BUD 423 Building Contract Law & Arbitration Lecture Slides PDF

BUD 423 BUILDING CONTRACT LAW & ARBITRATION WEEK Module Delivery Plan TOPICS & CONTENTS 1 Overview of Nigerian legal system i. Constitution ii. Governance iii. Structure 2 System of Nigeria Courts i....

BUD 423 BUILDING CONTRACT LAW & ARBITRATION WEEK Module Delivery Plan TOPICS & CONTENTS 1 Overview of Nigerian legal system i. Constitution ii. Governance iii. Structure 2 System of Nigeria Courts i. Sources of Law ii. Classification of Law 3 Principles of Equity 4 Tort i.Function of tort ii.Punishment/Appeasement 5 Law of Contract i.Formation of a contract ii.offer & acceptance iii.Consideration iv.intention to enter into legal relations 6 i. Terms of Contract 7 Standard Contract 8 Performance Review[Test] 9 Principles of Company and Business Law 10 Alternate dispute Resolution Mechanism 11 Term Paper Presentation 12 Revision Introduction Brief history of nigeria legal system Deductions conti... The Meaning of the Term “Source(S)” According to Black Law Dictionary The term “Source(s)” (also termed fons juris) may mean the origin and defined source of law as something (such as a constitution, treaty, statute, of custom) that provides authority for legislation and for judicial decisions; a point of origin for law or legal analysis authoritative statement from which the substance of the law is derived. A source of law is the point of origin for law or legal analysis. lawyers in Court, when they make statements and refer the Court to particular decided cases, the Law Reports where such cases can be found, to some Act or Statute and pointing to a particular chapter, part or section. We say that the Law Reports and the Statute or Act so cited are sources of his authoritative statements or law. In the context of legal research, the term “Sources” connotes (i) the origin of legal concepts and ideas (ii) governmental institutions that formulate legal rules (iii) published manifestation of the law  Classes in Sources of Law ❖ Sources of Law may be classified into formal or material, and the latter further subdivided into historical, legal, authoritative and binding, or other sources. ❏ Formal Source:A formal source is what gives validity to the law. ❏ Material Source:concerned here with the origin of the substance of the law. Where the law derives from or the authoritative source from which the substance of the law has been drawn. This may be; (i) Historical This may comprise the writings of lawyers, e.g. the rules and principles of foreign law.The writings do not form part of the local law until they are formally received or enacted into law. Prior thereto, they serve as persuasive authority. (ii) Legal These are sources that are recognized as such by law itself. Examples are statutes, Judicial Precedent and Customary Law Authoritative And Binding Source This refers to the origin of the legal rules and principles, which are being enacted or formulated and regarded as authoritative and binding. Examples are legislations (Received law and Local statutes), judicial precedents (Common law and Equity; and local precedents) and Customs (Customary law). Other Sources These are non-formal sources or origin of legal rules that lack authority, but are persuasive merely. Professor Elias considered the “Source of Law” in terms of the main spring of its authority and classified this into six categories; namely: (i) Local Laws and custom (ii) English Common law, the doctrines of English Equity and Statutes of general applications in force in England on 1st January, 1900. (iii) Local legislation, and the interpretations based thereon (iv) Law Reports (v) Textbooks and Monographs on Nigerian Law (vi) Judicial Precedents ❏Theories of Sources of Law Consensus Theory This theory conceives of a legal system as a product of consensus idea of society,functioning as an integrated structure, whose members agree on the norms, rules, and values, which they have mutually and voluntarily agreed should be uniformly respected. Conflict Theory The conflict theory is to the effect that the society is made up of series of conflicting and competing groups, and the law and legal system are dictate of the wealthy and powerful in the society to perpetuate their positions, and class interests.  Other Theory (Middle Course) There is a middle course between Consensus theory and conflict theory. This middle of the road approach argues that Legal system is the handiwork of those exercising political and legal powers of state, not necessarily to protect their own class interests, but expressing the definition of the privileged group, their values, notions and morals. Autochthonism Autochthonism or autochthony pertains to the nativity of the law. That is to say, the extent to which the law is or is not indigenous or native to the land in which it operates. Are the sources of Nigerian law indigenous (autochthony) or foreign (alien)? An autochthonous legislation, for example, may be one which does not trace its validity to any foreign legislature; rather it is home-grown and rooted in the country itself. Autochthony has two aspects: (i) Formal Autochthony This relates to the “Source(s)” from which the law or the Court, derives its authority as law (ii) Substantive Autochthony This refers to the contents of the legislation or law e.g. the frame of government which the Constitution has established. Legal system in Nigeria Constitution Structure sources of law In the context of legal research, the term “Sources” connotes (i) the origin of legal concepts and ideas (ii) governmental institutions that formulate legal rules (iii) published manifestation of the law Principles of Equity Definition: ❖The words ‘law and equity’ … can be understood to mean general principles of justice as distinguished from any particular system of jurisprudence or the municipal law of any state. ❖Can be regarded as the spirit of the law ❖An international tribunal