THE LAW OF

CONTRACTS

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 Contents

2.1 Types of contracts,

2.2 Subject matter in contracts,
2.3 Terms and conditions of
contracts,
2.4 Rights and responsibilities of
both parties in contracts.

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What is a contract?
A contract is a legally binding or valid agreement
between two parties.

The law will consider a contract to be valid if the

agreement contains all of the following elements:

1. Offer and acceptance;

2. An intention between the parties to create

binding relations;

3. Consideration to be paid for the promise made;

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 What is a contract?
4. Legal capacity of the parties to act;

5. Genuine consent of the parties; and

6. Legality of the agreement.

An agreement that lacks one or more of the

elements listed above is not a valid contract.

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 What is a contract?
Not all contracts need to be in writing.
Exceptions being contracts to buy and sell land, motor
vehicles and door to door sales.

It is always useful to have the terms agreed between

the parties written down and attached to or kept with
any other relevant papers; and records of payments.

In a written contract the parties must each sign and

date the document at the end preferably with
witnesses.

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Elements of a Contract
1. Offer and acceptance
A contract is formed when an offer by one party is
accepted by the other party.

An offer is a definite promise to be bound, provided

the terms of the offer are accepted. This means that
there must be acceptance of precisely what has been
offered.

Acceptance occurs when the party answering the offer

agrees to the offer by way of a statement or an act,
which must be unequivocal and communicated to the
party giving the offer. 6
2. Intention between the parties to create legal
relations

The parties to the agreement must intend to enter into

a legally binding agreement.

A contract does not exist simply because there is an

agreement between people.

The legality of the agreement is normally inferred

from the circumstances in which the it was made

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3. Consideration to be paid

Consideration is the price paid for the promise of the

other party.

The price must be something of value, although it

need not be money.

Consideration may be some right, interest or benefit

going to one party or loss or responsibility given,
suffered or undertaken by the other party.

Considerations must not be illegal or impossible

to perform.
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4. Legal capacity of the Parties to act

Not all people have legal capacity to enter into a valid

contract.

The following group of people are not legally

recognized to enter into and bound by contracts:

• people who have a mental impairment;

• young people (minors);
• bankrupts;
• corporations (people acting on behalf of a
company);
• prisoners.
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5. Genuine consent of the parties

Entering into a contract must involve the elements

of free will and proper understanding of what each
of the parties is doing. In other words, the consent
of each of the parties to a contract must be genuine

Proper consent may be affected by any of the

following matters:
•mistake;
•false statements;
•duress; and
•undue influence or unconscionability.

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6. Legality of the agreement.

Certain types of contracts are illegal at common law,

because they are contrary to the public good. These
include contracts:
•to commit a crime, a tort or a fraud;
•that are sexually immoral;
•that prejudice public safety, including good relations
with other states or countries;
•that prejudice the administration of justice;
•that tend to promote corruption in public life; and
•to defraud the revenue.

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Illegally formed contracts are generally void and
unenforceable by either party at common law.
Therefore, property or money transferred cannot be
recovered.

Sometimes legally formed contracts are performed in

an illegal manner then the contract is not void, but:

•no remedies are available to the guilty party; and

•the innocent party retains all rights and remedies
(provided they did not know the contract was to be
performed illegally).

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 The terms of a contract

Terms of a contract are various statements contained

in the contract document made by one party in order
to encourage or induce the other party to enter into
the contract

The general rule is that a party is bound by all the

terms set out in a contractual document if they have
signed it. This applies whether or not they have read
the terms or understood them.
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Standard Contract Documents.

Standard contract documents exist which have been

accepted by many clients, contractors, consultants
and project financiers such as the World Bank, EU etc.

The forms fairly represent the interests of all parties

involved.

Such a standard form has the following sections

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1. General provisions: - define relations between
parties, the applicable law, language, notices, taxes
and duties, legal authority, authorised
representatives, etc.;

2. Terms of Commencement, completion,

modification and termination of contract including
contract effectiveness and ‘force majeure’

(i.e. unexpected circumstances that excuse somebody

from fulfilling a contract);
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3. Obligations of contractors on:
- standards of performance,
- avoiding conflict of interest,
- confidentiality,
- liability,
- indemnification (compensate) of client,
- insurance,
- accounting arrangements, and
- reporting arrangements.

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4. Contractor’s personnel acceptable to the client
with their respective qualifications; permissible
turn-over and, expected working hours of
contractor and his personnel;

5. Obligation of the client including payments,

indemnification of contractors and accessibility to
the site;

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6. Mode and terms of payments to the contractor
stipulating currency and ceiling amount on
payments;

7. Fairness and good faith in operating and

implementing the Contract Agreement;

8. Settlement of disputes amicably either through

arbitration or in a Court of Law.

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PAYMENTS PER CONTRACT:

The client sets the ceiling amount on the amount of

money payable for executing a given project;

The money is arrived at after carefully considering

and accepting the contractor’s financial proposal;

The proposal submitted by the would be contractor

is assembled after a careful study of the tender

documents;

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The appointed contractor must undertake to

complete the project on the financial resources

agreed upon with the client;
Failure to honour this obligation, might land the

contractor in a court of law;

N.B.

Students preparing to enter the world of professional

practices must learn project costing to avoid
setbacks!!
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PARTIES INVOLVED IN CONTRACTS IN A PROJECT:

In general, the execution of surveying and other

engineering projects requires the involvement of

at least three parties, namely,

- the client;

- the consultant; and,

- the executioner or better known as the

‘Contractor’

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 The Client

As the owner of the project, the Client is the party who wants
the job done.

He provides financial resources for the project either from

own servings or through a loan or a grant;

He has little, and often no know-how about the technicalities

of the project but merely interested in the end results; e.g.

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 The Consultant

The Consultant is a person or company engaged by the

Client to provide professional services such as:
- undertaking a feasibility study,
- preparing the design,
- compiling specifications, and,
- preparing tender documents.

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The same or other consultants will also administer the
contractual agreement that will be entered into
between the client and the executioner of the project.

The consultant will also supervise the contractor to

the end of the project acting in the best interest of
the client, but also,
Making sure that the contractor is not treated

unfairly by the client.

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• The success of the project, including the optimal
use of the resources, will largely depend upon the
client choosing a competent consultant;

• The consultant will exercise independent

professional judgement based on his knowledge,
experience and ethics.

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 The Contractor

The Contractor is a person or company that

undertakes to execute a specific project, either wholly
or in part;
A general contractor is the one who is engaged by

the client for the entire project, usually from start to

finish;
When the engagement of the contractor is confined

to selected classes of work, such project executioner

is known as a ‘sub-contractor’. 26
A sub-contractor may be engaged directly by the

Client;
He may also be engaged by the general Contractor

but on terms agreeable to the Client;

Most projects engage sub-contractors because:

- the range of work, and hence the skills

required in a project, is so varied that the general
contractor may not be in a position to provide.

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- Rare to find a general contractor who will tender
and be able to do all the works in-house.

- Even where this may be so, the general contractor

may lack some of the technology which may be
available somewhere else.

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A sub-contractor may be engaged directly by the
Client, or He may also be engaged by the general
Contractor but on terms agreeable to the Client

The difference between the two arrangements of

engaging a sub-contractor lies in the reporting and
payments arrangements;

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In the former case, the sub-contractor will be
answerable through the consultant, directly to the
Client. His payments will be made by the Client.

In the latter case, the sub-contractor is answerable to

the general contractor for the quality of work and for
payments, His work will not be subjected to scrutiny by
the Client’s consultant, but will taken as part of the
Contractors main work.
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