CONTRACT LAW: GUIDANCE FOR ENGINEERS

It is important to provide information and a roadmap for engineers to avoid potential problems when
entering contracts. One also needs to be aware of implied terms in contracts that could make engineers
liable for unforeseen issues. Each case is unique and not intended to offer legal advice.

One of the potential issues faced by engineers is claims due to breaching implied terms in contracts,
such as providing information within a reasonable time. Many engineers, especially startups, fail to
formalize agreements into written contracts, leading to missed terms or unaddressed implied terms.
This lack of clarity can result in construction delays and potential breaches of contract terms.

Use of standard forms in contracts, like the JCT contract, and it is also important to modify them to
avoid ambiguity. Terms like "reasonable examination" can be problematic if not clearly defined, as what
is reasonable to one party may differ from another. Standard forms should be used with proper
modifications to prevent misunderstandings and disputes.

It is important to remove clauses in contracts to reflect intentions accurately. Standard forms that
extend liability to engineers beyond reasonable skill and care, such as collateral warranty forms.
Insurance companies typically do not allow liability extension beyond reasonable skill and care, leading
to potential breaches of contract. Additionally, there are standard forms that place duties on engineers
for work done by others, as well as liabilities arising from partnerships and cost implications of
instructions given to builders.

There are situations where engineers may unknowingly become liable, such as through partnerships or
giving instructions to builders. The Defective Premises Act 1972, holds engineers and architects
accountable for defects in premises even after design and construction.

Engineers face various issues that need to be addressed, with a focus on contract law basics. A legally
binding contract requires an offer, acceptance, and consideration. An offer is a definite promise to be
bound by terms, leading to a verbal agreement that can be reduced to a written contract. An invitation
to treat, exemplified by the Boots Chemist case, occurs when a party is asked to make an offer to buy a
product, not when the product is offered for sale.

There are different examples of invitations to treat, such as labelling a bird for sale and placing a price,
tenders for projects, and carefully worded quotations of fees. These examples illustrate situations where
one party invites the other to make an offer, rather than making an offer themselves. In these cases,
there is no sale until the other party accepts the invitation to treat by making an offer.

Unilateral offers are offers made to the public where acting on the conditions of the offer constitutes
acceptance. It is important to communicate an offer for it to be valid and able to be accepted. If an offer
is not communicated, there is nothing for the other party to accept.

Effective communication is essential in accepting offers, and counteroffers can terminate the original
offer. Business hours are significant in creating binding contracts, and offers can be terminated by the
lapse of time or if the goods offered are no longer available.
A contract cannot be formed if there is only silence and no action. The postal rule states that an offer is
accepted when the acceptance is posted, making it irrevocable. For the postal rule to be valid, the
acceptance must be posted within a reasonable time frame to reach the recipient. Additionally, there
must be an intention to create legal relations for a contract to be valid. In commercial contexts, this
intention is presumed, except for ex-Gracia payments where the intention may be disputed. In domestic
scenarios, such as a father promising money to a son, the intention to create legal relations may vary.

It is important to be intent in creating legally binding contracts. It emphasizes that without the intention
to create legal relations, there can be no enforceable agreement. Consideration is highlighted as the
final element necessary for a contract to be legally binding. Polok's definition of consideration as an act
or forbearance of one party in exchange for a promise from the other is explained. This involves making
a promise to do something in return for a promise from the other party.

The concept of offer and acceptance is mentioned, followed by the introduction of consideration.
Consideration can be in the form of a deposit or a promise to pay for work to be done. It is described as
a benefit to one party and a detriment to the other. It should be clear that consideration does not need
to be of equal value, using an example of designing a two-story dwelling for one pound as adequate
consideration. The case of Chapelle and Co. Ltd. versus Nestle Co. Ltd. is cited to illustrate the concept of
consideration, where three chocolate wrappers were deemed sufficient consideration.

