University of Calgary Continuing Education Construction Contract Law and Documents
Construction Contract Law and Documents • Cleanup from Last Week • Notion of Sovereignty – Power of the Courts • Hierarchy of Courts • FILAC – look at sample assignment
Construction Contract Law & Documents • FILAC • A methodology for the systematic analysis of legal problems. Different acronyms are used but they all amount to the same thing. • Facts • All relevant facts should be listed • Issues • Define the questions that must be answered • Law • What law – both statutory and case law should be dealt with • Analysis • Correlate the facts and the law • Conclusion • Example of a case • Sample Analysis
Contracts • Agreement between parties for provision of one thing for another • Fundamental Elements are: • Offer • Acceptance • Consideration • Characterized by • An intention by both parties to enter the agreement and, • An ability to enter into the agreement
Contracts • Consider the this situation: • I promise to give you the Jetta.
Contracts • Consider this situation • I promise to give you the Jetta if you lend me your pen
Intention To Be Bound • Essential that both parties want to be bound by the terms • Generally manifest by some form of open agreement
Intention To Be Bound • Balfour v Balfour • Wife sued husband for the allowance he promised her while he was working abroad. • At first he paid. • They split up – he stopped paying. • Result: Court ruled that there was no intention to form a contract under the circumstances – no award.
Offer and Acceptance • Offer • Invitations To Treat • An invitation to treat is a statement that a person has, for example, goods for sale and is willing to accept offers. Advertisements, invitations to tender, auctions and a general display of goods are typical examples of invitations to treat and are considered to be designed to elicit offers from other persons.
Offer and Acceptance • Offer • Knowledge of Offer • Is it necessary for a person to have knowledge of an offer to take advantage of it? Apparently so, according to courts in the U.K. and Australia. It is not, however, necessary for the offeree to hear of the offer directly from the offeror; he can hear of it indirectly through parties who may be considered his agents.
Offer and Acceptance • Offer • Duration of Offers • An offer lapses if the time limit specified in the offer is reached before acceptance although the time period for acceptance can be extended by the offeror. • An offer will lapse after a reasonable period of time. (Barrick v Clark)
Offer and Acceptance • Offer • Revocation of Offers • An offer can be revoked by the offeror at any time prior to acceptance and it cannot be accepted thereafter. (Petterson v Pattberg)
Offer and Acceptance • Offer • Tenders • Some now – More later
Offer and Acceptance • Acceptance • Acceptance refers to the indication of the offeree that he agrees to enter into a contract on the terms included in the offer. • Acceptance is fundamental to the formation of a contract. • Circumstances under which an acceptance may be invalid include acceptance after the deadline stipulated in the offer or acceptance after the offer has been revoked.
Offer and Acceptance • Acceptance • Must Accept Terms Offered • In order for a contract to be formed, the acceptance must clearly accept the terms that were offered. If the acceptance attempts to vary the offered terms, the acceptance is invalid and no contract is formed. If the offer contained instructions regarding how the acceptance was to be communicated – for example, “acceptance must be in writing” – then, if the acceptance is purported to be delivered by phone, it would probably be invalid.
Offer and Acceptance • Communication of Acceptance • Counteroffer • If, in response to an offer, the offeree responds with a counteroffer, in most circumstances the original offer is considered dead and cannot be subsequently accepted.
Offer and Acceptance • Communication of Acceptance • By performance • Father bought house for son and wife and stated that he would transfer the property to them if the son made mortgage payments. • The son made the payments. • Court upheld existence of contract even though no formal acceptance was demonstrated.
Offer and Acceptance • Break
Offer and Acceptance • Exercise • An advertisement appears in the newspaper saying: “Lost Dog. I will pay $100 to the first person who finds my poodle Fifi and returns her to me. Bob Schuett”. • Is this an offer, in the contractual sense? Is this an invitation to treat?
