0% found this document useful (0 votes)
22 views

Lecture 3 Principles of Law of Contract

Uploaded by

Derek Lam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
0% found this document useful (0 votes)
22 views

Lecture 3 Principles of Law of Contract

Uploaded by

Derek Lam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 72

SCE4281

Contract Administration &


Measurement
Lecture 3
Principles of Law of Contract

1
Lecture 3

It is important for construction professionals


to have some basic understanding of law of
contract. This lecture will give an overview of
the key things including elements, breach,
remedies, etc. relating to contract. More
advanced ideas relating to the law of contract
will be discussed later in another module.

2
Photo Source:
3
http://www.icts.uiowa.edu/content/contract-negotiation
Definition of Contract

• An agreement between two or more parties to do or not


to do some acts, their intention is to create a legal
relationship which is enforceable by law.

• In the case of a civil engineering contract, this is an


agreement under which the contractor undertakes for
reward to carry out the civil work for the project owner,
commonly referred to as either the Client or the
Employer.

4
Essential Ingredients of Valid
Contract
• Offer
• Acceptance
• Consideration
• Contractual Capacity
• Genuineness of Consent
• Form of Contract
• Terms of contract

5
Photo Source:
http://www.web-books.com/eLibrary/Books/B0/B66/IMG/fwk-collins-fig16_003.jpg

6
Offer
The nature of an offer
• Agreement takes the form of offer and acceptance.
• An offer is a manifestation by one party (the offeror) to
the other (the offeree) of a willingness to be bound to the
offeree in contract, in the terms of offer, if the offeree will
show willingness to be bound to the offeror on the same
terms.
• The offer gives to the offeree the power to create a
contract by making an acceptance.

7
Offer
The nature of an offer
• A contract is formed when an express or implied offer is
made by the offeror and is accepted without qualification
or amendment by the offerree.
• An offer may be made by spoken words or writing or
conduct or any mixture of those methods.

8
Offer
The nature of an offer

http://pixabay.com/en/red-school-
stop-cartoon-purple-35938/

• But all the stages in negotiation are not necessarily offers.


They may not show any willingness to be bound to a
contract immediately, without further negotiation.

9
Invitation to Treat
• An invitation to treat is an invitation to make offer.
• The person making the invitation to treat does not intend
to be legally bound if terms are accepted, so this cannot
be turned into a contract.
• An invitation to treat is not an offer.

Photo Source:
http://www.123rf.com/photo_12804
036_vector-cartoon-of-woman-
shopping-in-supermarket.html

10
Invitation to Treat
Examples of invitation to treat :
• Display of goods for sale.
The customer by taking the goods form the shelf and presenting them at
the cashier counter is making an offer, at which the cashier may accept or
reject.

Illegally offered for sale ?


Patridge v. Crittenden [1968] 1 WLR 1204
Pharmaceutical Society v. Boots [1953] 1 QB 401
Advertiser’s intention ?
Harvela v. Royal Trust of Canada [1986] AC 207
Carlill v. Carbolic Smoke Ball Co. [1983] 1 QB 256

11
Invitation to Treat
Examples of invitation to treat :
• Advertisements, price lists, catalogues.
– Generally, advertisements only invite offers, price indicates the
range along which an offer may be made.
• Auctions
– The auctioneer’s request for a bid is merely an invitation to treat
and is not an offer which can be converted into a contract by the
highest bidder.
– It is an invitation to bid and it is the bid itself which is the offer. It is
up to the auctioneer to accept or reject the offer.
– The Sale of Goods Ordinance (Cap 26) s60

12
Tender
• A tender is an offer.
– Client/Employers often invite tenders, that is they ask others to
submit details of prices at which goods or services may be bought.

• For example, tendering for construction works.


– An invitation to tender from the Client/Employer to the contractor
is an invitation to treat whereby the tender price submitted by the
Contractor is the offer from the Contractor subject to acceptance
by the Client/Employer.

