Elements of the State Agency v NCG Contract - Case Study Example

English law of contract Course Institution Tutor Date English law of contract Introduction The employer for NCG, a state agency, had failed to release further designs for the project on time. On the process of delaying the designs, NCG incurred father costs that were not on the inclusions of the contract. NCG submitted a claim for additional time frame and additional pay and produced evidence on the claim. However, the engineer in charge allocated half the time NCG asked, and half the amount claimed on the submissions. NCG felt dissatisfied with this arrangement and went ahead to launch a dispute resolution strategy as stipulated in the contract. Even so, the dispute resolver offers NCG 60% of both the time requested and the funds requested. Elements of the state agency v. NCG contract The law of England/Wales stipulates that, for a contract to be valid, it must possess the three elements which include an offer (that claims whether to sell or to purchase) from an offeror. In this case, the state agency is the offeror. The offer should be acceptable by the offeree of the offer. In this case, the offeree is NCG. There must be an intention to create contractual relations which under the case of the government agency and NCG, there was an agreement to enter into contractual relationships when the agency allocated a road construction contract to NCG and on its part, NCG accepted to continue with the terms of the contract. Several elements show the intentions to contract. The first element is a consideration. The state agency offers NCG money and construction designs for the services of road construction in exchange. There was a part-performance between the two contracting parties. NCG delivered on the first end of the agreement and started its contracting services while the state agency had fulfilled the first end of the bargain. There as an embodied contractual terms recorded in the form of a deed. The deed serves as evidence of an existing contractual relationship between the state agency and NCG. The claim process An in-house resolution to the problems affecting the two contracting parties is the best solution to the impending problem. Entering into a contract agreement for construction purposes is a very risky venture for both parties. However, under the case of the state agency v. NCG, government agency has breached the timely agreement for design submission. The resultant effects are heavily felt by the construction business. NCG incurs extra costs and will require extra additional time to complete the task that will be expensive for the business both financially and on time considerations. NCG, the construction business, had carried a risk analysis leading to a proper application of risk management strategies such that the construction was to be in agreement with the stipulated terms of the contract. The England/Wales contracting law provides for English procedures that a contracting party can use to settle a claim. The procedures were adopted overwhelmingly as a result of the Woolf Reforms in 1999. These procedures are what NCG will adopt in its formal claim under the contract with the state agency. NCG will launch its claim under the multi track claim allocation window. Detailed advice to NCG on the claim The first step on the claim is for NCG to identify and document the main causes of the dispute. In this case, NCG is launching a dispute on the delay of the designs that has lead to financial loss and time expenses on the company’s side. After identification of the claim, NCG should determine the responsibility for the problem. It means that NCG should run a thorough risk assessment to identify any risks assigned by the contract to its side or the employer’s side. NCG should carry out a full assessment that will facilitate a clear understanding of the contractual obligations. After the two processes, NCG will be in a better position to launch its claim. Article 4 (4) of the England/Wales contract law gives the provisions of how to carry out a formal claim for compensation or additional compensation. It requires that the contractor (NCG) provide notice indicating a delay on the designs and explaining the results the designs have on the construction. The notice serves as a timely notice for an existing dispute. Article 8 (2) guides on the development schedule terms. The scheduled progress was altered by the delay in designs. Claiming an additional time for the project is very acceptable for NCG. NCG will argue ion the basis of the acceptable program that the agency had accepted before. The engineer had accepted the early schedule that stipulated all the requirements for completion within the stipulated dates. NCG is entitled to a claim of additional time because it has fulfilled its end of the bargain. The engineer had all access to the working plans and was well aware of the program. The argument is that he knew that the contractors will need the designs in order to complete the task yet he still delayed them. Under the contract terms, the government agency is liable for paying additional compensation to the contractors and adding more time because they understand well the implications of failing to accomplish their obligations1. The liability of the state agency lies from the initial performance recommendation under a contract law. The responsibilities of the employer are stipulated as follows. The employer is to provide a complete, clear, and concise plan that guides the applicants of the contract on the specifications and estimates of bidding and construction. After offering the contract to any chosen company, the employer is not supposed to interfere with the contractor’s plans, schedules or resources. However, NCG was not entitled to creation of the designs. If the employer interferes with one of these tenets, the contractor is liable for claims under the contract law. The state agency assumed full responsibility for a claim when they offered half of what NCG was