Introduction To Contracts II

Summer 2020

Dr. Mohammed Haitham Salman

 Outline

 Indirect offers
 Tenders
 Contract documents
 Standard form conditions of contract
 Common contractual terms
 Project delivery contracts
 The contract of insurance
 Contracts for the sale of goods
 e-Commerce
 Special or indirect offers

Advertisements: Generally speaking, advertisements for the sale of goods or services such as
those that appear every day on television, newspapers and magazines, are not considered to be
offers. Rather, they are treated as being invitations to trade, or invitations to offer because they
do not contain sufficient words of commitments to sell. But if an advertisement contains a
positive promise and statement of what the advertiser expects in return (i.e. Ads which are
highly specific about the nature and number of items offered for sale or Ads that are requiring
some special performance or actions – like first come – first served), the courts usually hold that
the advertisement is an offer, especially if the word OFFER is used.

Public Offers or rewards: Advertisements offering rewards for lost property, for information, or
for the capture of criminals are generally treated as offers for the public at large. Accepting the
offer and being entitled to the stated reward, offerees must perform the requested acts.
 Special or indirect offers

Bid or tender: A call for bids or estimates for materials to be furnished or services to
be rendered is considered a request for an offer that can be accepted or rejected
by the person calling for the bid. Such advertisement is often called a request for
proposal (RFP) and the proposal submitted in reply to this request is considered as an
offer. (See Ads. No. 1) Bids related to governmental contracts with private firms
usually provide that the contract will be awarded to the lowest bidder to ensure
having the most economical price and to avoid dishonesty in the form of bribery.

Auctions: When an auction is advertised, the seller is treated as having made an

offer to sell the goods to the highest bidder.
 Tenders

 Tenders are a way for contracts to be awarded

 The party who issued the tender awards the tender to the tenderer that they believe
can do the best job
 Tender process contract
› A legally binding agreement which will govern the way in which the tender is
conducted.
 Tenders

Selective tenders and public tenders

› Selective: Selected number of tenderers are requested to submit a tender.
› Often used when those issuing the tender know that the task at hand is
specific & that a number of parties could do the job well.
› Each of the parties is given a chance to submit a tender.
› Alternatively, when a public tender is advertised, any interested provider can
submit a tender
Government tenders
› Government departments that issue tenders are subject to the provisions of
statutes that control the tendering process.
 Tenders

Types of Contracts:

 Lump sum contracts:

 Unit Price contracts
 Cost plus contracts
 Tenders

Tender documents
 The following documents usually accompany a request for tender:

› Notices to Tenderers
› Conditions of Tendering
› ƒGeneral Conditions of Contract
› Specifications
› Drawings

 When an organisation submits a tender, it should ensure that this tender complies with the
form and detail required by the Conditions of Tendering.

 If it fails to comply, its tender may be rejected.

 Tenders

Withdrawal of tender:

 Can be withdrawn at any time before it has been accepted.

 Issuers must be notified that the tender is withdrawn for the withdrawal to be effective.

 If posted, the recipient needs to receive a withdrawal of offer for the withdrawal to be
effective.

 Issuers can protect themselves against tenders being withdrawn by including in the
Conditions of Tendering that a security deposit be lodged with the tender.
 Tenders

 The deposit will be forfeited if the tender is withdrawn within a specific period.

 The tenderer is still free to withdraw their offer, but there is a disincentive—they will forfeit
the security deposit.

Acceptance of tender

 The acceptance of tender is required to be unqualified, i.e. subject to no conditions or

qualifications

 If qualified, it is arguable that this will amount to a counter offer

 Contract documents

What a contract includes

 Once the tender process has concluded and a successful tender has been accepted, a contract
is formed.

 The contract includes all of the documents that are expressly incorporated into the contract.

 The first thing, therefore, that a written contract should do is to expressly incorporate all of
the intended documents and expressly exclude documents not intended to be incorporated.
(Parol Evidence Rule)
 Contract documents

Interpretation of contract documents

Inconsistencies between documents

 If the parties have reduced their agreement to a written form, the courts regard this
document as reflecting the agreement between the parties.