13
Supply of Information
• A negotiation statement will not be an offer if it is merely
intended to supply information, because then the
intention to be bounding will be lacking.

Harvey v. Facey [1893] AC 552

14
Offeree
• Only a person to whom the offer is addressed can accept
it.
• The offer may be made to one person, or a number or class
or the whole world.

Carlill v. Carbolic Smoke Ball Co. [1983] 1 QB 256

Photo Source:
http://hawaiiesquire.wordpress.com/2012/02/
14/draw-the-law-what-is-an-offer/

15
Termination of Offer
An offer may come to an end in the following ways.
• Termination by acceptance
– An offer to one person will come to an end it is accepted – its
purpose is then fulfilled – or it is rejected or if for some reason it
lases.

Photo Source:
http://www.uwlax.edu/faculty/ross/module1/
concession-7.htm

16
Termination of Offer
• Termination by Rejection
– This may be an outright rejection or refusal of an offer or it might
take the form of counter offer.

Stevenson v. McLean (1880) 5 QBD 346

• Termination by Revocation
– Withdrawal or revocation of an offer must be communicated to the
offeree before acceptance.
– Revocation is of no effect until it is actually brought to the notice of
the offeree.

17
Termination of Offer
• Lapse of time
– If the offeror gives a time for acceptance it will end when that time
has passed without acceptance.
– If no time is specified it will lapse when not accepted within a
reasonable time. The court will decide what is and what is not a
reasonable time.

• Demise of offeror or offeree


– In case of an offer made by one individual to another individual, if
either dies before acceptance, the offer will immediately come to
an end.

18
Acceptance
• Acceptance may be oral, in writing or by conduct.
• The offeree must accept all terms of the offer without any
qualification or amendment.
• The acceptance must be communicated to the offeror. However,
under some circumstances conduct may be sufficient evidence of
acceptance.
• For example, if a person owning a flat asks a builder to call around to
the flat to carry out certain repairs, and the builder does so, there is
legally binding contract: the builder having accepted the flat owner’s
offer by conduct.

19
Photo Source:
http://extension.missouri.edu/publications/DisplayPrinterFriendlyPub.aspx?P=G312 20
Consideration
• Consideration is essential to the formation of all contract not under
seal.

• Consideration is what a party contributes towards the contract; it is the


price which is paid for the other party’s act or promise.

• In the case of a civil contract, the contractor construct a seawall, for


example, for the employer who in turn pays the contractor an agreed
sum of money.

• The contractor has given consideration to the employer by constructing


the seawall and the employer has given consideration by paying the
contractor.

21
Rules of Consideration
1. Consideration must not be past
• The law does not recognize past consideration as this is treated as no
consideration at all.

• For example, a contract may build a house without a price being


agreed beforehand. After completion, the employer promised to pay
the contractor $500,000 but eventually pays only $400,000. Under
such circumstances the contractor will not be able to enforce the
original promise to pay the $500,000.

• This is because the house was completed (therefore the consideration


given) before the promise to pay was made. The contractor’s
consideration was past, and therefore could not be recognized as a
consideration for the purpose of supporting the contract.

22
Consideration
2. Consideration need not be adequate (fair) but it must be sufficient
(valuable)
• The court will not inquire into the value of the consideration given to
the other party, providing it is valuable consideration, meaning that it
has some monetary value.

• For example, a contract will be binding even if a Mercedes is


exchanged for a bicycle as both have value, even though not
equivalent.

3. To carry out a public duty does not provide consideration


• If a person promises to do something he is already legally obliged to
do, this is not a valid consideration.

23
Consideration
4. To carry out existing contractual obligation does not provide
consideration
• For example, a project might be short of workers due to resignation of
some staff. The employer may agree to share the wages of the wages of
those resigned workers between those who have stayed behind to
finish the project.

• If the employer did not pay out as agreed, the workers who stayed back
were not entitled to sue as they were already under the contractual
obligation to work on the project.

