|Type of paper:||Problem solving|
|Categories:||Project management Contract Law|
Determining the existence of Contract between Camford University Property Developers (CUPD, Red Construction and Green Builders.
Issues; Is there a valid, actionable agreement in place?
Was a counteroffer made by either party?
Whether CUPD can claim damages from RED Constructions for failure to accept the offer within the given timeframe?
Whether GREEN Builders should be compensated for work done and terms ofthe offer changed?
Whether GREEN Builders communicated their acceptance successfully?
What is the project Managers position?
In this task, we'll tackle the various issues that came up by determining the existence of contracts between CUPD and the two construction companies and the role of CUPD project manager in the various transactions that arose in this particular case.
Camford University Property Developers (CUPD) invited competitive tenders and qualified both RED Construction and GREEN Builders. RED Construction agreed to abide by the NEC4 standard conditions of the contract, however, changed the terms of payment. To make this a valid contract, various elements must have been in place. An invitation was made by CUPD to both construction companies. This invitation was done through a tender as is seen in the case of Blackpool and Flyde Aero Club versus Blackpool Borough Council. (Burton 2002)
The facts of that case involved a council that worked in an airport. They requested for tenders for a concession to operate pleasure flights from a terminal. Only a few parties received invitations to tender connected with the airport, but only three parties chose to bid. The Invitation to Tender required tenders to be submitted by as early as noon on the seventeenth day of March 1983. (Taylor 2007)
The Plaintiff's tender was placed in the tender box at 11 am on 17 March. The council staff did not clear the tender box, and it was recorded that the tender had been received late. The complainant, therefore, sought damages for breach of contract, contending that there was a warranty that if the tender were received by the deadline, it would be considered. It was held that an express request for a tender might have implied that the tender was to be considered. (Taylor 2007)
It was held that an invitation to tender is usually an offer to receive bids after the council made an appeal thereafter. However, circumstances could arise whereby the invitation gave rise to binding contractual obligations. The court considers upon a thorough examination of what the parties say and establish whether there was a clear intention to create a contractual obligation with the plaintiff's tender in conjunction with all other conforming tenders. Council had breached this contractual duty. (Taylor 2007)
The first term was that both firms were to keep their tenders open for acceptance for 42 calendar days following the date of tender. RED Construction gave a counteroffer, however, desiring a 15% payment on the signing of the contract and 85% of the value of work monthly. However, the payment terms issued by CUPD involved 95% value of the work done monthly, 2 % on practical completion of the work and a final 2 % 12 months after completion.
In Hyde Versus Wrench, the claimant refused an offer to purchase land by sending a counter offer. He then tried to accept the initial offer. No offer was formed at the initial offer price since a counter offer destroys the offer. Thus it can no longer be accepted. (Burton 2002)
On 12th December 2017, RED Construction received an email showing acceptance of the tender by CUPD, But the firm reverted by stating that they would have to withdraw their offer if their set terms had not been adhered to. No reply was received as of 21st December 2017, but the firm faxed a letter to CUPD stating that their tender was withdrawn.
Communication must be undertaken between the parties in any given contract. An offer must be known to the person being offered that is the offeror, and it is equally essential that the revocation of an offer must be communicated to the offerer. If no such notification has been made, then there is no revocation. The party revoking may do so in one of three ways. He can choose to create a new offer on his part. He may also make what purports to be an acceptance. However, this may not be as effective because there is a variation of a material term of the offer. The final option is to make a formal rejection. The offer between RED Construction and CUPD was duly revoked even though the offeror had designated a period during which the offer should remain open, and such time had not expired.
GREEN Builders, on the other hand, offered a contract construction period of 13 months instead of the 12 month period for the completion of the work proposed by CUPD. On 2nd January 2018, they received an offer from CUPD stating that they had been awarded the contract. CUPD indicated that they were prepared to withdraw all their tender qualifications, accept their terms of the contract and undertake to complete the work within 12 months. GREEN Builders responded by stating they would start working on 3rd January 2018 provided that they received a letter of intent authorizing them to begin work.
The Director of GREEN Builders subsequently changed the tender price to PS20.1M from PS19.5M. The Project manager representing CUPD authorized GREEN Builders through an email to immediately start work. GREEN Builders failed to respond to the letter but immediately started work. A day after, they received a Bill of Reduction reducing their tender to PS19.5M, but GREEN Builders refused to sign the contract as it did not meet their desired contract price.
On the first issue that CUPD sought, that is claiming damages from RED Construction; there was no validity as the offer was revoked by RED Construction. Both firms had undertaken to keep their tenders open for acceptance for 42 calendar days. However, no response was received as of 21st December as the firm had formally sent their revocation to CUPD. The offeror may revoke an offer any time before acceptance is issued. This is held in the case of Dickinson versus Dodds. (Taylor 2007)
Compensation to GREEN Builders for the work done and contractual commitments into which they had entered is valid. This is because CUPDS's Project Manager confirmed the intention to contract and that they were authorized to start work immediately. One of the issues was to establish whether there was a valid acceptance between GREEN Builders and CUPD especially since the firm did not reply to the project manager's letter but they immediately started work. A binding contract is formed once a valid acceptance is made.
For the acceptance to be valid, the agreement must be specific, terms of the acceptance must exactly match terms of the offer, and the acceptance must be communicated to the offeree. In the case of Brogden versus Metropolitan Railway, the plaintiffs were suppliers of coal to the defendant; the railway company. For many years they had never had any formal written contract. The defendant drafted a contract and sent it to the plaintiff who made some minor amendments and later sent it back. The defendant did not communicate acceptance, but he filed the document. Later on, a dispute arose as to whether the written contract was valid. (Taylor 2007)
It was held that it was valid despite their being no communication of the acceptance. Acceptance was through the performance of the contract. Considering CUPD had very explicitly stated that they would not change the terms of their Invitation to tender, GREEN Builders claim to be awarded PS20.1M and a 13month contract period, was not valid.
CUPD should also sue their project Manager for damages as a result of additional cost of construction. A formal contract was not in place when he gave GREEN Builders instructions to proceed.
The NEC4 philosophy is based on unique processes of collaboration, fair dealing as well as proper project management. The project manager aims to ensure that all parties work together to achieve the client's objectives. He/she should meet the projects objectives based on time, reliability, cost, whole life cost, customer satisfaction, disruption to the public.
The Project Manager has to make sure that all the relevant goals for CUPD are met. Apart from ensuring that projects are completed within set timeframes, the project is completed within financial management; he also has to ensure that communication is up to par. Project management involves good communication. Every key person must be informed about any changes, costs, budgets as this will ensure that the project management failures are eradicated. (Levy 1987)
Burton, S. 2002, Contract Law. West Group Publishers, Eagan, Minnesota.Taylor, R. 2007, Contract Law. Oxford University Press, USA.
Levy, S. 1987, Project Management in Construction. McGraw-Hill Companies, New York.
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