claiming. The business is to assume all the costs that will occur due to the delays in the designs. The law of contract stipulates that the employer is in no position to direct the contractor on how to use his resources. In the case when an employer decides to direct the contractor’s use of resources, he is liable to assumption of all costs and time expenses that occur as observed under this case. The government decides to delay the designs, which form one of the contractor’s equipment for his working plan. Categorizing responsibility of the problem The law of contract offers the contracting parties with an opportunity to categorize the result of the problem under the stipulated categories. In order to categorize the result, the time decision and the dollar decision are used as guiding principles. NCG is liable to a claim under the excusable impact which stipulates that the contractor can be allowed more time other than the stipulated deadline in case of conditions that he has no control. NCG is also entitled to a claim under the compensable result. The compensable impact allows NCG to be compensated because it incurs additional costs at the expense of the employer. The employer is obligated because the cause of the problem was not beyond his capacity. Requirements of the claim The claim should be put in writing and submitted in the same manner to the engineer. The claim is distinguished from any other form of complained by its features. These features are a written demand or written assertion that seeks, as a matter of right, the payment of compensation as a means to cover for the breach of the contracting terms. It seeks to ask for more time in the contractual business as a means to cover for the time wasted waiting for the contracting further designs. NCG should call the claim and insist as of such. NCG should make sure that the government agency understands that the claim is not a request for adjustments. The claim should adequately ask for a final decision of the business and the time the claim should take such as the standard time of 60 days. The claim should also ask for interests as stipulated under the English law of construction contracting. The claim will require certification in order to remain valid and relevant as stipulated from the disputes clause. NCG is supposed to take action. NCG should give the business a maximum of 60 days to either issue a decision or give a notice on what amount of time will be required to offer the decision2. If the business gives a decision that is not favorable to the contracting party such as the case for NCG, an appeal will be a favorable means to tackle the problem again. The government agency settles on half of the terms of the claim meaning he is breaching the claim. He goes ahead to forcing concessions on the contractor. It goes beyond the governing regulations meaning that NCG is entitled to its claims. Dispute resolution process Disputes arising from contracts are time-consuming. These disputes can destroy the relationship between the employer and the contracting party. There are some main options that NCG and the state agency can implement in resolving their dispute. A good resolution method will mean a reliable resolution of the dispute. Obtaining legal advice is a very crucial step for the parties to the contract. NCG should consider litigation as a last option to the dispute resolution. The English law has provisions that guides on disputes resolution stored under the ADR (alternative dispute resolution) pledge. Dispute management is an important task that helps the contracting parties to positively resolve the matter3. Dispute management enables an early settlement to the issues. Dispute resolution includes any processes that are effective in the resolution and ending of a dispute. Dispute resolution methods range from the most informal negotiations through increased formality. There are several ways the two companies can use to manage and solve their dispute. One of the best ways is negotiation. The parties attempt to solve their disputes by themselves under negotiations. Mediation is also a way that they can use to resolve their issues. It involves a kind of private negotiation where the parties employ the services of a third party as a peace initiator. The other way is through neutral evaluation. It involves a private and non-binding technique that involves a third party who legality qualified by law. The third party gives an opinion on the likely results of the outcome at trial as a basis for settlement discussions. Litigation involves a formal law process where the parties go to court and involve the judges on a countable opinion. Section B FIDIC contracts in the Gulf countries FIDIC was established in 1913, with the aim of promoting interests of consulting global engineering. FIDIC condition contracts were established in 1999, and they are the most widely used, international forms of contracts, even by World Bank and its projects. FIDIC international agency forms conditions where tenders can be invited on an international basis. FIDIC contract conditions are widely used in domestic projects but with minor modifications. FIDIC family of contracts contains Red Book contract conditions, silver book, yellow book and green book. These new forms of standard contracts are distinguished based on the allocation of the design function unlike the prior ones, which were distinguished on the basis of the project type used. This is seen in the title of 1999 Yellow and Red books where the Red book was drafted using all types of engineering and construction work designed by the employer, or designed on behalf of the employer. The Yellow book of 1999 was designed for all types of engineering and construction works designed for the contractor. The FIDIC wished for the two books to be identified by their design function and the respective allocation rather than their color (Jenkins, p. 15). FIDIC recommends that the tender documents need to be prepared by qualified, suitable engineers, conversant