24
Consideration
5. Only a person who has himself given consideration will be able to
enforce a contract.

• The relationship which exists between the parties to a contract is


known as Privity of contract, since only the parties to the contract
provide consideration. This particular rule has an important bearing
on construction contracts.

• If, during the course of construction, the main contractor employs a


sub-contractor to carry out the work and the work turns out to be
defective, the employer cannot sue the sub-contractor for breach of
contract. The employer must sue the main contractor who would in
turn sue the sub-contractor.

25
Photo Source: http://www.remaxwest.com/blog/p/history-of-signing-documents-
under-seal 26
Contract Under Seal
A simple contract may be made in writing, orally or by
conduct and each party must contribute consideration to
make it binding. The only exception to this principle is a
contract under seal.

1. Must be in writing, signed and sealed


– A contract under seal is a contract made by deed, that is to say a
contract in writing, sealed, and delivered by the party who
arranges the contract, which in the case of a building contract
will be the employer.
– Where an individual is a party to a contract under seal, his
signature is also necessary. A corporation, however, has no
signature and the affixing of its seal is necessary.

27
Contract Under Seal
2. Need not provide consideration
– A party may make a promise under seal which is enforceable, even
though there is no consideration.
– This would be accepted by a court of law and is the major
difference between a contract under seal and a simple contract
which requires consideration.

3. Limitation Ordinance
– Another important difference is that under the Limitation
Ordinance, for simple contracts, once six years have passed the
right to sue in a court of law is no longer possible.
– However, for a contract under seal, this right lasts for twelve years.

28
Contractual Capacity
The general rule is that any person may enter into a bonding contract. To
do this , there are certain Rules:

• Minor
– a person under the age of 18 is considered to be a minor and as
such do not have the legal capacity to enter into contracts.
However, there are exceptions, such as contracts for necessities,
and contracts of services which are the benefit of the minor, for
example, contract of apprenticeship.

• Persons who are mentally disordered or influenced by drugs


– Contracts made by mentally disordered persons or persons
influenced by drugs are only valid if the person so affected
understand the nature of the contract.

29
Contractual Capacity
The general rule is that any person may enter into a bonding contract. To
do this , there are certain Rules:

• Companies
– A company which has been properly formed following the
procedures laid down in the Company Ordinance is recognized by
the law as having legal personality of its own.
– The Memorandum of Association contains details of the
company’s business and defines the objects of the existence of the
company.
– Any of these objects is said to be beyond the power of the
company and it may lose its capacity to enter a valid contract.

30
Genuineness of Consent
• A contract may become void if there is no
genuineness of consent between the two parties.

• Contract made maybe rendered void by


– Mistake;
– Misrepresentation;
– Duress and undue influence.

31
Mistake
• Mistakes are a group of rules in English contract law, which happen to
share the same name. If the law deems a mistake to be sufficiently
grave, then a contract entered into on the grounds of the mistake may
be void.

• A mistake is an incorrect understanding by one or more parties to a


contract. There are essentially three types of mistakes in contract,

Photo Source:
http://www.wildy.com/isbn/9781841
135076/mistakes-in-contract-law

32
Unilateral Mistake
• Unilateral mistake is where only one party to a contract is mistaken
as to the terms or subject-matter.

• The courts will uphold such a contract unless it was determined that
the non-mistaken party was aware of the mistake and tried to take
advantage of the mistake. It is also possible for a contract to be void
if there was a mistake in the identity of the contracting party.

– An example is in Lewis v Averay where Lord Denning MR held


that the contract can only be avoided if the plaintiff can show
that, at the time of agreement, the plaintiff believed the other
party's identity was of vital importance. A mere mistaken belief
as to the credibility of the other party is not sufficient.

33
Unilateral Mistake
• There are two categories within unilateral mistakes: mistakes relating
to the terms of the contract and mistakes as to identity.

