Contract Law Case Study Analysis

This assignment presents a case study where construction company WBS faced delays on a project for the Kangaroo Island Council. Students are tasked with analyzing the contractual obligations of both parties, examining relevant legal principles like consideration and breach of contract. The analysis should consider the impact of liquidity problems, agreed-upon compensation, and potential claims WBS could make against the council.

PROCUREMENT AND CONTRACT
MANAGEMENT

TABLE OF CONTENTS
QUESTION 1..................................................................................................................................1
Issues............................................................................................................................................1
Rules.............................................................................................................................................1
Applications.................................................................................................................................2
Conclusion...................................................................................................................................2
QUESTION 2..................................................................................................................................3
Issues............................................................................................................................................3
Rules.............................................................................................................................................3
Applications.................................................................................................................................3
Conclusion...................................................................................................................................4
QUESTION 3..................................................................................................................................4
Issues............................................................................................................................................4
Rules.............................................................................................................................................4
Applications.................................................................................................................................5
Conclusion...................................................................................................................................5
REFERENCES................................................................................................................................6

QUESTION 1
Issues
In the given case, Kangarro Island Council has successfully obtained funds from the State
and Commonwealth government in order to develop Kangaroo Island Airport Upgrade Project to
provide sustainable air access to/from Australia’s east cost and from to/from international
markets. Kangaroo Island Council had advertised a RFT (Request for Tender) on SA Tenders *
Contract Website, in which, the minimum requirements for the project was clearly set. The
project had been awarded to the UniSA Projects R Us who have had good aviation experience in
runway extension, overlay and related airside work but not with terminal upgrades. Another
tenderer Boot Projects Australia had also submitted a tender and spent $25,000 in its completion.
Now, the main issue in the scenario is Boot Projects Australia is threatening to attempt legal
action against Kangaroo Island Council claiming that the project must be rewarded to them
before UniSA Projects R us because they had previous aviation project management experience
along with terminal expansion at Melbourne Airport.
Rules
According to the contract legislation, offer and invitation to offer are two different
elements of a contract. First is an offer presented to other party for acceptance whereas invitation
to treat encourages other party to make offer at mentioned price. For instance, tender or quotes
are a perfect example of invitation to treat that may be either accepted or rejected by client.
According to the legal rules, client does not have legal binding to accept the project at the
minimum possible price unless, it is clearly stated or promised by the client in the tendering
condition that tender will be accepted at the lowest price proposed or the conditions of the
tendering evaluation is clearly stated. It is treated as pre-contract condition that needs to be
followed properly (Tender Process Contract. n.d.). Applying the case law of Hughes Aircraft Vs
Airservices Australia 1997, FCAS 558 client did not evaluate the tender as specified or promised
in the RFT1. The decisions of the court were that an unsuccessful tenderer has full authority to
sue against the client to get compensation for the cost of tendering (Fried, 2015).
1 Hughes Aircraft Systems International v Airservices Australia [1997] FCA 558
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However, in the case of State Transit Authority of NSW Vs Australian Jockey Club 2003
NSWSC 7262 and Cubic Transportation System Inc Vs New South Wales NSWSC 656 are two
cases, wherein court did not found any unfairness and breach of tender process contract,
therefore, the claim by tenderer dismissed3.
Applications
Applying the case decisions of Hughes Aircraft Vs Airservice Austalia 1997, it becomes
clear that in the current case, Kangaroo Island Council had clearly stated the minimum
requirements for the project, as per which, it is necessary for the proposed tenderers to have great
experience of Aviation including new and refurbished terminal experience. In the RFT, it was
clearly mentioned that the project will be examine considering all the criteria stated, in
accordance with satisfying the set minimum requirements. Thus, it was the pre-contract
condition in the case with which Kangaroo Island Council is abided. UniSA Projects R Us had
no experience in terminal upgradation, still, had been rewarded and Boot Project Australia had
enough experience in both the areas still, had not been awarded. Thus, it is clear that Kangaroo
Island Council did not follow the set contractual conditions and did not examine the tenders
proposal in line with the minimum set requirements (Emerson, 2009). Thus, no-doubt, it had
violated the terms of tender process contract and awarded UniSA Projects R Us just because of
competitive price. It becomes clear the tender assessment had not been conducted fairly,
reasonably and in accordance with the agreed criteria, hence, Kangaroo Island Council is liable
to compensate Boot Projects Australia with the cost of $25,000 incurred in tender preparation
(Poole, 2016).
Conclusion
The application of the rules and relevant case laws evident that in the given issue, Boot
Projects Australia had no need to threaten claiming against Kangroo Island Council; It is because
of the existence of tender process contract condition that was not followed for awarding the
tender. Hence, it can claim against council and get compensation of $25,000.
2 State Transit Authority of NSW v Australian Jockey Club [2003] NSWSC 726
