Construction Law: Contract Terms

Incidental Terms in Construction Law

• Incidental terms are those terms of a contract that are collateral to the fundamental terms and the non-performance of which may give rise to a claim for damages but not to a repudiation of the contract.

Interpretation of Contracts

• Interpretation of a contract is the process of giving meaning to the phraseology of the contract.
• It involves discovering and expounding the intended signification of the language used, which is the meaning the authors of the contract designed to convey to others.
• There are two types of meanings: narrow (literal meaning) and wide (intention of the contract/law maker).
• Rules of interpretation of the law in Ethiopia include:
  • Where the law is clear but unreasonable: interpret according to good faith, morality, and reasonableness.
  • Where the law is ambiguous: use contextual interpretation or exposé de motif.
  • Where the law is silent: use non-exclusive method.
  • Where the law is contradictory: the higher law prevails over the lower, the special law prevails over the general, or the recent law over the old one.

General Terms and Their Interpretation

• Ejusdem Generis Principle: general terms are understood in their context, not in their literal dictionary meanings.
• Article 1735 of the Civil Code: a contract shall be deemed to relate to such matters only on which it appears that the parties intended to contract, however general the terms used.
• Contextual Interpretation (Article 1736): provisions of a contract shall be interpreted through one another and each provision shall be given the meaning required by the whole contract.
• Ambiguous terms shall be given such meaning as is more likely, having regard to the subject matter of the contract.
• Positive Interpretation (Article 1737): provisions capable of two meanings shall be given a meaning to render them effective rather than a meaning which would render them ineffective.

Essential Conditions of a Lawful Contract

• The parties must have the intention to enter into legal relations.
• There must be free consent.
• There must be an offer made by one party to the other.
• The offer must be accepted by the other party.
• The parties must have the capacity to enter into a contract.
• The object of the contract must be lawful.
• The contract must be in a valid form.

Terms of the Contract

• The terms of the contract can be classified into Express Terms and Implied Terms.
• Expressed Terms are those terms that are expressly agreed in written contracts at the time the contract is made.
• Implied Terms are those terms that are implied into the contract by law, the Civil Code, or courts.
• Common implied terms in the construction industry include Environmental Protection, Gender Violence, Labor Law, and OHS.
• Article 1713 of the Civil Code provides for terms to be implied into contracts from three principal sources: customs, equity, and good faith.