• Mistake as to the terms of the contract


– Hartog v Colin & Shields [1939] 3 All ER 566
– Smith v Hughes (1871) LR 6

34
Unilateral Mistake
• Mistakes as to identity are generally induced by fraud in that one of
the parties is claiming to be someone who they are not.
• There is thus an overlap with misrepresentation. A claim based in
mistake is more favorable to one based in misrepresentation as the
affect of a finding of mistake is that the contract is void as oppose to
voidable. This is important where a rogue has acquired goods and
sold them on to a third party. If the contract is void the rogue will
never receive title to goods and will not be able to pass title when
selling the goods. However, if the contract is voidable the contract
exists and title passes. If the goods are sold before the innocent
party rescinds the contract, the purchaser acquires good title to the
goods. In determining whether a contract will be held void for
mistake the courts draw a distinction between contracts made inter
absentes (at a distance) and contracts made inter praesentes (face to
face transactions).

35
Unilateral Mistake
• Inter absentes
– Where the parties are not physically present when the contract is
made, for example, where the contract is made through dealings
through the post, telephone or over the internet, the courts will
only make a finding of mistake if the claimant can demonstrate
an identifiable person or business with whom they intended to
deal with. A mistake as to their attributes will not suffice:

• Cundy v Lindsay (1878) 3 App Cas 459


• King's Norton Metal Co Ltd v Edridge; Merrett & Co Ltd (1897)
14 TLR 98
• Shogun Finance v Hudson [2003] 3 WLR 1371

36
Unilateral Mistake
• Inter praesentes
– Where the parties contract in a face to face transaction the law
raises a presumption that the parties intend to deal with the
person in front of them:

• Phillips v Brooks [1919] 2 KB 243


• Ingram v Little [1961] 1 QB 31
• Lewis v Avery [1971] 3 WLR 603

37
Mutual Mistake
• Mutual mistake is when both parties of a contract are mistaken as to
the terms.

• Each believes they are contracting to something different. The court


usually tries to uphold such a mistake if a reasonable interpretation of
the terms can be found.

• However, a contract based on a mutual mistake in judgment does not


cause the contract to be voidable by the party that is adversely
affected.
– See Raffles v Wichelhaus (1864) 2 H & C 906

38
Common Mistake
• Common mistake is where both parties hold the same mistaken belief
of the facts.

• This is demonstrated in the case of Bell v Lever Brothers Ltd, which


established that common mistake can only void a contract if the
mistake of the subject-matter was sufficiently fundamental to render
its identity different from what was contracted, making the
performance of the contract impossible.

• This is similar to frustration, except that the event precedes, rather


than follows the time of agreement.

39
Common Mistake
• Common mistakes exist where both parties to the contract make the
same mistake. Three categories have emerged as giving rise to a cause
of action:

– Res extincta - the subject matter of the contract no longer exists

• Res extincta will apply where both parties enter a contract


with the belief that the subject matter exists when in fact it
does not exist. The contract will be held to be void for mistake:
– Scott v Coulson [1903] 2 Ch 439
– Couturier v Hastie [1856] 5 HL Cas 673

40
Common Mistake
• Common mistakes exist where both parties to the contract make the
same mistake. Three categories have emerged as giving rise to a cause
of action:

– Res sua - where the goods already belong to the purchaser

• This applies where a party contracts to buy something which


in fact belongs to him. This will generally render the contract
void. Although if the action is based in equity this will render
the contract voidable:
• Cooper v Phibbs (1867) LR 2 HL 149

41
Common Mistake
• Common mistakes exist where both parties to the contract make the
same mistake. Three categories have emerged as giving rise to a
cause of action:

– Mistake as to quality - only available in very narrow limits


• A mistake as to quality is only capable of rendering a contract
void where the mistake is as to the existence of some quality
which renders the subject matter of the contract essentially
different to that what it was believed to be:

• Bell v Lever Bros [1932] AC 161


• Leaf v Int Galleries [1950] 2 KB 86
• Great Peace Shipping v Tsavliris (International) Ltd [2003] QB
679

42
Mistake
General Recap:

• Mistakes as to the nature of the obligation.


