owing duty of care.
Many foreign types of engineering contracts contain special ground conditions clauses,
creating a compromise to balance the risk between the contractor and the employer. For instance:
i) JCT SBC/Q 2016
To determine the work number and quality, the employer must create sketches and charts
of quantities. A lump sum with monthly transitional instalments is the basis of the
10 Lunney, Mark. "Trespass to land." The Law of Tort. (LexisNexis Butterworths, 2015).
11 Bailey, Stephen. "Occupiers’ liability: the enactment of ‘common law’principles." (2018).

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payment and structure of the contract. Sub-contractors can be approved or chosen from a
list of three names, with the written approval of the Architect or Contract Administrator12.
ii) The FIDIC Short Form of Contract (1999)
The contract provides that the ‘Employer's liabilities’ include actual obstacles or
environmental conditions other than climatic situations, discovered on the site during
works, which a skilled contractor does not possibly anticipate and inform instantly the
Contractor to the Employer of obstacles or conditions13.
iii) NEC4 ECC
NEC4 Engineering and Construction Contract (ECC) provides greater versatility,
transparency and accessibility, helping to provide real value for the acquisition of works.
NEC4 allows you to deliver projects on schedule, on budget and at the highest rates from
large infrastructure projects to road building. This contract will be used to designate an
engineering and construction contractor, and at all rates of design liability. A short
contract variant is also available for less advanced projects, as well as the subcontract, to
allow users to get the best out of the contract14.
In all the contracts mentioned above, the contractor is liable to risk-averse site conditions
in such a way that these provisions would have been expected by him. In Obrascon Huarte SA
vs. Her Majesty’s Attorney General for Gibraltar, 15 sub-clause 4.12 of the FIDIC Red Book
was considered and showed the risks of the contractor implementing and referring to knowledge
and data submitted by others, were taken into account in Obrascon Huarte Lain SA vs. Her
Majesty's Attorney General for Gibraltar, 15 Subparagraph 4.12 of the FIDIC Red Book.
12 Lupton, Sarah. Guide to JCT Standard Building Contract 2016. (Routledge, 2019).
13 Dief, Eng Moustafa I. Abu. "Applied Management for FIDIC Contracts, Part One: Segregation of General
Provisions." (2017).
14 Eggleston, Brian. The NEC4 Engineering and Construction Contract: A Commentary. (John Wiley & Sons, 2019)

10BUSINESS PROCUREMENT AND CONTRACTUAL PRACTICE
Whereas, a unique, but FIDIC-specific arrangement was found in Van Oord UK Ltd & Anor
vs. Allseas UK Ltd 16 case to enable to allow the possibility of the existence of further contrary
conditions in parts of the site not checked by an experienced entrepreneur.
This concept of FIDIC Golden Principle ensures that the responsibilities, obligations, and
rights of the Contract Participants, such as employers, contractors, engineers, and dispute
avoidance board do not substantially alter their expression in the GCs. Nonetheless, the GP1 also
demands that the positions, responsibilities, obligations, and rights of the contracting parties need
to be adequate to the project requirements. This certification is necessary to ensure that for the
unique features of the project the chosen FIDIC contract is adequate15. An instance of the correct
use of GP1 is as follows:
 Regardless of the employer’s funding plans, the employer is obligated to make
contributions under the contract.
In comparison, the following example is not GP1 compliant:
 The transition of risk to the contractor regarding the possibility of unexpected physical
conditions under a Yellow Book arrangement. If the employer is unwilling to bear such a
risk, the Silver Book is the correct form.
In selecting and negotiating the appropriate contract form, the contracting officer will
take several factors into account, such as:
 Price competition: Efficient price competition usually leads to fair prices, and the
government is typically involved in a fixed price deal;
15 Christie, Graeme. "The Golden Principles-FIDIC's shiny Christmas present." (2018) CONSTRUCTION LAW
INTERNATIONAL 13.2.

