Contract Law in Construction

This assignment delves into the intricacies of contract law as applied to the construction industry. It examines various aspects, such as the formation and interpretation of contracts, implied contractual terms, and the impact of legislation like the Construction Act 2009. The analysis considers both theoretical legal frameworks and practical implications for managing construction projects effectively.

ASPECTS OF
CONTRACTS AND
NEGLIGENCE IN
BUSINESS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
LO 1 Essential elements of a valid contract.....................................................................................1
1. Importance of elements to form a valid contract....................................................................1
2. Impact of different types of contract.......................................................................................2
3. Terms in contract and their effect...........................................................................................3
LO2 Applying the elements of contract...........................................................................................4
4. Elements of contract in the given business scenario...............................................................4
5. Law on terms in different contracts........................................................................................4
6. Effect of different terms of law...............................................................................................5
LO3 Principles of liability in negligence towards business activities.............................................6
7. Contrasting liability in tort with contractual liability..............................................................6
8. Nature of liability in negligence..............................................................................................6
9. Vicarious liability of a business..............................................................................................7
LO4 Application of the liability principles......................................................................................8
10. Elements of tort of negligence and defences in the given scenario......................................8
11. Elements of vicarious liability in the given business situation.............................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
A contractual relationship is an important aspect which clearly defines formal association
among two or more parties. It is a promissory note between the business entities or certain
individuals who are dealing into a work agreement. An agreement is reinforced by law and thus
it is recommended to strictly adhere by it (Key, 2013). However, the indulged parties possess
definite legal rights in breaking any bond policies. Thus, in case of any negligence towards the
dealt terms and conditions of their stated agreement, the injured party has full rights to sue
infringed party in court. The present report intensely showcases importance of corresponding the
deals through a contract. It is based upon few case studies which together defines that how one
should comprehensibly avoid neglecting a contract or one has to meet varied consequences of
their delinquency (Liu and Aron, 2014).
LO 1 Essential elements of a valid contract
1. Importance of elements to form a valid contract
In today's business environment and in day to day lifestyle of an individual, it is
important to deal with a legal contract with a certified agreement among indulged parties.
However, an agreement can also be in oral form but a safe aspect of treating a contract is via a
formal written agreement (Liu and Aron, 2014). It is of great help at the time of resolving any
existing conflict or dispute among the parties. Hence, a contract consists of various essential
elements which give it a valid title to become an agreement. Below mentioned are required
constitutes Offer and acceptance- These are the foremost components of a sound business contract
which together forms a certified legal agreement. It is impossible to move towards a bond
without these two terms which clearly states the “do and don't” of managing a task. An
offerer presents a proposal for a particular substance on whose acceptance, both offering
and acceptive party indulges into the contract with a lawful agreement. However, the
offerer is required to allot a certain time period to the accepting party for endorsing
proposed scheme (Meiners, Ringleb and Edwards, 2014). Followed by which the
acceptive party is required to acknowledge his acceptance to the offerer within the given
time frame. An offer can be dissolved at certain situations like if an offerer dies, or the
confronting party rejects the offer, or the allotted time for receipt gets over.
1

