Brief introduction to the scenario
1.1 Significant facts found between Barnard Building (BB) and Happy Construction (HC)
- HC negotiated with BB and was successful in winning the contract.
- BB sent the offer letter to HC with detailed term and conditions via post.
- HC sent a counter offer via post. No communication is made from BB afterwards.
- HC signed a contract with Edward Building Specialists (EBS), and sent a letter to BB to withdraw their acceptance.
- BB threatened to take legal action against HC.
1.2 Significant facts found Between EBS and HC
- HC signed the contract with EBS.to build steel structure for a high rise building.
- HC emailed a scanned version of the signed contract documents to EBS.
- Also HC sent the original signed documents to EBS via courier.
- Contract Clauses 5 and 10 are related to employees’ health and safety and milestones of the project in order as given in the scenario.
- HC circulated EBS’s health and safety procedures among all employees. All the employees did not read but signed a document confirming they have understood the policies.
- Wearing safety harness and being clipped on the safety rail is one of those procedures while working at height.
- One of HC’s employees fell down from the height and became paraplegic, as it was second fall and most serious. As the result EBS decided to terminate HC.
1.3 Significant facts found Between Susan and HC
- Susan is HC’s employee working as a steel welder.
- Health and safety procedures were circulated to her as well.
- Always she unclipped her from the safety rail while moving one section to the next, as being clipped while moving was impractical.
- She did not inform to anyone about that or did not listen her colleague’s advice.
- She fell down while unclipped and became paraplegic.
2. Advice to HC by considering events occurred between BB and HC
A negotiation is a formal discussion between people who are trying to reach an agreement.
While two parties are engaged on negotiation there will be a lot of bargain on the offer until the “meeting of minds” is reached. Parties can halt the negotiation at any levels, either initial or matured stage, if the meeting of minds is not reached. Sometimes this will cause disputes, because one party may think that other party has agreed a contract with them while other party will be thinking that they are still negotiating on the offer.
In the given scenario, there is no such misunderstanding from BB, because the scenario says “HC was successful in winning the contract and BB prepared the offer letter with detailed terms and conditions of the proposed contract.”
A contract is a legally binding or valid agreement between two parties.
Generally a contract can be agreed either orally or in writing. A legally binding agreement includes,
- The intention to create legal relations
As construction agreements are falling under commercial agreements, we can presume BB and HC had intention to create legal relations.
- Legal capacity
BB and HC as construction companies will be registered under Companies Act 1996, therefore we can presume they have legal capacity.
In simple terms this is a willingness to do or give something to somebody. It is seen as a main body of a contract. Price, unit, quantity and the like form parts of an offer. Also Offer can be in verbal.
An acceptance is an unqualified assent to all the terms of the offer.
It can also be in verbal form
- Consideration (in English Law)
Consideration is the benefit that each party gets or expects to get from the contractual deal
Here BB will pay wages to HC to the steel framework built on behalf of it. “…the doctrine of consideration requires the existence of a bargain but it does not demand that the bargain be a good one.”
Therefore we can conclude in our case that the contract formed orally. It is not must to a construction contract to be in writing, but it is preferred to avoid the unnecessary disputes in future. But the consequent events are not supporting us to come to that conclusion, because, afterwards BB sent the offer letter to HC with all the terms and conditions. The basic formula of a contract is that there must be an offer, followed by an acceptance meeting the offer.
Also, we are not sure that the written offer sent by BB comprised all the scope, terms, and conditions as they discussed at the time of negotiation. Generally to form the contract the offeree needs to accept the offer from the offeror as is. Otherwise it will be treated as rejection of the initial offer. In our case, upon the receipt of the offer from BB, HC made minor changes on payment terms and completion date. It means HC did not reject the offer but made minor changes on the original offer. This is called as qualified acceptance or counter offer in law. If offeree is sending a counter offer it means the initial offer has gone null and void. In other words initial offer has been killed by counter offer, no longer capable of acceptance. Even HC accept again the initial offer also, BB does not required to bind on it.