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 Price analysis: It may provide a basis for choosing the contract form, either with or
without competition;
 Cost analysis: The cost forecasts of the offeror and the basis provided by the government
for negotiations on the contract pricing agreements in the absence of efficient market
competition, even if and in the absence of an appropriate price study.
 Period of performance: During periods of economic instability, a fairly long-term
contract can include economic price change or price restatement clauses16.
Multi-tiered dispute settlement arrangements have become a standard practice in the
energy industry, in particular in difficult construction contracts, joint venture contracts and other
contracts, where long-term partnerships are formed and continued cooperation is envisaged. As
per the multi-tiered dispute settlement provisions, on the arrival of a conflict situation, parties
shall take such steps to resolve the dispute on a friendly basis before commencing arbitration.
There are also disadvantages, but there is a range of advantages to these clauses. Besides, there is
some confusion regarding the duty or the authority of these clauses to initiate arbitration and
whether such clauses may be enforced by non-compliance by a party. Besides, there is a
difference of opinion among the national courts concerning the impacts of non-compliance on
the jurisdiction of an arbitral tribunal17. The advantages of this mechanism are:
 These clauses offer the parties a contractually required opportunity, without incurring any
expense or delay related with the actual arbitration process, to settle disputes fairly and
cheaply;
16 Abed, Mohammed, et al. "SELECTING THE APPROPRIATE CONSTRUCTION CONTRACT TYPE BY
USING THE ANALYTICAL HIERARCHY PROCESS APPROACH." (2018) International Journal of
Construction Project Management 10.2: 137-154.
17 Tevendale, Craig, Hannah Ambrose, and Vanessa Naish. "Multi-Tier Dispute Resolution Clauses and
Arbitration." (2015) Turk. Com. L. Rev. 1: 31.

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 In situations where the parties have a long-term contractual partnership which they want
to maintain these clauses can be especially useful.
However, the drawbacks of these clauses are:
 Pre-arbitration conciliation where the parties are firmly entrenched and where there is no
hope to reach an agreement will result in needless waste of time and expenses;
 If a term of limitation is set to expire before the arbitration term, a claim may be
excluded18.
In Walford vs. Miles [1992] 2 AC 128 case the court held that an arrangement of
negotiation in good faith was not realistic, as both parties had the right to withdraw from the
negotiations at any time and for whatever reason when the negotiations had been concluded.
New Engineering Contracts are a family of contractual agreements explicitly designed to
be versatile, transparent and involved in fostering collaboration and the competent management
of projects. The three key principles of NEC contracts are:
 Clarity: These contracts are written in basic English by using simple sentences and bullet
points;
 Flexibility: All NEC contracts are for the project, technical and delivery services and all
of them involves the same language and processes, which presently includes a contract
for ‘design-build and operate’;
 The stimulus to good management: Contracts are conscripted as procedures and can be
handled within cloud systems19.
18 Tomic, Katarina. "Multi-Tiered Dispute Resolution Clauses: Benefits and Drawbacks." (2017) Harmonius: J.
Legal & Soc. Stud. Se. Eur. : 360.
19 Davis, Terrence, and Peter Newson Thurlow. "Briefing: Good faith obligations in NEC contracts." (2016)
Proceedings of the Institution of Civil Engineers-Management, Procurement and Law 169.4: 145-146.

13BUSINESS PROCUREMENT AND CONTRACTUAL PRACTICE
Donoghue vs. Stevenson [1932] UKHL 100 was a landmark legal ruling by the House
of Lords in the Scottish law on criminal offences and the English rule on tort. The modern law of
negligence begins with this case. It was unexpected for Mrs. Donoghue that a decomposed snail
was presented in the bottle of ginger beer which made her ill. It had been held by the House of
Lords that the claim of Mrs. Donoghue is valid because maybe her friend bought that bottle but
that person cannot deny the unifying principle of duty of care. Her friend had a duty of care
towards Mrs. Donoghue which had not been performed appropriately20. As the concept of duty of
care has been elaborated through this case thus, it has great importance in the law of tort.
Conclusion
Therefore, from the above discussion, it can be concluded that contracts are an important
part of the process when any building or real estate project is involved. Usually, contracts
include the responsibilities and obligations accepted by the parties but also include provisions for
safeguarding any parties who fail to comply with their responsibilities. Building contracts
provide information about the project and the work to be done and how compensation for the
project is managed. If one of the parties to the contract violates the terms and conditions of the
contract, the other party will become eligible to get compensation from the contract violating
party. However, before entering into a construction contract, several factors need to be taken into
consideration to reduce problems.
20 Ladkin, Peter Bernard. "Duty of Care and Engineering Functional-Safety Standards." (2019) Digital Evidence &
Elec. Signature L. Rev. 16: 51.

