Tope: Chl Entering Conroe ‘Topic: Civil Engineering Contracts 1. Whats contract? Definition of conrac: Different berween contract and tortious lability: = One is cy abe Cont ys oe eas contacted by ee oe i eee emonnaelebe ifm BE get Me = The contract that the parties enter must be the same contact, with the same + Usually, this is not a problem where the agreement isyinowriting, but contract ay also ben om innate Freedom to contract: es + In many cases today, the law may impose tems called “implied terms” ‘whether the partes wish to include them or not 2 What are the essentials of «valid contacto make it enforceable by court? ‘Offers: = Contract requires agreement. This is usually defined in terms of clearly defined “offer” boing unambiguously “accepted” = An offer isa “clear expression” of a willingness to contact on defiite JR One oe aay sored et ets i ere ial to distinguish an ofer, which is capable of producing a contrct, fom a mere indication that © party may, pethaps, consider forming « contrat but snot yet fully commited = Withdrawal of an offers effective only when the other party knows = Sufiient time has elapsed to bring the offer to an end. Where an offer is stipulated to lst fora fixed time, it comes fo an end when that time expires. ‘Whea no time is xed offers comes to an end after “reasonable” tine, = An acceptance is il tad ungeaifed® expression of asent othe terms offered. Unconditional ecceptance binds both partes,‘ope: Chi Engineering Contracts conditional accepiance,js not in fact an acceptance but &counterffen and is equivalent to ejection of ita offer unless it is condition or stipulation ‘normally implied i law. — = The acceptance may take any form provided that it is clear unless the “offeror has stipulated a particular form. = The general rule for acceptance is that there must be communication. “SieREe8 HOF SUMETeR, An offeror cannot impose a contractual obligation upon the offeree by stating that, unless the latter expressly rejects the offer, hae willbe held to have accepted it. The general rule isto protect the offeree and therefore it should not apply where its application would cause hardship to the offeree. = In general, if the method of communication is instantaneous, acceptance takes effect when notification of acceptance is received by the offeror. The exception to this general rule isthe “postal rule” which applies to letters of scceptance. An acceptance by post will take effect as soon as it is validly posted even fit ever aves. | Consideration: — ~All “simplesonimecs” must be spOHea"by consideration or they will not be binding = Only an agreement which hasan element of bargain will be enforced by the courts, One party “sive something” to another party in return forthe benefit eis receiving. = The consideriton need not be equal ia aay wey t0 dhesbenait: being» _sesived, end may be actully doing something forthe other party, or not doing something which would be to his advantage, or promising to do ether + When consideration tkes the form of a completed ac, it is said to be “executed”, when it takes the form a promise itis described as “exceutory”. Both executed and executory considerations ae equally valid Intention: = The partes intend the agroement tobe legally bound Certainty: = The terms of an agreement must be sufficiently certain to have a practical ‘meaning.‘ope: Co Bxginerng Conroe + Both partes must have a correct understanding as to the existence of the subject mater ofthe contact and ofits nature, Otherwise, the contract will, be void by mistake. + Amambiguiy my est ina dispute. awe Legality of object: ~The object ofthe contact mus not bene oP whichtheln disapproves tng = tis perfectly effective eventhough a contract isnot recorded in writing + However, ten "SORtHSt WS SronglytecommendsA"A detailed written contract does supply a framework for preventing and setting dispute, Capacity: = The pati toa contact must have the capacity to contact. + Aperson under 18 sin general not bound by a contrac. 3. How the terms of contract are classified? Conditions: = Legally a conditions so fundamental oa contract which goes tgthe oot or “igen Ahh f oe il ne ive party to clad the Contract, ~ Examples of such are the nonpossession of Site, nonpayment of the Employer, consistent breakh of a contractor in terms of sefety or ‘workmanship, his ack of progres! to ~The breach of above by cither party may entitle the other to abandon or ‘terminate the contract and claim for damages. = In order to avoid unnecessary arguments as to which condition will be fundamental, it is nonnal t express such conditions ia a clause called )) forfeiture which serves asa basis fr ether party to terminate the Contact, ito putittoanend = Ifthe Employer does nt pay punctual, the Contactor wil lave problem {ncash flow and so he may lose his control over sub-contractors, suppliers, manufacturers, plat hier, et. and th contractor cannot perform, $0 3s land availability, land i not available. 