may apply equity within the law. That is, if a law can be interpreted in more than one way, then equity may be applied in order to ascertain the interpretation that would best serve the purposes of the law. ❖In another sense equity may be used where the law is silent to bring the case within the law so that the intention of the states can be implemented. ❖Despite evidence that equity is applied broadly, nonetheless its characterisation as a ‘general principle’ of law places certain constraints on its operation. Tort Types of Torts Law of Contract Principles of contract law An agreement between parties for exchange of promises or performances. A bargain is not necessarily a contract because the consideration may be insufficient or the transaction may be illegal. Freedom of Contract The philosophy of individualism existed in English since 18th century and this was adopted in Nigeria. The freedom to enter into contract got an express approval in the Supreme Court case of Merchant Bank Nigeria Ltd. v. Adalma Tanker (1990) 5 NWLR (pt. 153)747 CA, ❖here the court said that the parties are bound by their agreements and the court will not rewrite the contract for the parties. The principle of freedom of contract was however reinforced by Cohen The view that in an ideally desirable system of law, all obligations would arise only out of the will of the individual contracting freely, rest not only the will theory of contract but also in the political doctrine that all restraint is evil and the government is best which governs least N.J Dion 1932 46 Harvard Law Review 558. The law of contract is the basis of all economic activities in a modern society. The concept is that the terms should be left to be determined by the parties, less regulated by statutes or courts, except to protect the weak and young from exploitation. An eminent judge, Sir George Jessel expressed ‘freedom of contract’ in this way: “If there is one thing which more than another, public policy requires, it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that contracts, when entered into freely and voluntarily, shall be held sacred and shall be enforced by Courts of Justice”. how valid this is today in the hurly barley of Nigeria’s commercial environment. It can now be argued that this lofty and entirely commendable ideal has been gradually eroded over the years in the face of the onslaught of an increasingly commercial, complex world. ❏ Freedom of contract is workable only if the parties to a potential contract have equal bargaining power; failing that, the concept, is indeed a myth. ❏ The bargaining power an average individual has – or lacks – when negotiating a line of credit with a bank, the inherent power a major financial institution is abused to the detriment of the individual. ❏ At appropriate time in the course, references are made to enactments, which have incorporated into them both common law and statutory provisions which imply certain terms designed to protect the individual:  The Concept of Bargain A bargain is an agreement of two or more persons to exchange promises, or to exchange promise for a performance. ‘bargain’ Thus defined as narrower than ‘agreement’ in that it is not applicable to all agreement, and broader than ‘contract’, since it includes a promise given in exchange for insufficient consideration. It also covers transactions which the law refuses to recognize as contracts because of illegality.” Consideration, defined as a valuable deliberation in the sense of the Law, may consist either in ‘Some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other’  Unequal Bargaining Power It is an equitable concept and can arise in cases involving economic duress. The mere fact that unequal bargaining power exists between the parties (an everyday occurrence!) is not, in itself, sufficient grounds for treating a contract made under those conditions as voidable. In this case, it was stated that, Equity will not relieve a party from a contract on the ground only that there is contractual imbalance not amounting to unconscionable dealing. You will appreciate how uncertain this area of law is when you consider that Lord Denning in Bundy stated, among other things, that duress of goods, conscionable contracts, undue influence and undue pressure all have a single thread that rests on inequality of bargaining power.  Unconscionable Bargains This is a mystery factor and has only been fleetingly referred to by legal writers over the years. However, as you have learned thus far, there are many contractual situations in which there is unequal bargaining power which can potentially give rise to unconscionable (unfair or oppressive) conduct. Contract law aims to provide an effective legal framework for contracting parties to resolve their disputes and regulate their contractual obligations. The essence of bargain is to establish the terms of a sale or exchange of goods and services between parties. Through bargain, an agreement between parties fixing obligations that each promise to carry out is reached. ❖ A contract is unique in that unless certain exceptions apply, parties are free to agree to whatever terms they choose, this is known as the ‘freedom of contract’. ❖ Formation – How is a contract formed, how does an individual create a legally binding agreement with another and what may prevent an agreement operating as a contract? ❖ Privity Of Contract – Exactly who are contractual obligations owed to? ❖ Construction – What kind of obligations can be included in a contract? ❖ Vitiating Factors – When might a contract be void, or voidable? ❖ Discharge Of Obligations – At what point are the parties free from their contractual obligations? ❖ Remedies ❖ Consideration is executor where there is an exchange of promises to perform acts in the future. For instance, in a bilateral contract, Ade promises to deliver goods to Bunus at a future date and Bunus promises to pay on delivery. ❖ Executory consideration happens quite often in commercial transaction where delivery and payment are to be made in future. Both parties become bound prior to contract performances. In executor contract,the exchange of promises that constitutes the contract as the whole transactions is in future. ❖ Consideration must not be illegal, immoral, or contrary to public policy  the law is not necessarily as consistent as an idealist would like. One of these principles is that the parties to a contract must be under some obligation to pay and perform (consideration), and in some cases endorse what appears to be a ‘bending of the rules’. In Williams V. Roffey Bros and Nicholls (Contractors), Williams, the sub-contracting carpenter on a block of flats being built by Roffey Bros., convinced them that they should pay him an additional sum of money for work he was already obliged to carry out. Williams was in financial difficulty but significantly, Roffey Bros. faced a penalty if they did not complete the project on time. This was crucial to the Court of Appeal’s decision to order the contractor to pay Williams the additional money when they refused to do so. In other words, it was a benefit to Roffey Bros. to have the contract completed on time. Also significant to this ruling is the fact that the court could find no evidence of economic duress or fraud in the parties’ business dealings. Therefore consideration was established by the benefit received by Roffey Bros. in meeting their contractual obligations and thereby avoiding a financial penalty. This was balanced by their promise to pay Williams an additional sum to complete his work on time.  Intention to create legal relation ❖ Intention to enter into legal relation is essential in the formation of a valid contract. ❖ The general rule is that a contract, which is duly formed with valuable consideration, will not be enforced unless there is an intention by the parties to be legally bound. ❖ The intention to create legal relation is a necessary independent element in the formation of contract and it is essential in all contracts. It means the readiness of each to accept the legal consequences if he does not perform his own part of the contract. An offer to be made binding by acceptance, must be one which can reasonably be regarded as having been made in contemplation of legal consequences. …the common law does not require any positive intention to create a legal obligation as an element of contract… A deliberate promise seriously made is enforced irrespective of the promisor’s views regarding his legal liability. Williston on Contracts (3rd Ed.) p21. An agreement alone will not create a contract binding in law. A critical factor in the formation of a contract is the necessity for an intention by the parties to create legally binding obligations. Unless the intention of the parties is to constitute an agreement enforceable at law, there will be no contract. Performance in Contract There are a number of rules affecting the performance of a contract. The cardinal one is that a person must perform exactly what he has promised to do. Doing something different from that agreed to, even though it may be commercially more valuable to the other party, is not performance in law. Re Sutro & Co. and Heilbut Symons & Co. (1917) It was held that a contract of carriage of goods by sea from Singapore to New York, with liberty to transship at other ports, was not performed by carrying them partly by sea and partly by rail. Even the slightest deviation from the agreed terms will entitle the other party to claim that the contract has not been performed, and to sue for damages - or, in certain cases, to treat the contract as discharged by reason of the breach. Re Moore & Co. and Landauer & Co. (1921) A contract was for the supply of 3,000 tins of canned fruit, to be packed in cases each of 30 tins. Part of the consignment was packed in cases of 24 tins. HELD: The entire consignment would be rejected by the buyers. This rule is, however, subject to the “de minimis” rule - that is, the law will not take note of trivial matters or indifferences. If a contract entails no personal skill, a contracting party may get someone else to perform it on his behalf (although he, of course, remains liable). However, if it envisages the personal performance of the promisor, whether expressly or by implication, then he alone must perform. Time of Performance You would think, from the above rules, that, if a contract stipulated a time by which performance must be completed, and that time is exceeded, the innocent party could treat the contract as discharged, if he wished. However, that is not, normally, the case. At common law it was so - but equity would always relieve a party from the harsh effects of such a rule, if it reasonably could. The Law of Property Act 1925, Section 41, ensured that equity would prevail. Therefore, it is now in only three circumstances that “time is of the essence” of a contract. The effect of this is that, except as stated below, time of performance is merely a warranty, breach of which will give rise to a claim for damages only. It is not a condition, allowing the innocent party to rescind. Time is, however, a condition in the situations described below. ! Where the parties expressly state in the contract that time is of the essence, or must be strictly complied with. The form of words used is not significant, provided the intention is clear. Where the circumstances of the contract or of the subject-matter show that strict compliance with stipulations as to time was intended, or should necessarily be implied. ! Where time was not originally of the essence but, because of undue delay, one party has given notice that the contract must be performed by a specified reasonable date.  