with technical aspects to the required works. Review by qualified lawyers is also a necessity. The governing law should be given priority in consideration, in technical requirements and proper procurement methods. Most of the FIDIC articles or books warn that some legal jurisdictions may require some modifications to the FIDIC conditions. Further, FIDIC asserts that FIDIC conditions do not have any limitations in regards to the durability of legal liability. Some pre-considerations must be made regarding the government law, and the governing law should be stated in the contract. However, some questions may arise legally, and such questions may not be directly governed by the governing law. Lex loci commissi covers on-site accidents. The lex fori governs questions concerning decisive private law and procedural questions. This will ensure ascertainable laws are in place in advance in regards to all or most questions regarding applicable law. Governing laws will answer questions in regards to interpretation of the contract, validity of contract; limitation periods and remedies available for breach of contract4. The legal systems used in the Middle East are mostly influenced by sharia law, civil law principles and Egyptian law. The jurisdiction determines the impact of sharia law. An excellent example is charging interest is prohibited in Saudi, and also, in UAE, prohibitive interest is unenforceable. Similarly, in the civil law jurisdictions and the UAE, legislation tends to provide significant subsidiary legislation and general principles of law. Also, legislation is based on a number of major codes. There is little precedent known in these countries, unlike common law jurisdictions. Decisions arrived at the courts at any given time can only be summarized at any point5. Since 1975, the FIDIC contracts have been used in the GCC countries, and the abbreviation FIDIC has become synonymous in the Middle East. Most of the GCC countries have based their contract conditions on FIDIC forms of contract despite the fact that such conditions are mainly based on common law principles6. This is a paradox because most of their laws are based on a mixture of sharia and civil laws. Historically, the Gulf countries have promoted Fidic in as an accepted standard in the public sector. The private sector has also followed suit, although there is no apparent reason for this rhyme. Interestingly countries like Abu Dhabi have officially adopted FIDIC forms of contracts, and it yet to be seen whether other Gulf countries will follow suit. However, most developers in Gulf countries largely choose FIDIC forms of contracts as a habit. FIDIC forms are well established, and well recognized in the region; hence they are mostly used as FIDIC forms of contracts or modified forms of FIDIC7. However, many developers in the past have complained that FIDIC contract forms are rigid thus somehow breeds an adversarial relationship. Consequently, this leads to change in how developers approach the contracts. Therefore, developers and contractors need to reassess their contract models, and probably come up with other contractual forms. Countries in the Gulf do not have specific engineering related laws and construction related laws. This leads to recurrence of many problems. Also, foreign contractors and developers gain a little comfort from the civil codes. However, there is need to address the uncertainty of laws and interpretations to prevent recurrence of problems. However, most legal systems have similarities in the legislation, however; there are quite significant differences in some other jurisdictions, as seen in the Gulf countries. These differences are seen referring specifically to the context of engineering and structural legislation. In the Gulf countries, the legislation is problematic and should certainly to be addressed from the outset. Therefore, it may be important to beware of local law nuances and civil code articles which may impact on FIDIC conditions8. Codes from different countries are similar but are obviously not identical. Therefore, it may be necessary to highlight certain legal issues when contracting based on FIDIC requirements. In most Gulf jurisdictions, contractors cannot contract for out of liability in major defects. This defect threatens partial or total collapse of building for a period that is less than ten years from the year of completion. Also, if damages are incurred due to a breach of contract, courts only award damages closely to the actual losses incurred9. This is despite the existence of an agreed cap, and damage is proved to be caused by a breach and sometimes in excess of any agreed cap. Accordingly, if certificates to claim payment are not issued, contractors may not be able to claim for payment. Therefore, wording of any standard contracts or under the FIDIC conditions, should be done with much care. This will ensure timely payment, as opposed to payment according to the use of date made by the contractor10. Similarly, most gulf nations permit agreement of the contract on the basis which the contract can be terminated. This also includes provisions as contractors obligations under the contract, but not all, and provisions that determine contractors employment. In other countries such as Qatar, employer can stop work or terminate the contract before completion of works. This is permitted as long as the employer compensates the contractor for profit which would have been made at the completion of work and losses incurred for completed work11. The loss of profit can, however, be reduced by the court, upon application by the employee to an amount the court deems fit. Such provisions are not provided for in the UAE laws, however, given different circumstances, the court may need to terminate the contract. Similarly, termination of contracts may be in accordance with the provisions given during the drafting, as required under the UAE laws. Therefore, contracts can be terminated as provided for under termination provisions, though, it