Case: Thornton v Shoe Lane Parking [1971]
In the above stated case, the person inserted money to accept the offer made by the machine. Consideration- It is a promise between the involved parties to show their deliberation
either by agreeing to make a payment for exchange of goods and services or some
property, etc (Möhring and Finch, 2015). It depends upon varied cases and to show a
mutual understanding among both parties.
Case: Re McArdle (1951)
It defines a former consideration which is logical only if followed by a request. Intention to build a legal relationship- It is to mention the interest of both the parties in
getting involved through a legal term and condition of an agreement by building
contracts.
Case: Balfour v Balfour [1919]
The above case declines the legal bond between the parties with an engagement of social and
domestic agreement (Paquin, 2013).
 Capacity- It concludes the authority of indulging parties to form a valid contract among
them. There are several laws to deal with different parties of minors, mentally impaired,
prisoners, bankrupts or any people acting on behalf of some firm and corporation, etc.
2. Impact of different types of contract
A contract consists of various types with its different aspects and effect on people or the
involving parties. It consists of various forms, as mentioned below-
 Distance sale contract- A contractual relationship between the parties is visible in case of
online sale of goods and services. The accepting party is unable to feel or touch the object
which is offered by the seller. For example, online railway reservations or advance room
booking in hotels, etc (Simons, 2014). Such type of contract can be easily ended if the
liable person fails to show a copy of the bond.
 Face to Face contract- Such type of contracts is created with a presence of both parties.
Usually, an oral agreement is formed in this procedure where both the parties are required
to conclude applicable policies which are then strictly recommended being followed by
each other (Ueda, 2012). However, a mutual consent of both the parties with no
involvement of any force or fraud should be ensured by both the parties in these types of
contracts.
2

 Written contract- It is the most preferred method of constructing a contract through a
written formal agreement enforced by law. It is a convenient way which easily solves the
dispute or conflicts among the parties. The business organizations rely on similar
methodology of the contract (Walentin, 2014). For example, an employment contract
consists of related aspect where a written agreement is formed between employee and
employer or the organization.
Case: ESSO PETROLEUM V MARDON (1976)QB 801
The above defined case study is an inclusion of appealing into the court due to a breach
of warranty into a written agreement between the Mr Mardon with Esso petroleum. Here, the
defendant met a loss of 5800 pounds by selling only 78000 gallons of petrol and breaking the
estimation of 200000 gallons of petrol. As a result, the claimant was liable to pay for the
damages without breaking the overall contract.
3. Terms in contract and their effect
A valid contract is based on some restricted provisions which are compulsorily needed to
be followed by both the parties. The harmed or damaged party has full legal rights to screw
failed party in case of breaching those terms. Therefore, these terms comprises utmost
importance and are as stated below- Express terms- These are the terms which are required to be specified into the agreement
either in a written format or orally among the dealers. However, a formal written
agreement is considered as the most convenient form which together comes to rescue at
the time of disputes among the involved parties. Therefore, it recommended for both the
parties to keep them updated and be aware of the predetermined terms and conditions of
their agreement which together forms their contract (Adamson and Morrison, 2011). Warranty terms- These terms cannot fully dissolves the contract and the breaching party
is only liable to pay for causing a breakage of warranty.
Case: BETTINI V GYE 1876 QBD 183
In this particular case, Bettini as an opera singer entered into a contract to perform for an
agreed term of 3 months. However, later he couldn't attend the practice sessions for 6 days due to
some health issues. It therefore represented a breach in warranty term that doesn't dissolve the
overall contract.
3

 Exclusion terms- It is when the offering party limits his own liability of any damage or
harm to another party. It is usually regardless with the possibility of damage to an
acceptive party. Implied terms- These are few statutory implied terms that represents the acts of “The sale
of goods act 1979” and “The supply of goods and services act 1982” (Miller, 2011). It is
to protect the rights of both buyer and the seller where it has been stated that the seller
has a prominent right to sell his goods but with a clear description on it. Also, the given
description should match the actual product and thus the buyer should not meet any
uncertainty. Therefore, the products must be of better quality to satisfy its users with no
fraudulent contents in it. Along with that, the sellers are together not permitted to sell any
stolen products to their customers.
Case: HUTTON V WARREN 1836
The above case has reflected a situation of a farmer as a claimant who was working very
hard to ensure the growth of crops into the field. However, the defendant earlier terminated his
occupancy due to which he appealed the court and their included an implied term on the
defendant.
LO2 Applying the elements of contract
4. Elements of contract in the given business scenario
Case
Ivan as a customer wanted to buy a book at 50 dollars which was displayed for sale in the
bookshop. However, the shopkeeper Todor refuses to sell him the book by acknowledging it as a
single copy remained with him and that is too sold to some another customer Carl a day before
today, but then he forgot to remove it from the shelf and keep it somewhere else. Ivan thus insists
to buy the book and got upset on shopkeeper's refusal.
Applicable elements
The above case has stated a unilateral offer which was opened for all. Here, the
shopkeeper invited a proposal of sale to be treated by the customers in regard to purchase his
books. Ivan thus represented as customer and accepted his proposal with a consideration of
buying the book at 50 dollars (Colino, 2011). However, both were enough competent with an
authority of forming a valid contract between them but only a single party of the customer
4