 Inconsistencies may be present between a number of contract documents.

 A precedence of documents needs to be established.

 This means that there will be a statement providing which document will prevail should
there be an inconsistency
 Contract documents

Implied terms

Provision in a contract that is not directly stated in written or spoken words but is introduced
into the contract

1. by the courts as necessary to give effect to the obvious intentions of the contracting parties,
2. by a statute such as sale of goods acts.

Example: Some terms that would be implied in building contracts:

 ƒthat works will be built in a good and workman-like manner

 that good and proper material will be used etc.
 Common contractual terms
Contract variations

Variations to a contract represent any changes to the works identified in the original contract.

Usually involve an adjustment to the contract price.

Although variations may apply to smaller contracts, they are much more of an issue in larger contracts
—such as large systems development contracts.

The main problems related to variations are:

 calculating the value of the variations
 assessing the impact of the variations upon the performance of the contract works.

It is important that a limit be placed on the extent of any variations

 Common contractual terms

Progress claims and progress certificates

Contracts that involve a significant amount of money usually require the client to make regular
progress payments to the provider throughout the period of the contract according to a schedule of
payments. (Concurrent payments)

The value of work done is assessed & a certificate or notice is provided for the value of the work done.

There may be a number of certificates & notices issued until the work is completed.

At that stage, a certificate of practical completion may be issued

 Common contractual terms
Liquidated damages

Liquidated damage provisions limit the amount of damages that the injured party (i.e. the client) may
claim to the amount or rate specified in the contract.

Therefore, it limits the liability of the provider.

The courts in the UAE will not always enforce such a provision, unless the amount specified in the
contract as liquidated damages truly represents a genuine pre-estimate of the damage suffered by the
client.

If such an amount is not a genuine pre-estimate, it will be regarded as a penalty & the provider will
only be obliged to pay an amount of damages which the client is able to prove has been suffered (i.e. the
actual damages).
 Common contractual terms

Time under the contract

Most contracts will state a time for completion of the works.

Such time is generally calculated from the actual date the provider was able to commence works

Extensions of time
Most contracts provide for extensions of time for completion to allow for delays or events which affect
the execution of the work and were beyond the control of the provider.

The assessment of claims for extension of time will depend on the specific terms of the contract and,
where necessary, general principles of contract law.
 Common contractual terms

Time is of the essence

The courts will regard essential time stipulations as conditions of the contract and non-essential time
stipulations as warranties .

Depends on how the contact was constructed.

Where the parties expressly agree that time is of the essence, a breach of a time stipulation gives rise to
a right to terminate the contract.

However, time of the essence clauses apply equally strictly to both parties and if the client fails to
perform any obligations within specified time limits, then the provider would be in a position to
terminate the contract also.
 Project delivery contracts

Involves a provider agreeing to supply labour and materials for the construction of a building or
other works for the benefit of another who agrees to pay for the works.

The types of project can be very diverse.

There are a number of parties involved:

 The client is one party to such a contract, or the 'customer' or the 'owner'.
 The other party to the contract is the provider who is often referred to as the 'contractor' or
'builder'.
 In some contracts there may be a superintendent. This person is not a party to the contract.
(consultant/Engineer)
 Project delivery contracts
Certificate of practical completion

Issued when the works are deemed to have been 'practically completed’.

The issue of the certificate of practical completion is important because:

 the provider is entitled to be paid all sums due under the contract, less any retention sums
applicable during the maintenance period, & any deductions withheld to secure the completion of
minor items yet to be done

 the actual date of the certificate is the critical date for the purpose of the applying for liquidated
damages

 it signifies the commencement of the maintenance period, often referred to as the 'defects liability
period'.
 The contract of insurance

 A classic example of the distribution of risk from one party, the insured, to another, the
insurer, through a contract.