Overall, intention and consideration are of great significance in forming legally binding contracts. It
explains the role of consideration as a key element in contract formation, highlighting that it does not
need to be of equal value and can vary based on the specific circumstances of the agreement.

The law allows the offeror to specify the consideration they seek, such as a deposit. Past consideration,
like work already done without prior agreement, is generally not valid. However, if there was an
understanding of payment after the work, it can be considered a valid consideration.

Existing duties, whether legal or public, can impact the enforceability of extra payments. If there is
already a duty to perform a task, additional payment for that task may not be considered valid
consideration. This applies to contractual obligations as well, where extra payment for work already
required may not be enforceable.

In Stilken Merit, sailors were contracted to move goods, but when one fell sick, the boss promised extra
pay but didn't follow through, leading to no binding contract due to lack of good consideration.
Contrastingly, in Williams and Raffey Brothers, subcontractors were offered extra money to continue a
job due to financial difficulties, resulting in a valid consideration exemption. Going beyond contracted
duties, such as an engineer drafting a party wall notice, can also lead to valid consideration.

Promissory estoppel is an equitable doctrine where one waives a legal right, like forgoing payment due
to circumstances. For example, if entitled to a thousand pounds but the client can't pay, accepting five
hundred could be a valid condition.

The concept of Promissory Estoppel involves waiving legal rights through a promise and acting upon it. It
acts as a shield, not a sword, preventing lawsuits based on the promise made. An example illustrates
how it works in practice. Promissory Estoppel is an equitable doctrine based on reasonability, allowing
parties to rely on promises made.
To avoid breaching a contract, it is essential to determine if there is an enforceable contract in place.
This involves assessing if there was a valid offer, acceptance, consideration, and identifying any
breached terms. Understanding the contents of a contract, such as the contracting parties' capacity to
agree, is crucial. For instance, minors under 18 cannot form binding contracts on their own.

Express terms in a contract outline the specific details agreed upon by the parties involved. It is
important to consider all aspects of a contract, including the capacity of the parties, to ensure its validity
and enforceability.

It is important to understand both the explicit and implied terms of a contract. Explicit terms are clearly
stated in the contract, while implied terms are not written but are still legally binding. Implied terms can
be established through past actions, customary practices, or the intentions of the parties involved. The
court may intervene to determine implied terms based on the previous course of dealings or the
business efficacy test.

In cases where parties overlook the content of a contract, implied terms can be crucial. The business
efficacy test assesses whether adding an implied term would make the contract more effective in
achieving its purpose. Additionally, the officious bystander test considers whether an outside observer
would believe a certain term should be included in the contract. These tests help determine the validity
of implied terms and ensure the contract's effectiveness in fulfilling its intended purpose.

The type of contract determines implied terms, based on reasonability. For example, in a tenancy
agreement, maintenance may be implied if not explicitly stated. Different contracts require assessing
reasonability for implied terms. Implied terms can also be statutory, such as the Consumer Rights Act
2015, which mandates services to be carried out with care and skill. Section 51 of the Act addresses
pricing when not explicitly stated in the contract, allowing for reasonable charges.

Section 52 of the Consumer Rights Act 2015 pertains to the timely delivery of services like drawings and
reports. If delivery time is not specified, there is an implied term for timely delivery. Reasonability plays
a key role in determining what is considered reasonable under the circumstances.

Reasonability is important in contracts, focusing on express terms, implied terms, and exemption and
limitation clauses. These clauses are common in contracts, such as the bill of lading for shipping cargoes
and standard contracts in engineering and construction. When signing a contract, there is a presumption
that the terms are correct, but this can be rebutted with evidence of a mistake. For a standard term to
be binding, it must be legible, readable, and understandable. Ambiguity in terms can lead to different
interpretations, especially in construction contracts.

Interpreting the words in a contract involves giving them their ordinary meaning, but if this does not
align with the contract's purpose, evidence can be provided to clarify the meaning. Mistakes in
contracts, especially standard ones, can be corrected through specific avenues.