• Mistakes as to the identity of the subject matter.
• Mistakes as to the identity of the other party.
• Mistakes as to the basis of the agreement.

43
Misrepresentation
A misrepresentation is an untrue statement by one party to the other
which causes him/her to entre into the contract.

• Fraudulent Misrepresentation
– An untrue statement made with the knowledge that it is true or
made recklessly without attempting to access its validity.

• Negligent Misrepresentation
– A statement made honestly, but without reasonable ground for
belief that is true.

• Innocent Misrepresentation
– A untrue statement is made in the belief that is true.

44
Misrepresentation
Fraudulent Misrepresentation

• Lord Herschell defined fraudulent misrepresentation in Derry v


Peek as a statement which is made either:
– i) knowing it to be false,
– ii) without belief in its truth, or
– iii) recklessly, careless as to whether it be true or false

• The burden of proof lies on the claimant: Derry v Peek (1889) 5 T.L.R.
625

45
Misrepresentation
Negligent Misrepresentation

• Under s.2(1) Misrepresentation Act 1967, a negligent


misrepresentation is a statement made without reasonable grounds
for belief in its truth. The burden of proof being on the representor to
demonstrate they had reasonable grounds for believing the statement
to be true.

• This burden of proof is difficult to discharge: Howard Marine v


Ogden [1978] QB 574

46
The Form of a Contract
• In most cases, simple contract made orally or by conduct will usually
be just as effective as a written one.

• However, in some circumstances written formalities are required for


example in contract such as share transfer or hire purchase
agreement.

47
Terms of Contract
Express Terms

• Where it is clear that a valid contract has been formed, it is necessary


to decide precisely what it is the parties have undertaken to do, in
order to be able to say whether each has performed, or not
performed, his part of the agreement.

• Statements made by each of the parties, which are intended to be


incorporated into the contract, are known as express terms which can
be classified as condition and warranty.

48
Terms of Contract
Condition
• This is the word used to a condition is so essential to the nature of the
contract that its non-performance may fairly be considered by the
other party as a substantial failure to perform the contract at all.

• So if certain conditions are not carried out in a contract, the injured


party may repudiate and sue for damages.

• For example
– in the case of a construction contract, if the employer refuses to
pay the contractor for work which has been properly executed, the
contractor an take the employer to court and terminate the
contract.

49
Terms of Contract
Warranty
• This is a term considered to be subsidiary to the main purpose of the
contract, an obligation which, although it must be performed, is not so
vital as a condition.

• A warranty may be defined as a term, the breach of which may give


rise to a right to claim damages but not a right to reject the contract
and treat it as repudiated.

• For a example
– The contractor may fail to provide the site with a site office. In such
case the employer cannot break the contract but will be entitled to
recover the cost the providing a site office from the contractor.

50
Terms of Contract
Implied terms

• A contract may contain and be subject to implied terms. Such terms


originate from custom or statute.

• Also a term may be implied by the court, where it is necessary to


achieve the result which the parties obviously intended the contract
to have.

51
Completion or Discharge of Contract
Once each party’s contractual obligations have been fulfilled, the contract
is considered to be discharged, this is known as discharge by
performance.

1. Performance
– completion of all obligations by all parties wholly in accordance
with the contract.
– For example, if a contractor has completed his obligations under
the contract and Employer has paid the contractor of all cost in
relation to the works, then the contract is discharged.

However, there are ways which a contract may be discharged without the
parties fulfilling their obligations, these are by agreement, frustration and
breach of contract.

52
Completion or Discharge of Contract
2. Agreement
– A contract is made by agreement and it is also possible to end it
by subsequent agreement which can arise from agreement
between the parties to terminate the contract.

3. Frustration
– where performance becomes impossible due to an unforeseen
event which must be so unexpected or unforeseeable at the time
the contract was entered into.
– Where such circumstances are determined by the court as to be
unforeseeable, both partied may discharged from their obligation
for further performance.