showed an intention to form a legal agreement. On another side, the shopkeeper Todor clearly
refused him to sell that particular book by concerning an exclusion clause in it.
Case: Fisher v bell 1961 1 QB 394
On concluding the above given case study, the defendant was duly responsible for a
criminal offence of displaying a knife at his shop without a price tag on it. It therefore
emphasised the court to implement his activity into a statutory regard.
5. Law on terms in different contracts
(a) A condition term-
It is the first step for entering into a contract with its definite stated conditions consisting
of do and don't in a contract. However, a contract can be easily dissolved in case if any party
fails to attempt a valid condition. It also gives a legal right to another party so that they can
charge court case against the breached party.
Case: Poussard v Spiers (1876)
In the above mentioned case, Madam Poussard breached the condition terms and as a
result Spiers ended the contract between them (Elliot and Quinn, 2009).
(b) A warranty term-
On comparing the warranty term with the condition terms, a contract cannot be
eliminated in breach of warranty due to its less importance. However, the violated party is only
liable to pay the injured party for their claimed destruction.
Case: Bettini v Gye (1876)
In this particular scenario, Bettini breached the warranty of contract and thus the
employer was not entitled to end the contractual term.
(c) An in-nominate term-
It is applicable at time of dispute among the parties where the mentioned conditions and
warranties of an existing contract gets dissolves on filing a case against each other in court and
certain new terms are drawn.
Case: Hong Kong Fir Shipping v Kawasaki Kisen Kaisha [1962]
A suitable case was drawn to appeal the court for justice and there applied an existent of
nominate terms (Manuel, 2011).
6. Effect of different terms of law
Case
5

A person named John went to a park which is maintained by his general assembly unit.
There he reads a notification for the visitors which stated the visitants to hire a chair at 50p for
each hour. He therefore goes ahead to engage a chair at 50p with a ticket assigned by one of the
parking attendant. However, it followed by an incident where the chair breaks down and John
was enormously harmed by it. Later when he complains the attendant about it and claims a
refund and recompense, the assistant clearly refuses by acknowledging an exemption clause
written behind the ticket (Middlemiss, 2011). It was clearly stating that the park authority does
not hold any liability for such kind of damage or injury by the leased equipment.
Applicable terms of law
In the above scenario, John as a service user went to his local park and observes a
unilateral offer made by the park authorities to all its visitors. Therefore, he rent a chair by
paying the consideration amount of 50p (Carby-Hall, 2003). However, he later met an accident
which causes a serious injury to him by equally deploying his cloths. To which he demands a
compensation from the amenable council who directly refuses to his urge by screening the
existence of an exemption clause and accordingly they were not liable for any sort of damage to
the user which is caused by their equipment. Later investigation dictated that the council did not
mention this clause into their face to face contract and thus was liable to pay back his refund
amount.
Case: Thorton v shoe lane parking 1971 2 wlr 585
It concluded the negligence of the defendant due to which the claimant suffered injuries.
Later the further investigation concluded an existence of exclusion clause. However, it was an
unstated clause to the claimant and thence the defendant was duly liable for a punishment.
LO3 Principles of liability in negligence towards business activities
7. Contrasting liability in tort with contractual liability
Interruption in the smooth operation of business activities is duly occurred by the
negligence of parties. A negligence in the terms and conditions of a contract is directly linked to
its breakage or some other negative consequences. It is due to the fact which yields an equal
level of authority to both the parties for charging a case file against the breached party.
Therefore, it is important to deal with a prior attention in order to avoid such cases of
uncertainties (Colino, 2011). However, negligence in both the terms of liability in tort and
6