Charles Rickards Ltd v. Oppenheim (1950) In early 1947, Oppenheim ordered a Rolls Royce chassis. In July, Rickards agreed that the body should be built for it “within six or at most seven months”. Seven months later, it was not completed; so, Oppenheim agreed to the company’s taking a further three months. At the end of this time, it was still not ready. Oppenheim served notice on Rickards that, if the car was not ready in four weeks, he would cancel the order. It was not - so he cancelled. Three months later, the finished Rolls Royce was tendered but Oppenheim refused to accept it. HELD: He was entitled to do so. Time was not, originally, of the essence, but because of Rickards’ breach, the notice requiring completion in four weeks served to make time of the essence. If a contract does not specify any time for performance, or if vague words are used, such as “as soon as possible”, or “with all dispatch”, then an obligation is implied by law to perform within a reasonable time. Partial Performance of an Entire Contract The complete performance of an entire contract is, normally, a condition precedent to any liability on the other party - e.g. to make payment. The courts cannot apportion the consideration - so, unless the contract is completed, nothing is due on account of it. The classic example is Cutter v. Powell (1795). A seaman was engaged for a lump sum on completion of the voyage. He died part way through the voyage, and it was held that his executors could not claim any wages for the time prior to his death. The common law rule on entire contracts was largely developed by building or “work and materials” contracts. So, unless the contract provided for stage payments, if a builder failed to complete a house, he could recover nothing, even though the owner would have derived substantial benefit from the work that had been done, and materials provided (modern building contracts ALWAYS provide for stage payments!). Likewise, a ship-owner cannot recover freight if the goods are not carried to the agreed destination (bills of lading, therefore, always provide for freight to be payable, “cargo lost or not lost”!).  From these two examples, you will see that, by express words, a contract can allow for partial payment in the event of incomplete performance. In addition, to alleviate what could be an absurdity, the doctrine of “substantial performance” has evolved. This says that, if a person has completed the contract in all but an insignificant or unimportant part, he is entitled to payment for the whole, less any amount for the uncompleted work. What is “substantial performance” is a question of fact, depending on the circumstances and the details of the contract. “Substantial performance” can be excluded by express words in the contract. If a contract is, however, only partially completed, and the circumstances are such that the court can reasonably imply it, then it may imply a fresh contract to accept what has been performed, and pay on a “quantum meruit” - i.e. for what has been done. This is likely to occur by implication where the innocent party has actually accepted some benefit under the contract. For example, in contracts for sale of goods, a buyer is not compelled to accept a different quantity from that ordered. However, if he does accept them, he must pay at the contract rate for what he takes.  A similar principle applies where an employee performs only part of his contract, e.g. as part of some industrial action. In Miles v. Wakefield Metropolitan District Council (1987) a Superintendent Registrar of Births, Marriages and Deaths refused to perform marriage ceremonies on Saturday mornings. His employers deducted from his salary the time spent on such refusal. He challenged the validity of the deductions. HELD: The employers had behaved properly. They were not bound to choose between dismissing him and paying for incomplete work. This principle was taken further in Wiluszynski v. Tower Hamlets London Borough Council (1989). Here the employer issued all employees working to rule (withholding specific duties) with a notice rejecting their part performance of the contract, and informing them that they would not be required to work at all unless they were prepared to do all that their contract required. The Council also stated that if the employees wished to enter the offices and work, such work would therefore be deemed to be voluntary and unpaid. Whereas in Miles the employer had merely deducted a proportion of the salary representing the work not done, here the Council sought to avoid payment completely. HELD: As the employees were offering only part performance the employer was within its rights to reject the part performance and refuse to pay at all. On the other hand, if a contract is not “entire” but it is divisible, the court can treat each part as entire. Those divisible parts which are completed must be paid for.  Payment A contract may provide for payment in a certain manner or at a certain time - and, if complied with, this serves to discharge the obligation to pay. If there is no specific provision, the strict rule is that payment must be made in legal tender. If the creditor accepts a cheque, bill of exchange, or other negotiable instrument, he is, in reality, agreeing to a variation of the contract. However, if such a negotiable instrument is dishonoured, the creditor has two remedies - he can sue for the value of the dishonoured cheque or other instrument, or he can revert to the original contract, and sue for payment under it. In practice, it is, usually, simpler to sue in respect of the instrument, as then no proof is required that the contract has been performed, and the money due. Should payment be made by a third party who is not jointly liable under the contract, then the debt is not discharged unless the third party pays as agent for the debtor, and with his authority. However, if the creditor requests the debtor to make payment to a third party, this - when made - discharges the debt. The time of payment is a question of the construction of the