CONSTRUCTION LAW

TCBE 4202
By
Dr. Muhwezi Lawrence
Contact : 0772402883/0702402883
Email:[email protected]

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 Suggested Literature
1. D.J. Bakibinga (2001), Law of Contract in Uganda
2. Allan Ashworth(2012),Contractual Procedures in the
construction industry, Six Edition
3. D. McGeorge and A. Palmer (2002), Tenders and Contracts for
Buildings
4. S. Owen (1998), Law for Construction Industry
5. The Aqua Group (2000), Contractual Procedures in the
Construction Industry.

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Introduction
• Construction law is a branch of law that deals with matters relating to
building construction, engineering and related fields. It is in essence an
amalgam of contract law, commercial law, planning law, employment law
and tort.
• It is intended “to ensure that what a man has been led to expect shall
come to pass and what has been promised to him shall be performed”
according to Sir William Anson.
• No matter what type of business you run, having an understanding of
contract law is a key to creating sound business agreements that will be
legally enforceable in the event that a dispute arises.
• Law of contract in Uganda is based on English principles of the law of
contract(Cap. 75 Laws of Uganda Vol. II)

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Contract and Agreement
• A contract has been defined by Sir William Anson as “a legally binding
agreement made between two or more parties, by which rights are
acquired by one or more to acts or forbearances on the part of the other
or others”.
Essential elements in this definition:
i)Legally binding - Not all agreements are legally binding-social or
domestic arrangements which are made without any intention of creating
legal arrangements
ii)Two or more parties - in order to have an agreement there must be at
least two parties; in law one can not make bargains with oneself.

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i) Rights are acquired- one person agrees to
complete part of a deal and the other person
agrees to do something else in return.
ii) Forbearances – to forbear is to refrain from
doing something; there may thus be a benefit to
one party to have the other party promise not
to do something.

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 Contract Definition. Cont’d
• The term Contract used in the Construction management can be
defined as: "An agreement entered into by two parties under the
terms of which one party agrees to perform a specific job for which
the other party agrees to pay. Contract documents attached to
and/or stated in the agreement form integral parts of the contract"
• The law of contract deals with agreements which can be enforced
through courts of law. An agreement is thus regarded as a contract
only when it is enforceable by law.
• A contract must specify two conditions: i) there shall be an agreement
and ii) such an agreement shall be enforceable by law which creates
legal obligations.

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Contract Definition Cont’d
• A contract is made where parties have reached
agreement or where they are deemed to have
reached agreement and the law recognizes rights and
obligations arising from the agreement.
• The law of contract is based on the concept of
bargain, in that each side to the contract must
contribute something to the agreement to make it
binding.
• An agreement is thus regarded a contract only when it
is enforceable by law.

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Agreement

• Every promise and every set of promises forming the consideration for
each other is an “agreement”.
• A promise is “when the person to whom the proposal is made signifies
his assent thereto, the proposal is said to be accepted. A proposal
when accepted becomes a promise”.
• Agreement(accepted proposal) = Proposal + Acceptance
If X offers his house to Y at UgShs. 10m and if Y accepts the same, it
becomes a concluded contract btn X and Y i.e. legal obligations
enforceable at law have been created btn the two parties.
In other words:
• Agreement +enforceability at law = Contract

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 Agreement
• Every promise and every set of promises forming the consideration
for each other is an “agreement”.
• A promise is “when the person to whom the proposal is made
signifies his assent thereto, the proposal is said to be accepted. A
proposal when accepted becomes a promise”.
• Agreement(accepted proposal) = Proposal + Acceptance
If X offers his house to Y at UgShs. 10m and if Y accepts the same, it
becomes a concluded contract between X and Y i.e. legal obligations
enforceable at law have been created btn the two parties.
In other words:
• Agreement +enforceability at law = Contract

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Every Agreement is NOT a contract!
•E.g If X invites Y to a dinner party or cinema and if Y
accepts the invitation, it is simply a social engagement
or agreement.
•The social engagement does not give rise to contractual
obligations and is therefore not enforceable in the court
of law. If thus X fails to serve dinner to Y, then Y has no
legal remedy in a court of law against X.
•Thus, only those agreements which are enforceable at
law are contracts.

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Elements of a Valid Contract
• Capacity to contract i.e. age, mental incapacity-insane, under influence
of drugs or alcohol.
• Agreement(Offer/Proposal)
• Acceptance
• Consideration
• Possibility of performance
• Intention of parties to create legal relations
• Consent – enter into agreement freely( not caused by coercion, duress,
fraud, misrepresentation and mistake)
• Legality – the purpose of the agreement must not be illegal, immoral or
contrary to public policy/government

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Capacity to contract
• Age : infants and minors under 18 years as set out in Family Law
Reform Act 1969 can not contract;
• Persons of unsound mind as defined in the Mental Health Act 1959,
can never make a valid contract;
• Persons under influence of drugs, alcohol and other forms of bodily
intoxications can not contract;
• Company can only contract on matters falling within its “objects
clause” and anybody intending to contract with such a company
should first inspect its details at the Registrar of Companies Offices;
• Consequently, any one making an ultra vires (outside the powers)
contract with such a company has himself/herself to blame.

