Construction Contract Law Exam Questions

Running head: Construction Contract Law Exam Questions
Construction Contract Law Exam Questions
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Construction Contract Law Exam Questions 2
Introduction
Construction contract obeys the rules of a general contract. A legally binding contract has
to posses the essential elements including; offer, acceptance, legality, intention to create binding
relations, consideration and capacity. Parties to the contract should perform their parts of the
bargain to avoid claims and actions for breach of contract. In Canada the model of construction
contracts commonly used is the Design-Bid-Build (DBB) (Levin, 2014, p. 18). In this model, the
owner often engages an architect or an engineer to do the design of the project before a general
contractor is engaged to undertake the performance of the construction of the project.
Dig Co. submitted an invoice to Site Ltd over 35 days ago and did not receive any
complaint or notices of non-payment from anyone. Dig Co. has however heard on the site that
Portal Inc. is not pleased with Site Ltd’s performance. There is also information that Site Ltd’s
principals are diverting funds received from Portal Inc. to fund services and materials on a
different project. Dig Co. is in possession of a copy of the subcontract between Portal Inc. and
Site Ltd which has a clause requiring written notices of claims to be submitted within 60 days of
the party becoming aware of the claim and a mandatory arbitration provision. There is a clause in
Dig Co’s sub-contract stating that the terms and conditions of the subcontract are incorporated
into the sub-contract (Callahan, 2012, p. 11).
Dig Co. last worked 43 days ago; there has been no certificate of substantial performance
published with respect to the project.
Remedies available to Dig Co
From the case scenario, it is evident that Site Ltd is in breach of contract between the
Company and Dig co. Site Ltd is the guilty party and therefore, Dig Co has several remedies it
can pursue to ensure performance of the contract by Site Ltd or in the alternative, seek payment

Construction Contract Law Exam Questions 3
and damages from Site Ltd for the services rendered. The available remedies are as discussed
below:
1. Damages
This is an action in a court of law for an award by the court of monetary compensation
for breach of contract (Banwo & Sagoo, 2015, p. 43). Damages for breach of contract are
intended to achieve the following goals:
Restitution - here, a party is restored back to pre-contract situation by being awarded the
money employed so far in the performance of the contract obligation. Restitution requires the
innocent party to furnish the court with an account of all the benefit that the other party has
obtained so far (Turner, 2016, p. 35). Restitution is based on two elements; the benefit that the
party in breach has obtained and that the retention of such benefit would be unjust if not
compensated.
Reliance interest – where a party puts heavy reliance on the performance of a contract,
the party has interest on recovering losses that directly arises from the contract (Adriaanse, 2016,
p. 37). The guilty party pays monetary compensation meant to return the innocent party back to
the pre-contract position. The costs incurred by the innocent party in the performance of the
contract form the basis for compensation.
Expectancy Principle – this gives the innocent party the promise in the contract in form
of damages. It is compensation and not punishment (Abdul-Malak & Khalife, 2017, p. 49).
In the case of Groves v John Wunder, the plaintiff had leased land to the defendant. In an action
for breach of contract by the defendant, it was held that the plaintiff was entitled to the cost of
completion of the work or remedying the defect.

Construction Contract Law Exam Questions 4
Damages at this juncture is payable for breach of contract by Site Ltd because though Dig
Co. has submitted an invoice; they have not received any complaint based on the submitted
invoice or a notice of non-payment. There is therefore loss of expectation for the consideration in
the sub-contract that Dig Co entered into with Site Ltd. The damages would be payable together
with the invoice submitted to compensate on the time taken to process such payment.
2. Specific Performance
Specific performance is available in circumstances where it is not possibly to compensate
a party by payment of damages. Where damages are not sufficient, a party to a contract can sue
for specific performance. Specific performance is to the effect that the other party is ordered to
complete their part of the bargain. The innocent party must have done a substantial part of their
bargain for specific performance to be open to them (Klee, 2015, p. 14).
Courts are however reluctant to order for specific performance for speculative breaches
of contract. The party seeking specific performance must prove that breach of contract has
already been committed by the other party before ordering for specific performance. The
likelihood of a party committing breach cannot be a ground for seeking specific performance.
Specific performance in this case scenario just relates to the payment of the invoice submitted by
Dig Co. action for the price would be cheaper as opposed to the payment of damages as well as
the consideration (invoice).
There have been notable amendments that have been introduced by the new Construction
Act. The issues captured in the new Act captures areas such as prompt payments, mandatory
construction dispute interim adjudication, lien rights, leasehold interests, trusts, surety bonds and
holdbacks.