contract. It may be expressly stated, or to be necessarily inferred from the terms. However, if nothing is stated or to be inferred, the debtor must pay when the work is completed and he has had a reasonable opportunity to inspect it. Money which is stated to be “payable on demand” must be ready and handed over when demanded. The place of payment is, unless otherwise stated in the contract, or to be inferred from it, the place of business or residence of the creditor. It is the debtor’s job to seek out the creditor and pay him. Proof of payment may be given in any way. A “receipt” is only prima facie evidence of payment Principles of Business Law Law affects every aspect of human life. We live in a society and we have to make various kind of transaction in our daily life. This subject deals with the matters of various business lives. In order to understand the legal implication of business activities, it is necessary to examine particularly certain basic features of principles and laws related to business transaction, Human life, principles and legal implication Business means activity of buying and selling; ‘commerce’ or ‘trade’. As Commerce develop beyond the most elementary stage merchants being to carry on their business in association. There had been the law of merchant, which includes the law of contract, which is the very basis of the Law of Business Principles of Business Law Creating a Business Partnership Agreement In business, a partnership is formed when two or more parties formally agree to own and operate an organization. Learn how to create a business partnership agreement that covers how the partners will handle business decisions and disputes, profits and losses, contracts and ownership changes, and dissolving the partnership when the business agreement is over. Dissolution and Termination of a Partnership When a business is owned by two or more people, they are engaged in a partnership. Discover what it means to terminate a partnership, the meaning of a dissolution of a partnership, and what steps are involved in winding up a partnership. How to Create a Corporation Corporations are large and intricate business structures in which the business itself is separated from those who are running it. Discover the common procedures of creating a corporation, the pros and cons of different types of corporations, and the roles of directors, shareholders, and bylaws. How to Dissolve a Corporation A corporation is dissolved when their existence is legally terminated and they're no longer liable for fees, reports, or taxes. Explore corporations and voluntary vs. involuntary dissolution. Basic principles of company law The separate personality of a company Acompany is an entity that is distinct from its owners – the shareholders – as well as from its directors, creditors and employees. It has a separate legal personality with its own rights and obligations. A company continues to exist even if its shareholders and/or directors change. This is a fundamental concept of company law, since there is always an extra entity to take into account: the company. Directors, in general, owe their duties to the company, not to the shareholders. Shareholders usually have rights against the company, rather than against the directors, and third parties with whom the company does business contract with the company, even though they negotiate with the directors. Limited liability Limited liability does not mean that the company’s liability is limited; it means that the shareholders’ liability (i.e. shareholders’ responsibility for the company’s debts) is limited. The creditors to whom the company owes money can assert their rights in full against the company but if the company has insufficient funds to meet its liabilities the company’s creditors cannot then pursue their claims against the shareholders. If their company goes into an insolvency procedure (such as liquidation or administration), the shareholders will be liable to lose the money that they have invested in the company by subscribing for its shares but that is the extent of their liability  STANDARD FORM OF CONTRACT IN CONSTRUCTION Usually these are agreements that employ standardised, non-negotiated provisions, usually in pre-printed forms. These are sometimes referred to as boilerplate contracts, contracts of adhesion;take it or leave it contracts generally the party with superior bargaining power who routinely engages in such transactions, With few exceptions, the terms are not negotiable by the other party. These contracts have the potential to reduce transaction costs by eliminating the need to negotiate the many details of a contract for each instance a product is sold or a service is used.  The danger of accepting unreasonable terms is greatest where drafters of such contracts present consumers with attractive terms on the visible or shopped terms of most interest to consumers , such as price and quality , In many cases, the consumer may not even see these contracts until the transaction has occurred. In the construction industry , there are a number of standard contracts , subcontracts , warranties and appointment agreements published by organisations such as the Joint Contracts Tribunal ( JCT ),the Royal Institute of British Architects ( RIBA ), the Institution of Civil Engineers (ICE), and so on.  Amendment of standard contracts should be approached with reluctance and caution as they can disrupt the balance of risk and impact on the true purpose.  Forms of Alternative Dispute Resolution Alternative Dispute Resolution is the use of methods such as m ediation and arbitration to resolve a dispute instead of litigation. This is a way to settle disputes without litigation. Forms of Alternate Disputes Resolution The most common forms of ADR for civil cases are 1.Conciliation, 2. Mediation, 3. Arbitration, 4. neutral evaluation, 5.settlement conferences and 6. community dispute resolution programs.