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 Offer/Proposal
• The basis of a contract is agreement composed of offer and acceptance; in
addition conditions are generally required by law to make the offer and
acceptance legally binding;
• When one person signifies to another his willingness to do or to abstain
from doing anything, with a view to obtaining assent of the other to such
act or abstinence, he is said to make a proposal/offer;
• When an agreement is arrived at by competent parties (consensus ad idem),
the agreement is expressed in an Offer by one party and an Acceptance of
that offer by the other party;
• Proposer /Offeror - person who makes offer
• Offeree – person to whom offer is made

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 Offer Cont’d
• An invitation for contractors to submit tenders is inviting firms to submit
offers for doing work;
• Offer may be revoked anytime by offeror before acceptance;
• Time lapse: Tenders for building works do not remain on offer indefinitely-
tender/bid validity usually prescribed by client. If not accepted within
reasonable time offer may lapse;
• Specific: offers concerned with building projects are generally made on
the basis of detailed terms and conditions which bind parties;
• Order/Procedure: offer must follow a stipulated procedure: delivery date
and time, in writing, on a special form and in a particular envelope; no
disclosure of offer to third party.

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Modes of proposal
A proposal can take any of the following modes:
By express words spoken
In writing
By conduct
Examples:
When A says to B: “Will you buy this car for 3000$?’’ this is an
express oral offer;
When A writes a letter to B stating the above offer, then it is an
express written offer;
A transport company running a bus on a particular road, this is an
implied offer or offer by conduct;

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Legal Rules to Offer
i) Offer must be capable of creating legal relationship
oAn offer must be of such nature as would result in a
valid contract when accepted by the party to whom it is
made;
oIf the proposal is not intended to create legal
relationship, it is not an offer in the eyes of the law;
e.g. Invitation to a friend for a cup of tea even if
accepted does not create legal relationship

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Offer Cont’d
ii) Terms of offer must be definite and certain
•The terms of an offer must be definite, unambiguous,
certain and not loose and vague.
•If the terms of an offer are uncertain, its acceptance
cannot create any contractual relationship.
Example: A says to B: “I will sell you a car”. A owns 4
cars, the offer is NOT definite
A says to B: “I will pay you money if you stay with me”.
No offer because terms are uncertain; how much? for
what period?

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 Offer Cont’d

iii) Offer must be communicated

A person cannot accept an offer so long as he is
unaware of its existence; unless an offer is properly
communicated, there can be no acceptance of it;
An acceptance of an offer in ignorance of the offer,
is a nullity, and does not create any legal right or
obligation;
S offers a reward to any one who returns his lost dog.
F finding the dog, brings it to S without having heard of
the offer. F was not entitled to the reward.

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 Offer Cont’d
iv) Offer may be conditional
A proposer is at liberty to make an offer subject to
certain conditions.
Conditions attached to the offer must, however, be
communicated to the other party
If the condition fails to be satisfied, the offer will not be
capable of acceptance
v) Offer may be general or specific
A offers to sell a car to B - specific
X promises 100$ to any one who finds his lost car-general

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 Counter offer
• An acceptance which introduces any new term is a counter offer. It is a
rejection of the original offer;
• If a counter offer is made, the original offeror may accept it but should he
reject it, then the original offer is not available for acceptance;
Example: Zziwa offered to sell a farm to Batambuze for 1000$ on June 6.
Two days later Y made a counter offer of 950$ that Zziwa rejected on June
27. Batambuze then informed Zziwa on June 29 that he now accepted the
original offer of 1000$. It was HELD that the original offer had been
terminated by the counter offer of 950$ made on June 8. It could therefore
not be revived by Y changing his mind and tendering in a subsequent
acceptance.

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 Termination of offer
An offer may only be accepted so as to conclude a contract if it is still open.
An offer may be terminated in the following ways:
Acceptance –once an offer has been accepted, a binding contract is made
and the offer ends;
Counter offer – amounts to a rejection;
Revocation –withdraw/revoke before acceptance(must be communicated
to and received by offeree);
Lapse –when an offer is expressed to last for a specified time;
Failure of condition-if a condition has not been satisfied;
Death or insanity of a party;
Rejection – when notice of it has reached offeror.