contractual liability are being dealt by court of civil law but there is a significant difference in
their attempts.
A contractual liability is broken when a party breaches the terms and conditions of
another party, whereas the tort liability on other hand is close to a criminal offence by an
individual and where he harms some another person by breaking his individual rights. Therefore,
tort is legally offensive where it is generally based on faults rather than the contractual liability
whose breakage has a comparatively strict approach to dealt with the breached party. Thus, a
contractual liability is mostly used in businesses to be adhere by the rules and regulation. Unlike
the tort liability which encompasses an individual's basic responsibility to maintain his duty of
not mistreating anyone.
For example, one can consider the case of Donoghue v Stevenson [1932]-
In which Mrs Donoghue and her friend went to a cafe and ordered a ginger beer and ice cream.
After consuming half of the bottle, they discover a snail coming out of that murky bottle of beer.
As a result to which, she suffered a serious health issue and thus claimed a valid case against the
manufacturer of that ginger beer which was duly accepted by the law (Lehto, 2010).
8. Nature of liability in negligence
Negligence is a situation which arises when the person fails to take an appropriate
measure at reasonable time frame. However, the nature of liability defends the level of
negligence where the suffered person is liable to prove certain elements to prove the intentions of
profaned party (Nystén-Haarala, Lee and Lehto, 2010). It is important for the prosecutor to
warrant his losses from the defendant. Below expressed are the major components that a plaintiff
needs to prove for receiving a compensation against her suffered injuries- Duty of care- It is where the businesses are liable for their own products and especially
the manufacturers as in the above stated case of “Donoghue v Stevenson”. However, their
was no existence of any contractual relationship among them as the payment was made
by her friend. But still the ginger beer manufacturer was liable for the harm caused to her
due to its consumption. Breach of duty- Here the injured party needs to provide sufficient amount of evidences to
prove her claim against the manufacturer. The court will then judge the exact scenario
with the required levels of considerations (Warren, 2012).
7

 Damages- It drags all the stages of caused damages to the plaintiff by a defendant where
the litigator is supposed to justify her injuries. She will be required to prove that the
damage was directly caused by the defendant's act including the remoteness of damage.
9. Vicarious liability of a business
Vicarious liability always exists where there is some sort of relationship between the
parties. It is mostly determined in business organizations to relate an act among the employees
and their employer. Like an employer is always responsible for the act done by his employee but
it is with a consideration that whether it has thoroughly done at the workplace and during his
presence or employment period, etc (Akintoye, Renukappa and Lal, 2012). However, most of the
employees are unaware of their obligations and therefore commits a wrong action followed by
some acts of discrimination or harassing them at the workplace. Therefore, at times it gets a bit
difficult to confirm the exact employment duration of that particular person especially when the
respective person has committed such course of action just before leaving the job without any
prior information and later not returning for work, etc. At such circumstances, the employer
cannot be held liable for similar act of his employee. But it is important to inculcate some
essentialist elements into the business activities that consists of-
 To restrict some sort of grudges among the employees, it is important for the employers
to give similar opportunities to all their workers.
 Violating activities and domineering should be duly restricted at the workplace
(Appleman, Appleman and Holmes, 2013).
 Unequal behaviour due to the acts of discrimination or racism should be strictly
prohibited.
LO4 Application of the liability principles
10. Elements of tort of negligence and defences in the given scenario
Case
In the given case study, a person named David was driving at a speed of 35MPH under
the zone of 25MPH (Owen, 2007). Many small children were playing at that particular place and
among all those children, an adolescent child Kevin who was merely 9 years old was chasing his
ball and ran into the street. David hits a telephone pole while driving his bike at another lane in
order to save that child. The pole was owned by TeleCo which was a local telephone company
8