 Insurance law involves a contract between insurer & insured.

 The insurer agrees to compensate or indemnify the insured for any loss sustained on the
happening of a particular event. (Car Insurance policy)

 The consideration for the contract is the premium paid by the insured, in return for a
promise of payment by the insurer, should a particular event or loss occur.

 The insurance contract is termed a policy.

 The contract of insurance

Premiums are calculated taking into account a number of factors:

 such as the types and extent of the unknowns;

 the possibility of them happening; if they did happen the likely impact upon the insured;
 the demographic characteristics and claims history of the insured, etc.

The insurer may also re-insure the risk with another insurer. This is one way the insurer spreads
their risk.
 Contracts for the sale of goods

 A contract for the sale of goods can be defined as a contract whereby the seller transfers to
the buyer property in goods for money consideration.

 The money consideration is referred to as the price.

 These Sale of Goods Act simply certain terms into contracts for the sale of goods.

 While the parties are free to contract out of the protection given by the State-based sale of
goods legislation, the protections given in the Competition and Consumer Act are
mandatory and cannot be contracted out of. (acceptable quality, fitness for the disclosed
purposes, sell by sample)
 e-Commerce

Buying and selling on the Internet is a common way of doing business.

When we buy or sell over the Internet, we are subject to the same rules regarding:

 offer and acceptance,

 consideration,
 reality of consent,
 vague and uncertain terms,
 breach of contract, etc.
Business Contract Review Checklist
 Business Contract Review Checklist

http://www.smartfasnet.com/blog/checklist-for-contract-review

 When you receive a contract from a prospective client or for a contractor role, you need to
read it and compare it with your checklist. Sometimes, the legal terms are difficult to read –
so keep a checklist handy to make sure that the key points are clear.

1.Who are the parties?

The agreement should clearly identify the name, entity, address, and jurisdiction of the parties.
 Business Contract Review Checklist

2. What is the purpose of the agreement?

The agreement should specify the scope of work. Does it clearly define deliverables and payment
terms? How are changes handled? Does it reference any other agreements?

3. What information is Confidential?

Confidential information is usually broadly defined to include “any and all information …
whether oral or in writing.” It is important that information be marked “confidential” and that
oral disclosures are reduced to writing and marked confidential in a timely manner.
 Business Contract Review Checklist

4. What is the term of the agreement?

How long is the agreement effective? Or, is it of indefinite duration?

5. What are the termination provisions?

How is the agreement terminated? What are the payment terms in the event of termination?
How is the confidential information handled in the event of termination?

6. What does it say about intellectual property rights?

Be careful of broad language. You do not want to give away rights to any prior works or your
underlying methods and tools.
 Business Contract Review Checklist

7. Are there restrictions on other work?

Be careful about restrictions – usually I recommend adding that “nothing in this agreement
precludes the other party from performing similar services for other companies as long as s/he
does not use the client’s confidential information.”

8. Is the existence of the agreement confidential?

Sometimes the agreement specifies that neither party shall make any public announcement or
disclosure of this agreement without the prior written consent of the other party.
 Business Contract Review Checklist

9. Are there any warranties?

Be careful about including warranties. Usually I recommend adding language that the
researcher will rely on the accuracy of the information provided by the client, that the work will
be performed consistent with industry standards, but that there are no other warranties.

10. What happens in the event of breach?

Unfortunately, for most business disputes, going to court is not an effective remedy because it is
costly and the outcome is unpredictable. For business disputes, mediation and arbitration before
a neutral party experienced in business matters is a faster and more cost-effective way to resolve
disputes.
 Business Contract Review Checklist

11. Governing laws and jurisdiction?

If both parties are located in the same state, the choice of law and the location for the dispute
resolution proceeding is easy. Frequently, however, the parties are located in different states or
countries and hence it can be contentious which law applies. To prevent one party from having
the “home court advantage,” I recommend a “mutually inconvenient” location that is business
friendly, such as Delaware or the Netherlands.