REPORT ON THE LEGAL POSITION OF PAD

Question 1

Requirements for a valid contract

The minimum requirements for the formation of a contract are identified by Marson, J., & Ferris, K. (2020) (p. 113) as offer, acceptance, consideration, intention to create legal relations, certainty, and capacity.

Offer

An agreement first starts with an offer. An offer is an indication by one person of his or her intention to enter into an agreement with another person (the offeree). A valid offer must contain ascertainable terms (Stone, R, 2005 (p. 25). An offer may be verbal or written, or by conduct. The offer must be communicated to the offeree, who can be one or more persons (including a company), or the whole world (Miller, R. L. R., & Jentz, G. A. (1994).

In the present case, Pad made an offer to the contractor to construct the accommodation block for the price of £25,000.

Acceptance

If the offeree does not communicate his acceptance of the offer, there will be no contract. This is the position in Felthouse vs. Bindley[1862]. Macintyre, 2018 further explains that the offeree cannot change the terms of the offer at the time he is communicating his acceptance.

The offeror must be informed of acceptance to his offer. In the case of Entores Ltd vs. Miles Fare East Corporation[1955], the court held that an acceptance is valid only when received by the offeror. Further, acceptance is shown by the offeree doing an action in response to the offer. Once acceptance is communicated to the offeror, an agreement is created between the parties (Felthouse vs. Bindley[1862].

In this case, the contractor accepted the offer by doing the construction work agreed upon to completion.

Consideration

An offer must ask for something in return from the offeree. This is the consideration in a contract. (Davies, P.S.(2018) (p. 74). The court in Dunlop v Selfridge [1915] described consideration as involving an act or a promise to act and a price for the action or promise to act from the other party. Each party to the contract must give or sacrifice something to the benefit of the other party.

A contract without consideration is invalid, thus unenforceable. However, it is an established principle that consideration doesn’t need to be adequate. It only needs to be valuable and sufficient. The court in the case of Chappell & Co Ltd v Nestle Co Ltd [1960] and Thomas v Thomas (1842) observed that consideration need only be sufficient “in the eyes of the law.”

The consideration from Pad is the payment of the £25,000, and the consideration from the contractor is the construction of the accommodation block.

Intention to create legal relations

As a general rule, unless there is evidence to the contrary, transactions are presumed to be legally binding, and parties become subject to attendant legal consequences in the event of any breach of obligations created under the contract. For instance, in Jones vs. Vernon’s Pools Ltd [1938], the court held that there was no contract as the winning coupon indicated that it was “binding in honor only,” thus there was no intention to create legal relations.

In determining whether parties intended to be legally bound, the case of Simpkins v Pays[1955] explains that the objective test is used.

The promise by Pad to pay for work done by the contractor is sufficient to create legal relations.

Certainty

A contract must be certain as to the terms binding the parties to it. The rights and obligations created under the contract should not be contradictory or be subject to different interpretations, thereby making the contract vague. The court held this position in the case of Scammel and Nephew Ltd vs. Ouston[1941].

Further, the terms of the contract must not be so uncertain that parties are unsure of their obligations under the contract. Vague contracts are unenforceable in law.

Capacity

Parties to a contract must be persons capable of executing the terms of the contract and be bound by its terms. They must, invariably be the same persons who negotiated the terms of the contract, or on whose behalf the terms were negotiated. MacIntyre, 2018 explains that persons below eighteen (18) years, mentally challenged individuals, and those of reduced mental capacity(like drunkards) cannot be bound by contract except particular circumstances, and only where the contract operates to their benefit.

In the case where a party to a contract is a corporation, they must be legally registered under the applicable law. Further, the person who negotiated and/or signed the contract must have had the authority to do so from the corporation. Thus, the legal nature of an entity will determine its capacity to enter into a contract (Hinkel, 2016).

Whether the oral contract can potentially be legally valid;

Contracts may be oral or reduced to writing. (Stone, Modern Law of Contract, 7. This is an oral contract between Pad and the contractor. Also, The Housing Grants, Construction and Regeneration Act 2009 applies to all construction contracts, whether oral or written.

In the case of Joachim vs. Weldon (1962), the court found that in the case of an oral contract, there must be such irrefutable evidence that any reasonable person would conclude that there indeed was a contract between the parties, the terms of which are discernible.

The court would usually consider such evidence as email or text messages exchanged between the parties concerning the transaction (Tekdata Interconnections Ltd vs. Amphenol Ltd[2009]. Oral evidence of other parties who were present at the time the contract was made as well as evidence of payment of consideration or a cheque, can also be used as evidence of an oral contract (Maggs vs. Marsh[2006].