which was instantly collapsed into two pieces. It hit the child Kevin by causing serious and
permanent injuries to him.
Applicability of tort elements
The above scenario clearly states the breach of duty by both David and TeleCo company
which has resulted in causing a permanent injury to the child. It clearly defines the duty of David
to drive at appropriate speed to eliminate such chances of accidents. On another hand, the
telephone company is duly responsible for constructing such low unstable and limp poles on
roads that can easily get collapsed by harming the localities. Therefore, David is not entitled to
file any case neither against the company and nor against Kevin (Caiado and Salgado, 2010).
The referred case also depicts about a contributory negligence of both the parties where David
and TeleCo company was equally responsible for the occurred incident. As a result to which,
both of them are liable to recompense for the permanent injuries of the child named Kevin.
11. Elements of vicarious liability in the given business situation
Case
Colin is working at the profile of head chef in Regent Hotel where he is annoyed by the
behaviour of Roger, who works their as a dishwasher (Sumner and Williams, 2010). As a result
to which, one day Colin unconsciously hits Roger with a frying pan which caused severe injuries
to him and he is later refusing for a treatment at the nearby hospital.
Applicability of vicarious liability
The given scenario clearly states the applicability of vicarious liability in which the
employer Colin is duly responsible for such an offence of beating or hurting his employee Roger.
Also, the incident took place among the workers at their workplace and at the time of
employment. However, Colin being a boss at the workplace has no such rights of striking or even
threatening his employees due to any reasons (Jennings and Twomey, 2010). Therefore, Roger is
duly entitled to file a case against Colin to blame him for the suffered injuries. But he is not
liable to directly sue Colin for this act and reconnected to file a charge in the court where Colin
will be adequately punished by the law.
A factual instance can be stated with reference to the case of Lister v Hesley Hall Ltd., which has
clearly depicted about a famed incident of vicarious liability. It was mainly with reference to
both emotional and behavioural traumas of the boys in Hesley Hall. They hereby played an intact
role of claimants and asserted a case of sexual abuse against their Warden cum House Keeper.
9

After a primitive misunderstanding by the court of appeal for proving a significant involvement
of the employers in the law-breaking activity of their employees, later decisions were evidently
proven to be right and in support of the claimants.
CONCLUSION
The above report effectively showcased the importance of involving contracts, especially
into the business activities. The report also existed various cases which has profoundly defined
the effectiveness of a contract in the daily lives of an individual. In today's work culture, a valid
contract plays a major role in enhancing the lives of an individual with an equal and required
level of trust and cooperation among them. It is together useful in handling the occurrence of
rapidly changing decisions that shatters the whole agreement of a contract. Therefore, the present
report has drawn certain required consequences to deal with the negligence of a contract. A valid
contract is directly enforced by law and thus it gives some definite rights to both the parties who
are getting involved into a legal relationship. In business organizations, it is a strategic tool to
promptly deal and manage the firm's resources. However, neglecting a valid contract could be
evenly disastrous to both the parties with major amount of negative consequences. It includes
some noted terms of tort that is directly discovered to be a criminal offence by an individual. On
the other hand, contractual liability is another term which states the breach of contract by the
parties rather than an individual as in the activity of tort. Lastly, the civil law comes to the rescue
of both the aspects of negligence by taking necessary measures to resolve the raised affair.
10