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 Acceptance
Once an agreeable has been made, there must be an acceptance of it
before a contract can be established.
Modes of acceptance:
By express words spoken
In writing
By conduct
A widow promised to settle some immovable property on her niece if the
niece stayed with her in her old age. Consequently the niece stayed with
her till her death. HELD, the niece was entitled to the property since,
there was an implied acceptance by her conduct.

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Legal Rules as to Acceptance
The acceptance of an offer to be legally binding must satisfy the following
requirements:
i)It must be absolute and unqualified
An acceptance to be effective must be absolute and unqualified and of all
the terms of offer. A conditional or a qualified acceptance is no acceptance
at all. An acceptance with a variation is no acceptance but is a mere
counter offer which is for the original offeror to accept or not.
Example: M offered land to N at 5m UgShs. N accepted and enclosed 3.5m
UgShs, with a promise to pay the balance by monthly installments of
200,000= each. HELD, there was no contract btn M and N as this was not
an unqualified acceptance

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Acceptance Cont’d
ii) It must be expressed in some usual manner
If the offeror prescribes a mode of acceptance, it must
be given accordingly. If the offeror says “Email reply”
and the reply is sent by post, there is no acceptance of
the offer.
Example: A offers to buy a certain quantity of cement
from B at a certain price and asks B to send a telegram
if he accepts. B writes a letter accepting the offer. A
may insist on a telegram from B; but if he does not
insist, the acceptance is good.

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Acceptance Cont’d
iii) It must be by the party named in the offer
An offer made to a particular person is to be accepted by him alone
because he is the only party intended to accept. It cannot be assigned
to another or accepted by another without the consent of the person
making it.
Example : X sells his business to Y without disclosing this fact to his
customers. Z was one of such customers. Z sent an order for goods to X
by name. Y received it and sent a letter of acceptance. HELD, there was
no contract between Y and Z because Z never made an offer to Y.
iv) An acceptance must be communicated to the offeror

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Acceptance Cont’d

v) Acceptance must be within a reasonable time

Acceptance must be made while the offer is still in force i.e. before
the offer lapses. Acceptance made after the offer has been
withdrawn is invalid.
Example:
M offered to take shares in company R on June 8. He received a
letter of acceptance on November 23. He refused to take the shares.
HELD, M was entitled to refuse as his offer had lapsed as the
reasonable period during which it could be accepted had elapsed.

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 Acceptance Cont’d
Vi) Acceptance can not be in ignorance of the
offer
Acceptance in total ignorance of an offer can not
result into a contract.
Example:
S offered a reward to anyone who returned his lost
dog. F brought the dog to S without having heard of
the offer. Held, F was not entitled to the reward,
because F was un aware of the fact and hence the
question of acceptance never arose.

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 Consideration
• Judicially Consideration is defined as” some right or benefit or interest
accruing to one party to the contract, or some forbearance, detriment loss
or responsibility suffered, given or undertaken by the other party OR the
price for which a promise is given by one party to the contract to the
other. See Currie Vs Misa (1875) and Dunlop Vs. Selfridge (1915).
• Most common forms of consideration are payment of money, provision of
goods and the performance of work;
• In building contracts, the consideration of the contractor to carry out the
works in accordance with contract documents is matched by that of the
client to pay the price

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 Rules Governing Consideration
Every simple contract requires consideration to make it
valid;
Consideration must be worth something (valuable) in
the eyes of the law- the courts are not concerned
whether the bargain is a good one, but simply that there
is a bargain;
Each party must get something in return for the
promise, other than something already entitled to,
otherwise there is no consideration;
Consideration must not conflict with established law

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Consideration Cont’d
 Consideration must not relate to some event in the past.
• Consideration for any promise must be provided at the time when the
promise is given. Thus, where an act is done before the other party’s
promise is made, the act is not consideration to support the promise.
Example: if A offers to drive B from Kasese to Kampala in his car and on
arrival in Kampala B promises to pay 10,000= towards the cost of the
journey, B’s promise is not binding because the consideration which
was given was past.
Refer to Re McArdle (1951) – about un authorised house repairs by
tenants and landlord.

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 Intention To Create Legal Relations
• Merely because there is an agreement, it cannot be assumed that an
enforceable contract exists;
• English law requires that the parties to a contract actually intended to
enter legal relations – actionable and enforceable in courts;
• If demonstrated that no such intention existed, then the courts will not
intervene despite existence of agreement and consideration;
• It is possible two parties to interpret words in different ways ie. do not
have same idea in mind when they agree;
• It is important that both parties have agreement to same idea
(consensus ad idem). Refer to raffles vs. Wichelhaus (1864).

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Free Consent
People should agree upon same thing in the same
sense. Consent is free when not caused by:
Duress and Undue influence
Coercion
Fraud-give false information
Misrepresentation
Mistake

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