53
Completion or Discharge of Contract
4. Fundamental breach in performance (by either party)
– that is a breach going to the root of the agreement.
– Failure to fulfill obligations during the execution of contract.
– In this case the injured party can choose either to treat the matter
as a repudiation by the other party, unless the injured party has
received a substantial benefit or property has passed to him, or as
a breach of warranty only.
– In either case the injured party can also claim damages.

54
Photo Source: http://coxandassoc.com/the-statute-of-limitations-for-breach-of-contract
55
Remedies for the Breach of Contract
1. Damages

• Damages are a remedy for breach of contract which consists of a court


awarding financial payment as compensation for loss resulting from a
breach.

• The aim of damages is put the injured party in the same financial
position as he would have been in if the contract had been properly
performed.

• Damages are not awarded as a punishment of the breach, merely


compensation for the financial loss the injured party has incurred.

56
Remedies for the Breach of Contract
1.1 Liquidated Damages
• Liquidated damages - These are damages specified in the contract,
an amount of money payable as compensation should there be a
breach in the completion of the work.
• The words liquidated means that the principle to pay money as
compensation for a breach has been established.

• Under Clause 52 of the General Conditions of Contract, if the


contractor fails to complete the works during the specified contract
period, the employer is entitled to be paid an agreed sum of money
by the contractor as compensation for the delay in the works.
• The amount in the Liquidated Damages are pre-determined and
should be a genuine pre-estimate of possible loss.

57
Remedies for the Breach of Contract
Penalty
• However, if the amount of liquidated damages are too extravagant
and unreasonable, the agreed sum will be treated as a Penalty (a
payment to make the offending party to suffer for his faults) and is
revocable by the court. The court has the power to substitute its own
award of damages, calculated on the basis of compensation for the
loss sustained.

• On the other hand, where an agreed sum is in the nature of liquidated


damages, no greater sum will be awarded by the court even if is
proved that the consequences of breach have been more serious than
foreseen.
Photo Source:
http://www.camelotcompany.com/liquidated-
damages/

58
Remedies for the Breach of Contract
1.2 Unliquidated Damages
• These are damages not specified in a contract and should there be a
claim for a breach, it will be up to the court to decide
 whether a breach has occurred and,
 the assessment of the value of the damages.

• The amount valued should be a compensation of the loss sustained


and as a remedy for the breach of contract and not as a punishment.
• The work unliquidated means that there is no agreement in principle
to pay compensation.
• When no L.D.is specified, then the sum is to be negotiated/agreed
between the two parties, or settled by legal means. Basically by mean
of quantum meruit.

59
Remedies for the Breach of Contract
2. Specific Performance
Specific performance is whereby a party in breach is ordered to perform a
specific task. It will only be awarded if it is fair and reasonable to do so, or
if the court decides that damages are inadequate. There a number of
specific performance such as:-

• 2.1 Injunction
– An injunction is an order made by the court to stop a person or
party from doing a certain act complained of.
– Party in breach is ordered to refrain from taking a specific action.

Photo Source:
http://www.pcworld.com/article/258624/repo
rt_apple_wins_injunction_against_galaxy_nex
us.html

60
Remedies for the Breach of Contract
• 2.2 Rescission:
– It is a remedy which is generally used in cases where one of the
parties to a contract has been misled, and so occurs mainly in
cases of fraudulent or negligent misrepresentation. It gives the
misled party the option of avoiding or accepting the contract.

Photo Source:
http://www.british-gazette.co.uk/wp-
content/uploads/2010/01/Pinocchio.PNG

61
Remedies for the Breach of Contract
• 2.3 Quantum Meruit:
– It means to pay reasonable sum for goods received or for the
benefit of services rendered. The court has laid down no rules
limiting the way in which a reasonable sum is to be assessed.