REFERENCES
Books and Journals
Key, N., 2013. Production contracts and farm business growth and survival.Journal of
Agricultural and Applied Economics. 45(02). pp.277-293.
Liu, Y. and Aron, R., 2014. Organizational Control, Incentive Contracts, and Knowledge
Transfer in Offshore Business Process Outsourcing. Information Systems
Research. 26(1). pp.81-99.
Maltese, D. and Farina, M., 2016. Theory of the Firm and Organisational Contracts: The
Remedial Aspects of Good Faith. European Business Law Review. 27(1). pp.51-83.
Meiners, R. E., Ringleb, A. H. and Edwards, F., 2014. The legal environment of business.
Cengage Learning.
Möhring, M.M. and Finch, J., 2015. Contracts, relationships and innovation in business-to-
business exchanges. Journal of Business & Industrial Marketing. 30(3/4). pp.405-413.
Paquin, J., 2013. Legal Reform and Business Contracts in Developing Economies: Trust,
Culture, and Law in Dakar. Ashgate Publishing, Ltd.
Simons, J., 2014. The end of'unfairness' in commercial contracts: Proposed extension of'unfair
contract terms' laws to business to business transactions.Governance Directions. 66(7).
pp.431.
Ueda, K., 2012. Banking globalization and international business cycles: Cross-border chained
credit contracts and financial accelerators. Journal of international Economics. 86(1).
pp.1-16.
Walentin, K., 2014. Expectation driven business cycles with limited enforcement. Economics
Letters. 124(2). pp.300-303.
Adamson, J. and Morrison, A. 2011. Law for Business and Personal Use. 19th ed. Cengage
Learning.
Miller, R., 2011. Modern Principles of Business Law. Cengage.
Colino, M. S. 2011. Competition Law of the EU and UK. Oxford University Press.
Elliot, C. and Quinn, F., 2009. Tort Law. Longman.Twomey, D., and Jennings, M., 2010.
Business Law: Principles for Today's Commercial Environment. Cengage Learning.
Manuel, K. M., 2011. Contract Types: An Overview of the Legal Requirements and Issues.
DIANE Publishing.McKendrick, E., 2012. Contract Law: Text, Cases, and Materials.
11

Oxford University Press.
Middlemiss, S., 2011. The psychological contract and implied contractual terms: Synchronous or
asynchronous models?. International Journal of Law and Management. 53(1). pp.32-50.
Carby-Hall, J. 2003. The contractual nature of social law. Managerial Law. 45(3/4). pp.23 - 107.
Colino, M. S. 2011. Competition Law of the EU and UK. Oxford University Press.N. S., Lee, N.,
& Lehto, J., 2010. Flexibility in contract terms and contracting processes. International
Journal of Managing Projects in Business. 3(3). pp.462 - 478.
Nystén-Haarala, S., Lee, N., and Lehto, J., 2010. Flexibility in contract terms and contracting
processes. International Journal of Managing Projects in Business. 3(3). pp.462 – 478
Akintoye, A., Renukappa, S. and Lal, H., 2012. The abolition of the “contracts in writing” rule in
the 2009 Construction Act: Potential implications for UK adjudication. International
Journal of Law in the Built Environment. 4(2). pp.140–156.
Appleman, J. A., Appleman, J. and Holmes, E. M. 2013. Excuses for Nonpayment and Defenses
to Actions for Premiums (5). Appleman on Insurance Law and Practice.
Caiado, V. N. and Salgado, M. S., 2010. Contract Management and its Influence Over Design
Quality. Architectural Engineering and Design Management. 6. pp. 153-157.
Jennings, M. and Twomey, D., 2010. Business Law: Principles for Today's Commercial
Environment. 3rd ed. Cengage Learning.
Sumner, G. and Williams, A., 2010. The economic impact of a shift from hard to fuzzy contracts.
Journal of legislation. 2(1). pp.80 – 87.
Online
Owen, G. D., 2007. The five elements of negligence. [Online]. Available through:
<http://law.hofstra.edu/pdf/academics/journals/lawreview/lrv_issues_v35n04_i01.pdf>
[Accessed on 26th March 2016].
Warren, J. M. C., 2012. Law and the Built Environment. Property Management. 30(2). pp.209-
210.Clarke, P. 2015. Contract and Tort Law. [Online]. Available through:
<http://www.legislation.gov.uk/ukpga/1984/3/data.pdf>. [Accessed on 26th March 2016].
12