University of Manchester

Management 4 – Legal Issues

Peter Bradley – 24035242

Discuss the definitions of contracts as promises or agreements and outline the necessary
(a).1 –Discuss
requirements for contract formation.

The law of contracts deals with the rights, requirements and obligations of persons who have
entered into a consensual relationship.

However much information on the subject

subject, it can be suggested that contracts
racts can be based on
promises, or on agreements.

A promise based contract is defined as: A promise or set of promises which the law will enforce.

This definition focuses on the individual promises undertaken by the parties and the reasons to hold
the parties to those promises, to the contract.

An agreement based definition of a contract is: An agreement giving rise to obligations which are
enforced or recognised by law law. This definition concentrates on the entire set of rights and
obligations that the parties are assumed to have established between themselves.
themselve

Essential requirements for a contract

There are three essential requirements for a legally enforceable contract. The first is that the parties
must intend to create a legal relationship between themselves. The second is that the parties must
have reacheded an agreement in the eyes of the. The final criterion is that there must be
“consideration”
onsideration” for the agreement
agreement.

Determining whether or not there h has been an agreement involves an objective assessment. The
test is whether or not an independent observer, ap
appraised
praised of the background facts known to the
parties, would consider there to be an agreement, and if so what agreement. This test is sometimes
sometime
referred to as “the man on the Clapham omnibus”.

Creating a legal relationship

Creating a legal relationship is about differentiating from contracts which are moral or honourable.
When the parties have outwardly agreed in the same terms on the same subject matter, then
neither can generally rely on some unexpressed reservation to show that h he
e or she did not actually
agree to the terms.

Agreement in the eyes of the law

The courts again judge from an objective approach as to whether there was a manifestation of
agreement by what each party has said, written and done. Where the agreement is reduced to
writing there is usually little doubt about the existence and content of the agreement. Verbal or oral
agreements incur doubts about whether, when and, if so, what agreement was reached. The courts
employ various analytical techniques which involve identifying an “offer” and “acceptance”
“acceptance of that
offer, in order to determine whether the contract is valid.

An offer can be defined as: An expression of willingness to be bound in contract as soon as the offer
is accepted. An acceptance is an acceptance, however introduction or deletion of a new term, at this
point cannot legally be classed
lassed as an acceptance. It is classed as a “counter offer”
ffer”.

Consideration

When one party appears, by the terms of the agreement, to be receiving “something for nothing”
the law
aw presumes that the other does not intend the agreement to be binding by law. The law
implies an objective test of intention: has the party who relies on the agreement provided a
commercial input into the
he agreement. This commercial input is known as “consideration”.
“cons The
consideration may consist of the promise to pay money, do work or any other matter that might be
said to have a commercial value.

(a).2 – Explain the legal concept of Torts.

Tort is an essential part of every project, while a substantial number of contracts exist in projects
there are relationships
ps without contracts, rights or obligations. The law of tort imposes these rights
and obligations on individuals towards fellow individuals and entities.

The law of tort covers a wide range of wro

wrongs
ngs including trespass, assault, libel and statutory torts. In
order to succeed the wronged party must prove that the “tortfeaser” ow oweded him/her
him/ a particular
tortious duty or obligation, and that it was breeched.

The principle purpose of awarding damages ththrough

rough tort law is to put the claimant as far as possible,
in the position he would have been in had the tort not been committed.

Negligence

By far the most important tort is that of negligence. The law sets out various requirements which
must be met in order
der for a claim of negligence to succeed.

1 – The defendant must owe the claimant a duty of care.

2 – The defendant must be in breach of that duty.

3 – This breech must be the cause of the loss of which the claimant complains.

4 – The claimant’s alleged loss must be foreseeable.

5 – The claimant must actually suffer loss or damage.

6 – The defendant must not be able to raise any of the recognised defences.
Duty of care

There is no single test for whether a duty of care has been upheld, however the courts have laid
down some guidance in determining whether a duty of care exists. The first step is known as the
neighbour principle and states (in brief
brief): you must take reasonable care to avoid acts or omissions
which you can reasonably foresee would be likely to injure your neighbour.. The second step is
determining the importance of a relationship of “proximity” between the two parties.
parties The final step
is whether the court deems the decree fair, just and reasonable.

Breach of duty

ndant must be in breach of the established duty,, in order for the courts to uphold the tort.
The defendant tort
The standard of breech however, may be modified by special circumstances
circumstances.

The courts may also take into

nto account the magnitude of the risk, the likelihood of injury, gravity of
consequences and finally the cost and practicability of overcoming the risk risk,, when determining
breech.

When assessing whether the breech was the cause of the loss of which the claimant
claim complains, the
first stage is to apply what is known as the “but
“but-for” test. (In brief): If but for the defendants
negligence, the claimant would not have suffered the loss.

When assessing whether the clai

claimants alleged loss was foreseeable, the plaintiff
plaintif must demonstrate
that the damages he or she suffered where in fact a reasonably foreseeable consequence of the
defendant’s actions.

When assessing whether the claimant has actually suffered any lo loss, the plaintiff must clearly be
able to demonstrate the magnitude of loss resulting from the defendant’s actions.

The final criterion is that the

he defendant must not be able to raise any of the recognised defences to a
negligence action, which are, voluntary assumption of risk, contributory negligence,
negligence exclusions of
liability and limitation of actions..

Nuisance

The other main form of tort is the law of nuisance, which deals with conflicting rights and interests
over land.. A defendant, who does not himself create the nuisance, will be liable if he knows or ought
to know of its existence and has allowed it to continue. Nuisance is not actionable without proof of
damage.
(b). Compare and contrast the dispute resolution techniques included in standard forms of
engineering contracts.

