Contracts Law and Importance of Contract TORS
Contracts Law and Importance of Contract TORS
Conditions (Lect-3)
1
No Such Thing as “the Perfect Agreement”
Legal issues involving contracts arise most often when one party fails
to perform the legal obligation it has agreed to do.
Parties who misunderstand the terms of their agreement may sue each
other and have a court settle the argument.
For example, imagine a company that provides bus tours enters into a
contract to buy a bus for $100,000. However, the seller backs out of
the contract and refuses to sell the bus.
The bus company finds another seller with a similar bus, but they
won’t take less than $110,000. In that case, the expectation damages
would be $10,000—the difference between the contract price and the
amount the company had to pay another seller for the same product.
Consequential Damages
Consequential damages are those that flow as a natural consequence
of the breach.
Consequential damages often comprises profits that a company lost as
a result of the breach.
In the case of the bus example, imagine it took an extra week to
secure the new bus. As a result, the tour company had to turn away
1,000 customers that would have each paid $50 for a bus tour. In that
case, the company could likely recover consequential damages for the
$50,000 they lost in ticket sales.
Often the breaching party will attempt to avoid paying consequential
damages by claiming that they are too speculative or that they are not
foreseeable. Also, sometimes parties to a contract may limit or
preclude either party from recovering consequential damages. An
experienced attorney can help you combat these arguments and
maximize your damages award.
2. Specific Performance
Specific performance is a type of remedy for breach of contract in
which a court orders the breaching party to perform their end of the
bargain.
Monetary damages are typically favored over specific performance as
a remedy for breach of contract. However, specific performance may
be available when monetary damages won’t adequately compensate
you. For example, they may apply to a contract for something that is
unique and can’t be easily replaced.
In the bus example above, monetary damages would be sufficient to
compensate the tour company for its loss. But imagine that the new
bus had been used previously by a famous singer. The tour company
wanted to use the bus for tours of the singer’s home town. In that
case, the tour company could argue for specific performance rather
than monetary damages because no other bus would be comparable to
the one it contracted to buy.
3. Injunction
Injunctions serve a similar purpose as specific performance. The
difference is that with specific performance, the court orders a party to
do something. With an injunction, the court often orders a party not to
do something.
While receiving nominal damages may feel like a pyrrhic victory, the
plaintiff does get the benefit of the ruling in their favor. This may be
simply a moral victory, or it may pave the way for the plaintiff to
pursue another type of legal action.
Service failure – the most obvious and common risk is that the supplier does
not deliver the service to the standard or timeliness specified in the contract.
Service failure can range from a relatively minor shortfall against required
service levels to complete failure.
Minor failure could be driven by, for example, the customer providing unclear
specifications, a lack of supplier capability, or a supplier cutting corners to
improve profitability.
At the extreme, financial or other problems could cause the supplier to go out
of business, unilaterally withdraw from the contract, or be unable to deliver the
service.
Reputational damage – even if the service is provided as specified in the
contract, there is a further risk that the supplier in some manner causes
harm to the customer organization's reputation.
For example, the supplier may act illegally or in a manner that conflicts
with government policy.
The amounts paid to the supplier may increase as a result of changes in the
quantity or quality of the services delivered or their prices. For example,
user demand may be higher than expected.
In such cases, additional costs may be reasonable and offer value for
money. But it is vital that processes are well managed so that value for
money is tested and achieved on this additional expenditure.
Michael Forington in his book ‘Civil Engineering Contracts
and Claims’ says
They are the documents that are a legal part of the contract and describe the
work. The contract documents describe the proposed construction (referred
to as the Work) that results from performing services, furnishing labor, and
supplying and incorporating materials and equipment into the construction.
c) Drawings
d) Method statement
e) Other documents
This is the document which describes the work to be carried
out, often in great technical detail.
Specifications
Bills of Quantities
Historically, these documents were non-contractual measurements
(taken off drawings) to assist tenderers in quoting lump sum prices.
1. Contract drawings
2. Amendments (revisions) of the contract drawings or further
details necessary for the construction of the work.
Amendments often give rise to claims for additional payment.