is challengeable12. FIDIC conditions for construction contracts are suitable for clients and international clients for several reasons. FIDIC contract requirements are suitable for countries in the Gulf because there are no specific contractual laws governing engineering and construction works in the Gulf countries. Similarly, FIDIC conditions provide some room for modification in regards to suitability of different clients. Furthermore, clients draft contracts on the same basis they might need to terminate the contracts. Therefore, it can be argued that to some degree the Fidic contracts are suitable for different clients in the Gulf nations. Additionally, the Acidic laws are suitable for international clients because it allows international clients to modify some contractual sections to suit their laws. The conditions also provide different criteria in the evaluation of tenders. Clients of FIDIC have their tenders that rely on some proposed subcontractors resources and experience. In international contracts, some local companies may sub- contract some percentage of business. In the evaluation of clients, certain criteria may be used, such as intentions and experience. Also, FIDIC conditions can be suitable for local and international clients because contractor can be adjusted for rise and fall n labor costs. This is according to the FIDIC sub-conditions of 1999, Red Book at sub-clause 13.8. These adjustments are appropriate to the subcontractor in regards to the appropriate schedule and certified payment certificates. However, adjustments cannot be valued based on current prices or costs13. Also, when there is availability of the current index cost, adjustments can be recalculated according to such indices. Also, Fidic laws are suitable for different clients because of the approach of fairness and balance of risk allocation between contracting parties. This is seen in a construction contract 1999, which provide rules for valuation and possibility of price reduction in the variations. The 1999 books usually are suitable for both international and local use. This is because the framework is very adaptable and can suit different local legislation. Contractors have freedom to use their own methods. Also, under the rules, the employer pays more while the contractor carries a lot of risks, thus favorable to all parties involved14. The orange book provides for condition of contract design build and, in the first edition of 1995. According to this edition, the employers representative should not be biased. The representative should also determine facts according to the contract and fairly. The first edition also provides for an independent adjudication board. When using DAB or RY books, 1996/7 can be used as supplements15. The FIDIC contracts have user friendly wordings and layout which improves clarity. They also have a balance between legal practicability and legal precision, which are compatible with both civil and common law concepts. Additionally, the conditions are prepared by engineers, therefore, favorable to the clients. Also, some parts have provisions for modification of old practices to suit current conditions. The Fidic conditions encourage amicable settlement, and encourage the continuance of work despite any differences that might arise. There are also detailed claims procedures which should strictly be followed, therefore, a strong management plan. Also, the general conditions which are given can be disregarded in particular circumstances. This ensures flexibility and international applicability of the FIDIC laws, therefore, very proper. In the same point, there are particular conditions provided for different situations. The design-build operates conditions are very suitable because it has a modern approach to insurance and risk. It assumes a 20 year operation period, therefore, favoring the contractors to some degree. In sub-contract conditions, the conditions require that only relevant information an be annexed into the contract. The rules are environmentally friendly, therefore, preventing litigation and lawsuits from environment pollution. It also limits damage and nuisance to other people, thus, protecting the environment. Design-build operate conditions should adhere to the rules provided and should not exceed the values given in applicable laws. Conclusion To sum up, the FIDIC conditions for contracts can be relevant in the Gulf countries. This is because the Gulf countries do not have specific laws governing engineering and build- operates requirements. Similarly, most of the gulf countries do not have specific laws which govern their build operations, therefore, benefit from the Fidic laws which are international in nature. Accordingly, the FIDIC laws allow for modification, and are flexible to some extent, therefore, may suit different investors and contractors in the gulf country. The Fidic conditions are also suitable for foreign investors in the country and different clients because of their flexibility, and the allowance to modify different contracts to suit different conditions. References List Baker, E., Mellors, B., Chalmers, S., & Lavers, A. (2013) FIDIC contracts: Law and Practice. CRC Press. Bailey, J. (2014) Construction Law. CRC Press. Top of Form Jaeger, A.-V., Hök, G.-S., & International Federation of Consulting Engineers. (2010) FIDIC, a guide for practitioners. Berlin: Springer. Bottom of Form Top of Form Jenkins, J., & Stebbings, S. (2006) International construction arbitration law. Alphen aan den Rijn [u.a.: Kluwer Law Internat. [u.a] MJ, Horwitz. (1974) The historical foundations of modern contract law. 87(5) Harvard Law Review 917 R Stevens, (2004) The Contracts (Rights of Third Parties) Act 1999. 120 Law Quarterly Review 292 S, Hill. (2001) Flogging a Dead Horse - The Postal Acceptance Rule and Email. 17 Journal of Contract Law 151. S, Gardner. (1992) Trashing with Trollope: A Deconstruction of the Postal Rules in Contract. 12 Oxford Journal of Legal Studies 170. Bottom of Form Read More