Standard forms cover a variety of engineering practises

practises. They are essentially all purpose forms which
outline standards, requirements and obligations of each participant
participant.

Conflict in one or more of its forms, occurs to some extent in all projects
projects, often precipitating project
change. Conflict
nflict management strategies are essential to harness a functional outcome to conflict
and to limit damage.

The following are some commonly used dispute resolution techniques:

Negotiated settlement

The vast majority of disputes are settled by amicable negotiations leading to a binding agreement.
Such agreements are usually made at the end of the project and contain all claims by both parties.
They are usually agreed upon by properly authorised agents of the negotiating parties, and must be
entered into willingly and supported
upported by consideration.

Adjudication

Adjudication is when a neutral third party, is appointed to make a decision on the dispute. This
decision can either be advisory, binding but can be overturned in court, or a final and binding
judgement. The principle functionion of the adjudicator is to regulate the agreement rather than direct
the project,, allowing the project manager to implement the decision.

Adjudication provides a dispute procedu

procedure
re which can be invoked by a party that otherwise has no
remedy in the short term, or would have to rely on the courts unassisted. Adjudication decisions are
interim and reviewable through arbitration or litigation. As a matter of policy adjudication has been
b
developed to compliment arbitration and deal primarily with disputes that might affect the project
cash flow.

The scheme requires that the adjudicator reach his decision in accordance with the applicable law in
relation to the contract.

Conciliation, mediation and similar processes

“Conciliation” and “Mediation”

ediation” are common forms of dispute resolution and are commonly
understood to refer to assisted negotiation. A third party attempts to bring the parties together
either in open sessions or in private tto discuss and to facilitate a resolution. The assistance may
either be facilitative or evaluative.

Mediation is similar to adjudication in its overall purpose and proceedings however it is usually
intended to be a means of obtaining final and conclusive di
disposal of disputes, rather than an interim
solution.. Like adjudication it can be a quick and economic
economic, however a drawback is its reliance on
party cooperation which is not always guaranteed.
A similar procedure is as a non binding tribunal process, where by a panel is employed to hear
submissions from the parties.. The panel is made of party members not related to the dispute, as well
as a neutral. This type of decision is not binding.

Expert determination

The parties mayy agree that a person or panel is to be empowered to determine any dispute without
any appeal. This is commonly known as expert determination. Each party agrees to be bound by the
expert’s decision, it may only be upset by fraud or a manifest departure from
fro the terms of his
appointment.

Arbitration

Most common in civil engineering cases, arbitrations are usually conducted under agreed rules of
procedure. Arbitration is the referral of a dispute to a person for his determination.
determination The arbitrator
must be fair and impartial and his decisions are made in accordance with the law, and are final (need
to be in writing),, although the courts may retain limited jurisdiction on the matter. In this case the
arbitrator is entitled to rule upon his own jurisdiction, bu
but hiss ruling may be challenged.

Litigation

Litigation is the term used to describe d dispute resolution in the courts.. Disputes are normally heard
by a single judge, thought there may also be ““assessors” or technical experts, present who advise
the judge. Where either party wishes to challenge a judgement, they may appeal through the Court
of Appeal. If not satisfied with that
hat judgement, they may seek to appeal to the House of Lords.
Lords

Comparison of Litigation, with Adjudication, Arbitration and Mediation

Mediation is informal and uncomplicated, there are no requirements to produce documents prior or
after the proceedings.. Adjudication is a formal process and the procedure is within the bounds of
natural justice, at the discretion of the adjudicator. Litigation however is a highly formalized and
complicated process with specialist rules. Arbitration, similar to litigation, is also considered formal
and complex.

In mediation proceedings the time frame is entirely up to the conflicting party’s discretion of the
conflicting parties, with the majority of mediators being restricted to one day or less. Adjudication is
operated under
der very strict time scales
scales.. Arbitration is similar to mediation in that the length of the
proceedings is dependent on the parties involved and the availability of the adjudicator. The
lengthiest process is litigation, taking years rather than months to complete
complete.

With regards to the flexibility arbitration and mediation can be considered reasonably flexible to
changes, while as expected litigatio
litigation requires specialist steps.

Mediation is an inexpensive process due mainly to the speed, informality and non-reliance
non on
lawyers.. Adjudication can be inexpensive due to the tight timescales. Arbitration has h some costs
associated with it,, namely the adjudi
adjudicator
cator fees. Litigation as expected is an expensive process, as a
result of the formality and slowness of proceedings.
In mediation, arbitration and adjudication, all matters are private or at the parties discretion. The
exception being if the decision is ttaken
aken to the court of appeal, at which point
poi the proceedings
become public and confidentiality is lost. Litigation is a public affair
affair.

Mediation has been found to improve relationships between parties, promoting an improvement in
underlying interests and concerns.
ncerns. Adjudication allows the power imbalance in relationships to be
addressed.. Litigation and arbitration however are not conductive to even maintaining relationships
let alone improving them.

Control is retained by the conflicting parties when using me mediation

diation procedures with regards to
procedure specifics.. The decision
decisions have to be agreed
reed upon by both parties, and the whole process is
considered voluntary.. Litigation, adjudication and arbitration how
however
ever are very much the opposite as
the dispute is handedd over to lawyers and judges.

The most important comparison of the techniques has to be with the usefulness and success of
outcomes. Mediation allows for creative solution and can involve many forms of evidence being
taken into account, resulting in a vari
varied range of outcomes. Arbitration n and litigation cannot allow
creative solutions and are limited to legal remedies available. Similarly adjudication is restricted by
legal remedies but it does allow for a prompt solution.