3.CL3 - Contract Practise

Question 1

What are the essential elements of a contract?

Answer 1

• Offer – offer and acceptance is the basis of all contracts formed
• Acceptance - accepting an offer made by a party forms a contract
• Consideration – valuing reciprocal promises between parties is consideration
• Intention – parties intend to form a legal relationship through offer, acceptance and consideration

Question 2

What are the advantages of using a standard form of contract?

Answer 2

• Reduces costs associated with drafting custom contracts for individual tenders.
• Speeds up bidding process i.e. reduces negotiation scope
• Consistency in terminology – developes familiarity for people over time and increases confidence in the contract terms

Question 3

What are the advantages of using a standard form of contract?

Answer 3

• Language problems – need to understand “legally binding” terminology
 i.e. “shall” establishes an obligation and is “legally binding”.
 i.e. “may” does not imply an obligation
• Risk allocation – inexperienced contractor’s or clients may not understand the allocation of risk
 RIAI ‘yellow’ form – client risk on quantities
 RIAI ‘blue’ form – contractor’s risk on quantities

Question 4

Why is it important to choose the correct form of contract?

Answer 4

• Success of a project is measured based on delivering on time, safely, quality and within budget.
• Inappropriate forms will mean objectives in terms of cost, quality and time are not fully realised and increases likelihood of disputes.
• Choosing an appropriate contract arrangement is a key element of this process