Offer and Acceptance • Exercise • An advertisement appears in the newspaper saying: “1990 VW Jetta. 200,000KM. $2,000. • Offer or invitation to treat? Explain
Offer and Acceptance • Example: • A company places an advertisement in the newspaper that says, “We guarantee that anyone using our product for the stipulated time and in the stipulated manner will not get the flu. If a person gets the flu under these circumstances, we will pay them £100.” Was there an enforceable contract here? (Carbolic Soap)
Offer and Acceptance • Example: • A drug store displays goods on its shelves. Some of the goods, by law, can only be sold under the supervision of a registered pharmacist. The pharmacist’s workstation was near the cashier and he could supervise and approve any purchase of a regulated product. A shopper picks up one of these restricted products, puts it in a shopping bag and takes it to the cashier. There was a question as to whether the sale took place under the supervision of the pharmacist. The result hinged on whether the contract was formed when the customer put the product in the shopping bag or when the customer passed through the cashier’s wicket. When was the contract formed? (Boots)
Offer and Acceptance • Example: • A shopper sees some displayed articles and changes the price tag on one of them. She takes the articles to the checkout, where the cashier rings the goods through. The shopper is caught by the store security and subsequently charged with theft. Was there a theft here or did the store accept the sale at the altered price by ringing out the products? (Dawood)
Offer and Acceptance • Acceptance • Battle of The Forms • This need for the acceptance to match the offer can lead to a situation where a “battle of the forms” arises
Offer and Acceptance • Battle of The Forms • Exercise: • A lumber supplier issues a quotation to a contractor and the quotation is subject to terms on the back of the quotation regarding payment, interest on overdue accounts and responsibility for delivery. The client issues a Purchase Order with its own set of conditions including payment and holdback. Is a contract formed?
Offer and Acceptance • Battle of The Forms • Exercise: • A contractor and supplier talk on the phone about doing work on a project. In general terms they discuss the scope of work and the price ($25,000) but there is no agreement formed. After they get off the phone, they each send the other faxes as follows: • The contractor states that he wants the supplier to supply the goods for $25,000. • The supplier states that he wants to supply the goods for $25,000. • The faxes cross each other. Is there a contract formed?
Offer and Acceptance • Acceptance • Subject To • If an offer is sent and acceptance given but the acceptance is “subject to” some other event, there is no contract. For example, if the acceptance states that it is subject to the review of the “boss”, there is no contract. Even if there is a direction to proceed with the work, as is done in some “letters of intent”, there is no contract.
Offer and Acceptance • Acceptance • Letters of Intent • The so-called letter of intent is a dangerous document.
Offer and Acceptance • Letters of Intent – Exercise • An owner has received a quotation based on the use of a standard CCDC form 2 Stipulated Price Contract from a contractor for the construction of a building. Unfortunately, construction must start within 10 days for the owner to retain his development permit and the bank that is funding the project will not have approval in place for 30 days. In an attempt to secure his position, the owner writes the contractor a letter stating: • It is my intention to issue the construction contract to you within 30 days but in any case, immediately after the funding approval from my bank… I would appreciate it if you can start mobilization and site work by the end of this week. • Is there a contract in place? If so what are its terms?
Offer and Acceptance • Letters of Intent – Exercise • Is this situation altered if the owner added the following language to the letter? • I hereby agree to pay for any and all work undertaken by you prior to the issuance of the contract on a cost-plus basis and even if the contract is never issued. • What are the terms of the contract that exists?
Offer and Acceptance • Acceptance - summarizing • Must Accept Terms Offered • Battle of The Forms • Subject To • Letters of Intent
Offer and Acceptance • Communication of Acceptance • When an offer is made which includes wording that states that the “offeree must signify his acceptance of the offer by mailing his acceptance within 30 days” then a contract is formed at the time the mailing of the acceptance occurs.
Offer and Acceptance • Communication of Acceptance • But what happens if the offeror never gets the letter. • The courts have held that the contract still exists because the mechanism for acceptance was stipulated by the offeror and it was followed. • In the case where the offer was sent by mail, the courts have held that it was implied that the acceptance could be sent by mail and the contract was formed when the acceptance was mailed. This is sometimes called the post office rule.
Offer and Acceptance • Communication of Acceptance • In other words, although common sense may say that acceptance must be communicated, there are circumstances where a contract may be formed even if such acceptance is not communicated.
Offer and Acceptance • Communication of Acceptance • If no such communication is required then the contract is formed in the offeree’s jurisdiction (unilateral contract) • If the terms of the offer require communication of acceptance and if the offeror is in Ontario and the offeree is in Quebec and the offeree calls the offeror on the phone to accept the offer, the courts have held that the contract was made in Ontario (Brinkibon v Stahag Stohl)
Offer and Acceptance • Communication of Acceptance • Silence cannot be construed as acceptance of an offer unless by subsequent action the offeree creates “acceptance”. (St John Tug v Irving Refinery)
Offer and Acceptance • Communication of Acceptance • Once an offer has been accepted, a binding contract has been formed and no revocation of the offer is possible.
Offer and Acceptance • Communication of Acceptance • Unilateral Contracts • A unilateral contract is formed when, by performance of some act, a party accepts an offer. • The example of finding someone’s dog, above, is an illustration of an agreement that could be found to be a unilateral contract. The classic case is Carbolic Soap, above.