5 Cue sap a refactor ete srt he the ‘teeters geet scene nt ype ate nr hoe Migs tectceeony ane sconnan rosple Ct Bngcrng Conracts fl ® Wearranies: Grounds on which the court to decide a term isa condition ora warranty: 4, What isthe standard form contract for PWP? f ‘the terms are not conditions, they ae infact called warranties. The breach of which only entitles the aggrieved party to claim damages", but not to rescind the Contract, and to continve to perform his obligations under the Contract. ‘A breach of condition entitles & party to repudiate the Contract, whist a ‘breach of warranty does nt. 1B rete ‘Who can decide these, only the des In many contracts, most tems are called conditions. But naming tems at conditions will not mean that these are relly fundamental conditions and : aPC EI ESTE, contrac sa whole and sometimes consider the coniequences ofthe breach, Its therefore alvays for construction contacto sate clearly wht are the fundamental breaches which entles an aggrieved party to repudiate the pasty. 3 Jsitaton treat: Jn standard form contracts for PWP, invitation to teat means the invitation to tender by the Government. ‘Tendering may open, selective, prequalified or single. ey tne: ‘The tenderer wil snd ina bid, with a tender price in prescribed form ata specific time and manne, This tender price and any other conditions attached to it will be the offer by tenderer In usual situations, tis is only an offer and not until the Goverment sccepis the offer will a validly binding contract be established. Acceptance bythe Government: ‘The acceptance by the Goverment would be in form of a letter of scceptanee. ‘The lester of acceptance will state the acceptance of the tender price and 5 cpt a nisi ling he ple ni i oa ide nt <4 Sige tiene Ect ea ns pcs eas pace“ype: Ct Bainesrng Contracts offered by a tender, Teil aso sate what comespondence and any ote ems ofed by th tenderer be accepted and be incorposed in the Contract. Also, some patclar regirmeat wil be stated inthe leer, for instance eS 5 ‘Tse oiling ie yo wile he he the Contract = Once the letter is delivered to the tenderer, o in some case, set 0 the post ? fs accomplished and a binding contract is in = Consideration: ~The tof the tends scepted by the Govenment willbe the consideration ofthe Contract. ~ From the legal point of view the price to carryout work in retum of money isthe considetation, There is a point called sufficiency of consideration. + We need not be concerned too much whether the price is good or not, wheter the begins fvouableto the Conimcoro the Bmloyer or nt, even SI vale can amount to god consideration = Of course, if we really have a, 2, the employer may have to st te atin ster 0 etcetera complet the works as anticipated. ‘ + For most standard form contact, the contet wil be exited under ea and legally speaking a seal will amount to good consideration. — Liastation patiod of the comect: = Anomlcontrs or contrast nt made under eli simple contrat The nly deren is.on the imitation period, applicable tothe wo types of contra aon one witout sal x oly Binding oon th panos (7a er sent otras ene ea party wishes o bing roeeing gn! he er, be would lose is ght fo lim subject to sary time tar of sx yous ater the acral of sion. = This situation will be" years for a sealed contract’. = Normally, we say in construction contacts the time bar period starts to,pie: Ch Bginsring Contracts ‘accrue tthe time when the contract is substantially performed. This is not absolute and depends onthe circumstances of the breach, 5. Why do we noed conditions of tender? Msrepresentaton = A party through innocence, no fuud, made a statement of fact called representation, which is untrue and because ofthis statement the other party ‘who rely on the mis-epresentation and enters into contract withthe othe, = The party which makes contmet based on the mis-representation may rescind the Contract. Conditions of tender: = The condition of tender tries to set these matters clear and straight forward 7 for the Bake of certainty and clarity in order to avoid allegstion of ‘mis-representation in the tendering process, 6 What are included tn the contract documents? Articles of agreement: — = Toexecute the articles of agreement under sel “Letter of acceptance: = Tomoeepte offer (ender as submited bythe tenderer timmash isle Tis = This form provides a model letter to the employer ffom:a tenderer offering ‘wenter nto a contract for the works, ~The appendix provides a document for listing contact data, particularly the time forscompletion of the whole works (and for diferent sections if required), amount oF insurance, for Higuidated damages, snd period of maintenance. General condition of contract (GCC): = Conditions of contrat which set outthe responsibilities ofeach party. + GOC consists of clauses expected to be relevant to a range of typeof project tnd are intended tobe used in conjunction with drawing, specifications and other documents that define the particular scope of the works.