But If BB agreed to the changes made by HC then there will be a new contract formed. Another important point here is that HC sent its qualified acceptance via post. According to the postal rule, an acceptance becomes effective from the time of posting. But as this is a counter offer contract will not become valid until the initial offeror accept the offer. Here in our case, BB was silent on the counter offer by HC. Expect the rare situations, silence will not be considered as acceptance of the offer. Even though, Whilst HC signed a contract with EBS, concurrently it sent a letter to withdraw their acceptance to BB. It can be seen only as revocation of counter offer. An offer can be withdrawn before the acceptance by effectively communicating with the offeree.
In England & Wales jurisdictions if the offeror did not define the period of time open for the acceptance along with its own consideration the offer can be withdrawn at any time.
It can be applicable to counter offer as well. So in our case HC revoked its counter offer according to right procedures. But BB threatened to take legal action against HC. In case, if BB goes for a legal action, it needs to prove that it is suffering to a material extent as it took some steps based on the promises of HC at the time of negotiation with prior knowledge of HC. But this concept is widely applicable only in Scotland. English courts may see this case in such view if applicable. Generally English courts do not accept prior negotiations as evidence because the bargains between the parties during the negotiation stages towards finalising the contract may change suddenly until the contract is agreed.
Also BB cannot argue that HC signed a contract with EBS before revocation of their qualified acceptance, because HC as a construction company has right to involve in one or more contract according to its operational capacity.
3. Advice to HC by considering events occurred between BB and HC
- Richard Stone, The Modern Law of Contract, 10th ed, Routledge, Oxon,2013
- Fafinski, S & Finch E, Law Express: Contract Law (Revision Guide), Pearson Education: 2012
- McKendrick, Contract Law, Text & materials 2003
4.2 ELECTRONIC SOURCES
- The law hand book, your practical guide to the law in Victoria’ <https://www.lawhandbook.org.au/handbook/ch12s01s01.php> accessed 10 January 2015.
- Magazine insite law, Daily online law news and law blogs’ <https://www.insitelawmagazine.com/ch4acceptance.htm> accessed 10 January 2015.
- Nolo, Law for all, Consideration: Every Contract Needs It’ <https://www.nolo.com/legal-encyclopedia/consideration-every-contract-needs-33361.html> accessed 10 January 2015.
- Sarah Cole, ‘Mersey Docks & Harbour Board v. Coggings & Griffiths’ <https://www.safetyphoto.co.uk/subsite/case m n o p/Mersey Docks v. Coggins & Griffiths.htm> accessed 31 December 2013.
- Edwards v Skyways Ltd.  1 WLR 349
- Harvey v Facey  UKPC 1,  AC 552
- Pickfords Ltd v Celestica Ltd -  All ER (D) 265 (Nov)
- Byrne & Co v Leon Van Tien Hoven & Co  5 CPD 344
- Routledge v Grant (1828) 4 Bing 653.
- Prenn v Simmonds  1 WLR 1381
4.4 STATUTORY PROVISIONS
- Companies Act 1996
- Law of Property (Miscellaneous Provisions) Act 1989, s.1
- Unfair Contract Terms Act 1977(UTCA) S2 & S14
- Personal Protective Equipment at Work Regulations 1992/2966
- Health and Safety act 1974
- Occupiers Liability Act
 “Clause 5. Happy Construction must ensure that all of their employees are informed and abide by EBS health and safety policies at all times whilst on site. Any breach of this clause will result in Happy Construction assuming all liability for any tortious acts resulting from the breach.” “Clause 10. Happy Construction undertake to meet all milestones. Failure to do so where there is no reasonable reason for the delay, will result in the EBS having the right to terminate the contract immediately.”  Oxford advanced learner’s dictionary 8th edition  Harvey v Facey  UKPC 1,  AC 552  This is statement will be contrasted further below  https://www.lawhandbook.org.au/handbook/ch12s01s01.php  Edwards v Skyways Ltd.  1 WLR 349.  https://www.insitelawmagazine.com/ch4acceptance.htm  https://www.nolo.com/legal-encyclopedia/consideration-every-contract-needs-33361.html  McKendrick, Contract Law, Text & materials 2003  BSM 743 Lectures Notes Topic 4: Introduction to Contractual Obligations & Formalities  Pickfords Ltd v Celestica Ltd -  All ER (D) 265 (Nov)  Byrne & Co v Leon Van Tien Hoven & Co  5 CPD 344  Routledge v Grant (1828) 4 Bing 653.  Prenn v Simmonds  1 WLR 1381
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