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Reference
Abed, Mohammed, et al. "SELECTING THE APPROPRIATE CONSTRUCTION CONTRACT
TYPE BY USING THE ANALYTICAL HIERARCHY PROCESS APPROACH." (2018)
International Journal of Construction Project Management 10.2: 137-154.
Adriaanse, Mr John. Construction contract law. (Macmillan International Higher Education,
2016).
Bailey, Stephen. "Occupiers’ liability: the enactment of ‘common law’principles." (2018).
Chen, Qing, et al. "Choosing appropriate contract methods for design-build projects." (2016)
Journal of Management in Engineering 32.1: 04015029.
Christie, Graeme. "The Golden Principles-FIDIC's shiny Christmas present." (2018)
CONSTRUCTION LAW INTERNATIONAL 13.2.
Davis, Terrence, and Peter Newson Thurlow. "Briefing: Good faith obligations in NEC
contracts." (2016) Proceedings of the Institution of Civil Engineers-Management, Procurement
and Law 169.4: 145-146.
Dief, Eng Moustafa I. Abu. "Applied Management for FIDIC Contracts, Part One: Segregation
of General Provisions." (2017).
Eggleston, Brian. The NEC4 Engineering and Construction Contract: A Commentary. (John
Wiley & Sons, 2019).
Farber, Hillary B. "Keep out: The Efficacy of Trespass, Nuisance and Privacy Torts as Applied
to Drones." (2016) Ga. St. UL Rev. 33: 359.

16BUSINESS PROCUREMENT AND CONTRACTUAL PRACTICE
Hughes, Will, Ronan Champion, and John Murdoch. Construction contracts: law and
management. (Routledge, 2015).
Ladkin, Peter Bernard. "Duty of Care and Engineering Functional-Safety Standards." (2019)
Digital Evidence & Elec. Signature L. Rev. 16: 51.
Levin, Paul, ed. "Construction contract claims, changes, and dispute resolution." American
Society of Civil Engineers, 2016.
Lunney, Mark. "Trespass to land." The Law of Tort. (LexisNexis Butterworths, 2015).
Lupton, Sarah. Guide to JCT Standard Building Contract 2016. (Routledge, 2019).
Naoum, Shamil, and Charles Egbu. "Critical review of procurement method research in
construction journals." (2015) Procedia Economics and Finance 21.1: 6-13.
Purshouse, Craig. "Liability for lost autonomy in negligence: Undermining the coherence of tort
law?." (2015).
Smith, Adrian J. Estimating, Tendering and Bidding for Construction Work. (Macmillan
International Higher Education, 2017).
Tevendale, Craig, Hannah Ambrose, and Vanessa Naish. "Multi-Tier Dispute Resolution Clauses
and Arbitration." (2015) Turk. Com. L. Rev. 1: 31.
Thomas, Reginald William, and Mark Wright. Construction contract claims. (Macmillan
International Higher Education, 2016).
Tomic, Katarina. "Multi-Tiered Dispute Resolution Clauses: Benefits and Drawbacks." (2017)
Harmonius: J. Legal & Soc. Stud. Se. Eur. : 360.

17BUSINESS PROCUREMENT AND CONTRACTUAL PRACTICE
Yan, Yunkai, and Yisheng Liu. "Analysis and prevention of construction contract risk
management based on the contractors' interests." 2016 International Conference on Logistics,
Informatics and Service Sciences (LISS). (IEEE, 2016).