3 Cubic Transportation Systems Inc v New South Wales [2002] NSWSC 656
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QUESTION 2
Issues
In the given case, the issue is that Rexell claimed that they have a legal binding
agreement in order to perform IT projects works for the new terminal. Thus, they want to claim
against UniSA Projects R Us to pay the extra cost to hire and terminate 3 employees which were
recruited to complete the New Terminal Work. On the contrary, in the case, it is identified that
contract has been awarded by UniSA Projects R us to Boots IT Brothers because they are ready
to completed the entire work in lower cost. Now, the issue is whether who first accepted the offer
and with whom, the contract had been made.
Rules
In the contract, it is necessary to accept the offer at given terms and conditions mentioned
in the offer. If in any case, party put a different condition to accept the offer, then it will be
considered as cross-offer. The postal acceptance rule applies in the case, as per which, post is
considered as an appropriate method and in this, acceptance is presumed at the time when letter
had been posted not when it is actually received by the offeror (Curry, 2008). Adams Vs Lindsell
1818, 1B& Ald 681 is a perfect English contract case of establishing the principle of “postal
rule” as per which, in the course of post, offer is accepted when the letter is being posted4.
Applications
In the case, UniSA Projects R Us circulated a request for tender and Rexell Consultant
had made a proposal that they are ready to fit the new terminal with all the necessary cabling an
information technology requirement within the cost of $4,075,987. Again, client had respond that
they are ready to pay only $3,567,567, in response, tender said final price of $3,900,000 which is
again rejected by client on August 23. On next day, Rexell had lost a contract with local hospital;
as a result, he immediately decided to accept the proposal of UniSA Projects R Us and posted a
letter agreeing with the condition which reached to the office on August 27. Before this, UniSA
Projects R Us approached by Boots IT brothers at lower cost of $3,440,000 and immediately
accepted as well. However, applying the “postal rule of acceptance” and the relevant case of
4 Adams v Lindsell (1818) 1 B & Ald 681
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Adams Vs Lindsell 1818, 1B& Ald 681 it is clear that Rexell Consultant had posted letter of
acceptance before on August 24, hence, it will be considered as an acceptance and immediately,
agreement is made (Jalil, 2011). However, UniSA Projects R Us did not follow the rule of
acceptance because it rewarded the contract to Boots IT brothers. Despite this, Henthorn Vs
Frasaer [1892] 2 Ch 27 also evident that acceptance is valid at the time of post5.
In the case, Rexell wants to claim for the cost of hiring 3 employees on a fixed 12-month
contract for completing the construction work of new terminal. However, they were hired on 20th
August at the time, no contract had been made thus, undoubtedly, and defendant had no
obligation to compensate Rexell Consultant for such cost (Butler and Mueller, 2016).
Conclusion
According to the findings, as per the postal rule, contract must be rewarded to the Rexell
Consultants because offer had been accepted before Boots IT Brother. Hence, in this regards,
UniSA Projects R Us is found in violating the contractual terms. Still, claimant cannot get
compensation for the cost of 3 workers because they were hired before the contract is being
made hence, defendant cannot be claimed to compensate the cost of redundancy pay for the
surplus workers.
QUESTION 3
Issues
Westside Building Services (WBS claims against Kangaroo Island Council to
compensate the extra cost of $450,000 so as to complete the project on time. Now, the question
is whether they can successfully undertake the claim or not.
Rules
Principles of contract act clearly stated that every party involved in the contract is abided
with the legal principles and contractual conditions with which parties had been agreed upon. In
a contract, every party promises each other to carry out or to not carry out certain tasks and for
the work carried out, both the parties’ pays consideration to each other (Anson and et,al., 2010).
It may be either in monetary or non-monetary terms. Evidence from the case law of Stilk Vs
Myrick [1809] 170 ER 1168 clearly declared that in a contract, individual is bound to perform
5 Henthorn v Fraser [1892] 2 Ch 27
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some duty and for which, it is compensated by the money agreed in the contract (McKendrick,
2014)6.
Applications
The case scenario identified that in the mid of July, 2018, WBS asked City’s project
manager to extend the completion of the contract by several weeks. It is because, it had
experienced a huge liquidity problem as a result of liquidation of a client for whom, WBS had
completed a large refurbishment project. After consultation with RBS, UniSA Projects R Us
declared that project could not extend and it is necessary to be launch on scheduled date before
the summer tourism season. Although, WBS was here legally obliged to complete the
construction work on time, still, Kangaroo Island Council had agreed to pay an extra cost of
$450,000 to WBS for guaranteed completion (McLaren, 2016). Based on it, WBS hired more
laborers and spent money on extra supplies to meet the set deadline and completed New
Terminal Construction by the due date. Here, contract had been made between Kangaroo Island
Council and WBS as per which, first party promised to pay extra cost which is the consideration
for WBS in relation to the timely completion of the terminal work. Thus, applying the
contractual principles, it is likely that WBS can claim against Kangaroo Island Council which is
liable to compensate the cost as they promised earlier (Burton, 2008).
Conclusion
The findings stated that it is compulsory for the parties to follow the agreed contractual
terms and conditions and as per which, it is liable to pay extra incurred cost to WBS.
6 Stilk v Myrick (1809) 170 ER 1168
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REFERENCES
Books and Journals
Anson, W.R. and et,al., 2010. Anson's law of contract. Oxford University Press.
Burton, S. J.,2008. Elements of contract interpretation. Oxford University Press.
Butler, P. and Mueller, B.M., 2016. Acceptance of an Offer Under the CISG in Brazil.
Curry, K. E., 2008. MBA Fundamentals Business Law. Kaplan Publishing.
Emerson, W. R., 2009. Business Law. Barron's Educational Series.
Fried, C., 2015. Contract as promise: A theory of contractual obligation. Oxford University
Press.Hart, H. L. A., 2012. The concept of law. Oxford University Press.
Jalil, A., 2011. Clarification of rules of acceptance in making business contracts. J. Pol. & L. 4.
p.109.
McKendrick, E., 2014. Contract law: text, cases, and materials. Oxford University Press.
McLaren, Y., 2016. 5 The Law of Obligations. Commercial Law. p.5.
Poole, J., 2016. Textbook on contract law. Oxford University Press.
Online
Tender Process Contract. n.d. [Online]. Available through:
http://www.constructionlawmadeeasy.com/tenderprocesscontracts.
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