Contract Types and Selection Factors

This assignment delves into the different types of contracts used in construction projects, highlighting the specific considerations involved in choosing the most suitable contract. It discusses factors such as price competition, cost analysis, complexity of requirements, urgency, performance duration, contractor capabilities, and subcontracting arrangements. The importance of legal implications and adherence to state laws is also emphasized for successful contract administration.

Running head: CONTRACT LAW
CONTRACT LAW
Name of the Student
Name of the University
Author note

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Executive summary
The primary tenet of this report has been to provide an understanding of the Contract law in
relation to the implications of the given clauses in different contract forms. The report deals with
the implication of damages for a breach of contract and its effects. The report further deals with
implications of insurance contract, and the provisions of subcontracting. The factors taken into
consideration for selecting or choosing type of contracts have also been discussed. In conclusion
it can be said that, all the said factors are to be taken into account, for the purpose of ensuring a
successful administration.

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Table of Contents
Introduction......................................................................................................................................3
Roles and responsibility of personnel under an NEC/JCT form of contract...................................3
Duck Construction (UK) Ltd (DCUK)............................................................................................4
PART A...........................................................................................................................................4
Damages for breach of contract...................................................................................................4
Insurance......................................................................................................................................5
Sub contracting............................................................................................................................6
PART B...........................................................................................................................................7
Conclusion.......................................................................................................................................9

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Introduction
Contracts are legally binding or valid agreements between two or more parties. The law
considers contracts to be legitimate and valid if the agreements contain each of the following
element. That is, Offer and its acceptance; Intentions between the parties for creating binding
relationship; Considerations to be paid for the promises that are made; Lawful capacities of the
parties of the contract to act; Genuine and free consents of the parties; and Legality or legitimacy
of the agreements. Agreements that lack any of the elements listed above may not consider a
contract to be valid.
Roles and responsibility of personnel under an NEC/JCT form of contract
Both the forms JCT and NEC contracts are standardized form of contracts, which are
parts of usual families for the procurement of work, or in the recent times, services of
consultancy (JCT) and works, goods or services (NEC). Since the year, 1931 JCT, The Joint
Contracts Tribunal, has been producing standardized forms of contract of construction, guidance
note and other standardized form of documentations for the use by the industry of construction.
JCT can be termed as conventional contracts and have been seen, for a long time, as the
standardized building contracts for the usage in the United Kingdom, but not worldwide. NEC
had ‘been intended for a global usage with a choice of the governance of language and law. JCT
concentrates on risks and liability in the manner of conventional contract while NEC forms
enable and require a more collaborative and proactive approach for managing of the contracts.
In due course, JCT has been changing the style of drafting to become more
comprehensible; a characteristic of the NEC has been drafting in basic English and providing for

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flexibility as well as clarity. NEC seeks to do away with the usage of legal terminology and in its
place provides for uncomplicated languages, and provides the word with their natural meanings.
Duck Construction (UK) Ltd (DCUK).
PART A
To ensure the successful administration of the contract between the company and the council, the
following implications of clauses relating to the following provisions in the contract, are
discussed:
Damages for breach of contract
The thought of awarding or giving damages for a breach of an agreement is a creation of
the common law system. Every party to any contract has some duty to perform. If one of the
parties perform, and the other party does not, the party who is not performing could face legal
consequence. Failure of performing under the contracts can result to a breach of the contract. The
party who is not breaching may file a lawsuit against the breaching party to recover the damages
"Expectation damages" generally put the party who is not breaching in the place he would have
been in had the other party had performed the contract. The concept had also been discussed in
the case of ----
The courts would desire the party who is guilty to accept responsibility for any of the loss
that has been suffered by the aggrieved party and pay compensation to him adequately or
sufficiently. The quantum of damages or compensation amount is determined by the extent of
loss caused by the breach. Damages are meant to pay compensation to the injured or aggrieved
party for any consequence of the breach of contract. The underlying principle has been to put the

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injured or aggrieved party monetarily as close as possible, into the place he would have been in,
had the promise or terms of the agreement been fulfilled.
Insurance
A contract whereby, for specific considerations, one party undertake to compensate the ot
her party for losses relating to a
certain subject as a consequence of the occurrences of designated hazard. When one makes
a contract with an insurance company, the contract is known as an insurance policy, that is, they
transfer the risks of some noteworthy financial losses to the insurance companies, and in
exchange, one must pay a periodical monthly payment during the time of the policy called
premiums.
Essential to all the insurance contracts are the insuring agreements that specify the risks,
which have been covered, the limit of the policy, and the terms of the policy. In addition, every
insurance contract specifies:
Condition, that are the requirements or wants of the insured, such as payment of the premiums or
reporting losses;
Limitation, that specifies the limit of the policy, like the highest amount that would be paid by
the insurance company;
Exclusion that specifies things, which are not covered by the contracts.
It is obvious that, the contents of insurance contracts depend on the types of policy, what
has been wanted by the insurance applicant, and what amount was he willing to pay. The details
of insurance policy have been covered in the Standard Insurance Policies. Only contracts that are
valid, are legally enforceable.
There are four requirements for any valid contracts, including the insurance contract:

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Offers and acceptance,
Considerations,
Competent parties, and
Legal purposes.
Insurance contracts have an added requirement that the contracts always be in legal form.
Insurance contract is regulated by laws of the state. Moreover, contract must be approved and
permitted by the state insurance departments before they can be used, for ensuring that they
comply or follow with the regulations. A recent Supreme Court case of Versloot Dredging BV &
Anor v HDI Gerling Industrie Versicherung AG & Ors [2016] UKSC 45 had hit the market of
Insurance immensely. The insurer succeeded in the Court of Appeal as well as the Court of the
Country; on every occasion, stating that the owner of the vessel had been spoiled in the storms
had formed a device that was fraudulent through lies.
Sub contracting
Subcontracting has been the practice of assigning parts of the obligation and task under a
contract to some other party known as the subcontractor. Subcontracting is particularly
widespread in areas where complex projects have been the norm, such as constructions and
information technologies. Subcontractor is hired by the general contractor of the project, who
continues to have overall responsibilities for the completion of the project and execution within
its specific deadlines and parameters.
There are numerous reasons as to what was the purpose of subcontracting or why was it
being carried out. Subcontracting has been very helpful in situation where the range of requisite
capabilities for some projects has been too diversified to be carried out by only one general
contractor. In case of such a situation, the subcontracting part of the projects that does not form

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the core competency of the general contractor can assist in keeping the cost under control and
lessen the overall risk of the project.
Secondly, a number of large government contract or contract, which affects or influences
development of the local community, may want the primary contractors to appoint a certain
number of subcontracting entities from the communities as an ingredient of the contract. In
addition, a business may make a decision of subcontracting some ordinary but essential jobs to
free up resources and time for attending other undertakings that are profitable.
Lastly, it is not that expensive for contractors to hire the service of subcontracting firms
or freelancers than it is of hiring employees as the primary contractor is not accountable for
paying the compensation benefits of the workers, vehicles as well as general liability
insurances, health insurances, full time salary, and the taxes for Social Security for the
independent contractor or the subcontractor. In the case of St Modwen Developments Limited
v Bowmer & Kirkland Limited [1996] it has focused on the question of valuation. The Court
had determined to see at the back of the labels of Domestic Subcontractor and therefore
addressed the realities of the process of procurement accordingly.
PART B
Factors in selecting the types of contract:
The contracting officer is expected to consider several factors while negotiating and
selecting the type of the contract. The following have been included:
Competition of Price: Usually, the consequences of effective price competition has been
realistic pricing, and the fixed prices contracts are generally in the interest of the Government.

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Analysis of Price: Price analysis with or without competitions, may provide a ground for
the selection of the type of contract. The degrees of which analysis of price can provide realistic
pricing standards are expected to be considered in a careful manner.
Analysis of Cost: In the non-existence of effective price competitions and if there has
been an insufficiency in the analysis of price, the estimate of cost of the offerors and the
Government provides the base for the negotiation of the contract pricing arrangement. It is
necessary that the uncertainty involved in the performances and their probable impacts upon the
cost be recognized and evaluated, so that a type of contract that place reasonable degrees of
responsibility of cost upon the contractors would be capable of being negotiated.
Complexity and Type of requirements Complicated requirements, especially the ones
distinctive to the Governments, generally results in assumption of greater risk by the
Government. This is particularly true for complicated research as well as development contract,
when the uncertainty of performance or the possibility of change makes it complex for the
estimation of performance cost beforehand. As requirements re occurs or as production of
quantity begins, the cost risks are expected to shift towards the contractor, and a contract of fixed
price is expected to be considered.
Urgency or priority of the requirement If the priority or urgency has been the main
factor, the Government can decide to suppose a greater risk or incentive may be offered,
modified to the outcome of performance for ensuring the performance of the contract timely.
Performance period or length of production runs. At the time of economic uncertainties,
contracts that extend over a comparatively longer period may require an adjustment of the
economic price or clauses of price redetermination.
The financial responsibilities as well as the technical capabilities of the Contractor

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Adequacy of the accounting systems of the contractor Prior to approving on a type of
contract other than the firm fixed price, the contracting officers shall ensure that the accounting
system of the contractor will allow well-timed developments of all essential cost data in the form
necessary by the proposed type of contract. The factor may be vital -
While the type of contract require revision of price when the performance has been in
progress; or
When contracts of cost reimbursement are taken into consideration and all the existing or
past experiences with the contractor have been on the basis of fixed price.
Concurrent contracts If the performances under the proposed or suggested contracts
involve concurrent operation under some other contract, the impacts of those contract, including
their arrangement of pricing, must be taken into consideration.
The nature and extent of proposed subcontracting. If there has been a proposal of
extensive subcontracting by the contractor, a type of contract reflecting the authentic risk to the
prime contractor is ought to be selected.
Conclusion
A contract is a voluntary arrangement between two or more parties that is enforceable by
law as a binding legal agreement. Hence, in conclusion it can be said that, to ensure the
successful administration of the contract between the company and the council, the implications
and the importance should be taken into account. The laws of the State are also to be abided by,
in order to make it legally binding.