If the oral contract meets the requirements of a contract, then the contract is valid as it is with the present case.

Whether Pad have to pay the contractor the additional £7,000 they are now asking for;

The contractor accepted the offer by Pad to carry out the construction at the price of £25,000 (excluding VAT). These are the terms of the contract. The contractor cannot purport to increase the price to £32,000 (excluding VAT). A party cannot unilaterally change the terms of a contract without the other party agreeing to the change. There was no agreement that there would be a renegotiation on price. (Kelleher and Abernathy, 2010).

Introducing this extra amount after completion of the constructions essentially amounts to another contract (Sergeant and Wieliczko, 2014, page 105).

Further under the contractor cannot enforce payment the Scheme for Construction Contracts Regulations since the contract was not in writing.

Benefits and drawbacks of contracts made orally as opposed to those made in writing

Oral contracts have the advantage of being done at any moment and sometimes does not need the parties to be physically present to come to an agreement, like when done by telephone call. It is faster, and therefore saves time.

One of the drawbacks of an oral contract is that it is easy for a party to forget later the obligations agreed upon under the contract. Also, the existence of a contract may be denied by a party; thus oral contracts are harder to prove in a court of law.

Steps Pad could take to avoid this situation arising in the future.

Pad should make sure all agreements are in writing and are signed by all parties to the contract. In the event the agreement is oral, Pad must make sure that there are other people present when the conversation or negotiation is taking place so that there is independent evidence of the existence of the contract. They must also ensure that all communication regarding the contract is done by email or other written form.

Question 2

Liability under the Occupiers’ Liability Act

This is a case of liability against Pad, which arises under the provisions of The Occupiers Liability Act, 1965, applies in this case. Pad, as a contractor, is considered an occupier under the Act for the reason that it had control of the premises at the time of the accident. Therefore, Pad was required to exercise due care and ensure that the contractor has put in place sufficient safety precautionary measures in the building. However, for liability to attach to Pad, the facts should meet the minimum threshold of negligence, that is, duty of care, breach of the duty of care, and damages resulting from the breach.

Duty of care

The rule laid down in Donoghue vs. Stevenson [1932] established the scope of the duty of care.

Pad should have ensured that the contractor has employed sufficient safety standards and put in place safety precautions to prevent any personal injury or damage any person accessing the building.In the case of Federal Ins. Co. v. Winters,(2011), it was held that the general contractor had a non-delegable duty to provide safety measures.

Breach of duty

In determining whether one has breached the duty of care, the test of a reasonable man is applied, as held in Grant v. Australian Knitting Mills Limited (1936). The fact that there were tools left on the floor where students would generally pass denotes a breach of duty of care.

Damages resulting from the breach

The student tripped and fell as a result of the tools left on the floor. Breach of duty must result in injury for liability to arise (Bolton v Stone (1951). Further, such loss and damage must be reasonably foreseeable and must not be remote. In the present case, a reasonable man would, in normal circumstances, know that any tools carelessly left on the floor can cause students to trip and fall, thereby causing the student to break her ankle.

The court in Hadley –v- Baxendale, (1854), held that “for loss to be recoverable, the damages should be such as may fairly and reasonably be considered either arising naturally i.e., according to the usual course of things, from such breach of contract itself or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach.”

How Pad might avoid such claims in the future.

Pad should ensure that all safety measures are put in place as well as signs indicating any dangerous areas within the premises. They must also ensure that all contractors working in the premises are bound by contract to ensure that safety is maintained at all times while the contractor is working within the premises, which would indemnify Pad should any claim arise based on the negligence of the contractor. In addition, Pad should ensure that contractors are all insured against such liability.

Question 3

RCIS Global Professional and Ethical Standards, Pad is required to act with integrity and professionalism in all their undertakings and transactions, as well as promote trust in the profession. The code of conduct applies to all professional members. Accepting the ticket may be seen as a bribe and would amount to unethical conduct.

Further, Section 7 of The Bribery Act also applies to this case. Pad, being a commercial organization as defined under the Act, may be prosecuted for failing to prevent bribery.

Pad could avoid this situation by having non- canvassing clauses as part of their conditions for approval of tenders. They should also report any incidences of bribery to the relevant authority for prosecution. There should also be established relevant bribery prevention policies and procedures to reduce the possibility of bribery.

Conclusion

From the above, Pad has a valid contract with the contractor for the construction of the accommodation block, and is, therefore, liable to pay only the contractual price agreed. Pad is, however, liable under occupiers’ liability for payment of damages resulting from the injury to the student. Concerning the issue of the tender, Pad must put in place measures to prevent exposure to the risk of prosecution under the Bribery Act.