‘pie: Chi BgineeringConrote a Special conditions of contract (SCC): $ SCC wil eter the seed for advancement or changes inthe empbsis of polis «th emphasis on say 0 we have the pay orth aft sheme in most contacts nowadays; se of insurances; delayed possession so st come round with he fndsmental each positon as std eater etons bjecttoscisiones, $20 ‘We wish that by ire of sch SCC the presto measure of damages and the situations upon which a deletion is ordered will make the contact tusning notte nh eon ofconincor, Goverment maintains ibrery fr these standard special condions of clauses. The GS lays down the quality of materials, the standards of workmanship, the testing methods and the acceptance criteria for civil enginering works ‘undertaken forthe government. Lenape I TT. Since the GS provides only the requirements on the quality of materials, standard of workmanship, methods of testing andthe criteria of acceptance {or typical civil engineering works, amplifications and modifications to the GS were necessary to suit particular circumstances of individual contract by means of the PS. ‘The PS clauses elaborate and supplement the requirements that are not shown in the drawings ‘The specifications also stipulate the general obligations and special responsibilities the contactor has to observe and take up respectively in ‘addition to those stated inthe Conditions of Contract. Compatibility ofall changes must be ensured by the department prepating the contract documents. It's essential to ensure thatthe PS does not alter ar conflict withthe GCC or SCC. The SMM standardize the layout, stuctre and content of BQ, the rules and units ofthe measurements, as well asthe descriptions ofthe tems andthe requirements of the unit ates. ‘The SMM provides detailed measurement methods and item eoverage for{ipe: Ci Egiering Conracs _most tems in the Bills of Quantities (BQ) of the Contract. It provides a guidance to agree to the exact technical manner in which the ‘quantities are to be measured; to Secure uniformity of tendering practice; t0 facilitate valuation of exten works and assessment of claims; and to facilitate interim payment. Particular prec For items which are not included in or deviated from the SMM, PP is given ‘tw specify the particular requirements in the method of measurement, itemistion and item coverage, Bills of quantities: — The BQ would be issued with the invitations for tenders. ‘The BQ helps the tenderers to realize the nature ofthe works, and to price ‘heir rates foreach item of work. In addition, it allows the Employer to compare different contractors by ooking into the rates inserted by different tenders on respective items. ‘The priced BQ forms the besis for future valuation of the works, and cost control during construction stage by comparing the percentage of work ‘completed with the time elapsed. Drawings: ‘The drawings which show what is to be constructed need to be listed in the tender documents. ‘The tender drawings become the contract drawings unless others or modified drawings are agreed in tendering period. ‘The drawings provide the tenderers with a good perspective of the nature and extent ofthe Works. ‘The requirements of the works are highlighted in form of notes on the ravings to supplement or amplify the specification. vai 7. How-to interpret the contract documents? Things of the same kind: ‘The rule that when particular words are followed by general words, the ‘general words are limited to the same kind as that ofthe particular words, (lt mts pega ind rbd Ose reas ea gcse reeds oe {Shteepancarve tare leet ben iin weTipe Chil Enginesrng Corot Meaning of a word cam be constdered from the immediate context: = Itsimply means tha the meaning ofa particular word derives its meaning or derives its colour from those which suround them’ “Mention of one or more things ina particular class is silently excluding al other members ofthe class = The contact should beso writen to avoid such from occurrence. Interpretation ina way less favourable tothe drafter: = This role works against the drafter when the clause is having ambiguity. Delete the surplus clause: = There isa rule which says any clause which purports to clarify or amplify another clause but eventually cannot make a more definite meaning of all, the concemed clauses then one may delete the “surplus clause to ave a clear picture of wat was intended, opt