Special meanings of words can be interpreted differently based on the context and evidence provided.
Courts use maxims of interpretation to guide contract interpretation, aiming for a reasonable meaning.
Surrounding words in a contract can help determine the intended meaning of specific terms. The "use
them generis" rule allows for interpreting ambiguous terms based on preceding words.
A contraproferendum is when an ambiguous term in a contract benefits one party over another. In such
cases, the interpretation will favour the party not relying on the ambiguous term. When drafting a
contract, it is important to edit standard contracts to suit the specific purpose of the agreement. The
main focus should always be on the object and purpose of the document to ensure it serves its intended
function.

Contracts that rely on other documents should reference those additional materials, such as schedules
or annexes, to avoid confusion or disputes. It is crucial to use the most appropriate form for the type of
contract being entered into, such as avoiding an appointment agreement contract for a collateral
contract. The language used in a contract should be simple and direct whenever possible to ensure
clarity and understanding, although there are instances where formal language may be necessary.

Overall, the key points to consider in contract drafting include ensuring clarity in language, aligning the
contract with its intended purpose, and referencing any external documents or schedules that are
integral to the agreement. By following these basic principles of contract law, potential issues and
misunderstandings can be minimized, leading to more effective and enforceable contracts.

It is necessary to add specific documents to the contract. It is also important to add implied terms for
clarity and consistency in contracts. The concept of agency, where engineers must have express
appointments to act on behalf of clients and apparent authority can lead to liability. The partnership is
also touched upon, explaining that entering into a partnership can result in shared liability, even without
a written agreement.

Entering into partnerships, especially unwritten ones, can have significant liability implications,
especially for sole traders. Limited liability companies offer protection by limiting liability to company
assets. Quantum merit entitles individuals to reasonable pay for work done if no fixed fees were agreed
upon. Understanding contract law basics can help engineers address potential issues and avoid
problems. Common contracts like professional appointments and novation contracts should be
approached carefully to avoid unintended consequences. Collateral warranties can extend liability, so
it's advisable to check with insurance companies for coverage. Party wall agreements, often made on
behalf of neighbours, are subject to contract rules and the Party Wall Act. Standard forms are useful but
should be adjusted as needed to accurately reflect intentions.

The text discusses the importance of interpreting standard contracts based on previous meanings to
reflect the intentions of both parties. It warns about the potential risks of not editing contracts properly,
as it may lead to unintended consequences. The speaker emphasizes the need to be mindful of actions
and words when dealing with clients and builders, as they could inadvertently create warranties or
implied terms in contracts. It is advised to refer back to the basic rules of contracts to ensure clarity and
avoid unintended obligations.

The use of pro forma standard agreements in contract drafting is a good starting point. Courts typically
interpret contracts based on previous meanings unless external evidence suggests otherwise. The
speaker mentions that lawyers often use pre-existing templates but make necessary edits to tailor them
to specific situations. This approach is considered common practice in contract drafting to ensure clarity
and consistency.
Furthermore, a question is raised about the obligations of a buyer when making an offer to purchase a
house. The speaker confirms that until a contract is signed, the buyer is not legally obligated to pay. This
situation falls under the realm of conveyancing, where specific rules apply. The importance of
understanding the legal implications of entering into contracts, such as real estate transactions, is
highlighted to avoid misunderstandings and legal complications.

Conveyancing involves stages before a legally binding contract is signed or exchanged. The seller's
solicitor must inform the buyer's solicitor of any occurrences affecting the contract. Formalities such as
searches and forms like CON29 are necessary for conveyancing to ensure agreements are documented.
CDM regulations require specific conditions to take effect when a designer creates something impossible
to build.

The process of conveyancing includes stages where a contract is not yet legally binding until signed or
exchanged. The seller's solicitor must inform the buyer's solicitor of any relevant occurrences.
Formalities like searches and forms such as CON29 are essential in conveyancing to document
agreements accurately. CDM regulations have specific conditions for their effect when a designer
creates something unbuildable.