repre tr ‘An implied term is aterm not incorporated inthe contact, Such tem should bbe written into the contract by judges when they have to find out the efficacy ofthe contract asa whole. = It-can be said that such a term has a characteristic that someone ater reading the implied term will say tht such term must be there without saying it. 8% Hov10 draft the contract documents? = Remember when you draf the contract documents, you must draft the ‘the mode and mechanism of resuming land, and its future operation tc. In Hong Kong, we can find such arrangement in MTRC, KCRC projects, cross harbour tunnels, or the running of landill by private companies, ete Apart from the funding aspect, a tumkey or BOT contrat is just another blend of design and build contract.“ples Ct Bgncring Contracts 16, Why do we need standard forms of contrast?” = The standardized contract forms has been drafted> mainly by people -expetiendet in enginoering and construction, and thus they are intended to provide a basis for = The wording has been considered carefully to try to make sure that itis + The stndard forms of contct have been used in many projets which should be known and understod by employers, engineers and contactors. ‘The dies of contractors, employers and engineers have been sundanized ~The risks inherent in civil engiacesing works have been distributed itl sone ion parins 17, Can the contractor's deductions from toal ofthe Bil be applied to extra work? Adjustment to total ofthe bills: = In remeasurement contact, e contrasior can make an adjustment (addtion/deduetion) to the grand summary of the bills of quantities as a short way of revising al is rates proportionately. Adjustment by means ofa percentage: = If the contractor inserted percentage for the adjustment, such revision should apply tothe rates forall his work, including the additonal works. Adjustment by means ofa fice amount: = Ifthe contractor inserted a fixed amount for the adjustment, the concerned adjustment should be restricted to the original work only. = Inthis connection, no adjustment should be made forthe rates as inserted in ‘the bill of quantities forthe valuation of variation, presuming that the item selected is appropriate. 18. Can you give me some examples for breach of contract? = Generally defects in compliance can be remedied, but wrong construction or ‘the destruction of materials, etc. can make it impossible for the works as specified ever to be constructed. = Failure to comply with the specification is likely to bea breach of warranty.ple: Ch Baginerng Conrocs = Under common law time is taken to be “ofthe essence” of a contract unless ‘contrary intention is clearly shown. | no date or period for completion has been explicitly stated, a reasonable time willbe infered to be binding. = Bauitable considerations prevail and “specific performance” is required plus the payment of damages for delay. = Delays caused by an employer such asin giving access to the site, delivery cof drawings, nomination of nominated sub-contractors or in giving {nstractions ean be breaches by an employer. = eompletion is feideed impossible because ofa faut of his employer then «contractor wil have a sight to payment for the work actually done by ‘means of “quantum meri’. ee x enloer ne ast he Bogen of exists o delay in making payments would be breach. = A Contractors at liberty to teat this only asa breach of warranty and seek ‘damages in compensation. tenia, great variety of matiers dealt with inthe conditions of contract, for instance if @ contactor refuses to accept instructions, fire to take care {x saety oo obey regulations 19, Whats retention money? "percentage of payments will be retained by the Employer until specified period after taking over the works. = The amount is then released if the contractor has completed his obligations such as fetifying defected Work” = The potential advantage tothe Employer is that a contractor should have the = In some cases, the contractor may even realise that his resources ean eam amore if used instead on work for other contracts. To anticipate this the cemployer can have specified a lager percentage retention of payments ‘when inviting tenders, but at the risk thatthe tender prices wil therefore be higher to meet the greater costs and risks to the contractors. = The contractor does not cease to be liable to the Employer or to other partes for defects or their consequences by being paid the retention money.Topic Chi Engivring Contracts Q1 Will you allow the construction works to commence without the effect of, third party insurance? ‘Q2 Will the Contractor be entitled to EOT or payment for any disruption of ‘works due to utlity undertakings? Re ‘Q3 Can the Employer rescind the contract for delay/poor workmanship/poor safety performance?