– However, useful evidence in any particular case may include:


• Negotiation as to price
• Calculations based on the net cost of labor and materials used, plus a
sum for overheads and profit.
• Measurement of work done and materials supplied
• Opinions of qualified experts in the field of construction

62
Termination of Contract by the
Employer/Engineer
In the HK Standard form of Contract, there are clauses empower the
Engineer or Employer to terminate the contract, if the contractor:

1. becomes bankrupt of going into liquidation (but excluding the


voluntary liquidation resulting from the re-organization of company)
2. assigns the contract without the written consent of the employer
3. suspends the works without any valid reasons
4. refuses or neglects to comply with the Engineer’s Instruction to
remove defective works or goods
5. fails to proceed regularly and diligently with the works

63
Termination of Contract by the
Employer/Engineer
Process of Termination In Accordance with the Standard Form of
Contract

• In that case of a termination, the Engineer may give notice to the


contractor specifying the defaults.

• If the contractor persistently neglect to comply with the requirements


of the notice for 14 days, the Employer may terminate the contract,
enter the site and take over the site and employ others to complete
the remaining portion of the works.

64
Termination of Contract by the
Employer/Engineer
• As soon as may be practicable after such entry, the Engineer shall:-
– ascertain and record the quantity of the completed works to such
time
– ascertain the amount of constructional plant and partially
completed works or materials delivered

• Upon completion of the remaining portion of works, and after


deduction of the additional charges Employer has to pay to complete
the works, and provided that there is a residue, the contractor shall be
entitled for payment.

• If the valuation is not enough to cover the additional charges, the


deficient may be covered in the form of a debt from the contractor.

65
Termination of Contract by the
Employer/Engineer
Default of the Employer

• If the employer fails to pay the contractor within the period as specified
in the contract and continuous such default for 7 days, the contractor
may notify client by registered post of such event.

• If payment still not be made within a further 7 days from the date of
the notice, the contractor can terminate the contract

• Client interferes with or obstruct the issue of any of the certificates.

• Client becomes bankrupt

66
References
Textbooks:
1. CHUI, C. AND ROEBUCK, D. (1991) Hong Kong Contracts. 2nd ed.,
Hong Kong University Press.
2. KNUTSON, K. et al. (2009) Construction Management
Fundamentals. 2nd ed., New York: McGraw-Hill.

67
References
References:
1. ASHWORTH, A. (2006) Contractual Procedure in the Construction Industry.
5th ed. New York: Prentice Hall.
2. BOCKRATH, J. T. AND PLOTNICK, F. L. (2011) Contracts and the Legal
Environment for Engineers and Architect, 7th ed., International Edition,
McGraw-Hill.
3. BROOKE, M. (2008) Estimating and Tendering for Construction Work. 4th
ed. Butterworth- Heinemann.
4. EGGLESTON, B. (2006) The NEC 3 engineering and construction contract: a
commentary. 2nd ed. Oxford: Blackwell Science.
5. MARSH, P.D.V. (2000) Contracting for engineering and construction
projects. 5th ed. Aldershot, Hampshire: Gower.
6. MAU, S. D. (2010) Contract Law in Hong Kong: An Introductory Guide.
Hong Kong University Press.
7. MURDOCH, J. and HUGHES, W. (2008) Construction contracts: law and
management. 4th ed. New York: Taylor & Francis.

68
References
Technical Documents
1. FIDIC. (1999) Construction contract (Red Book). Geneva: International
Federation of Consulting Engineers.
2. FIDIC. (1999) EPC/Turnkey contract (Silver Book). Geneva: International
Federation of Consulting Engineers.
3. FIDIC. (2006) Client-consultant model agreement (White Book). 4th ed.
Geneva: International Federation of Consulting Engineers.
4. NEC. (2005) NEC3 engineering and construction contract. London: Thomas
Telford.

69
References
Technical Documents
1. HONG KONG. DEVELOPMENT BUREAU. (1999) General conditions of
contract for civil engineering works.
2. HONG KONG. DEVELOPMENT BUREAU. (2002) General conditions of
contract for term contracts for civil engineering works.
3. HONG KONG. CIVIL ENGINEERING AND DEVELOPMENT DEPARTMENT.
(2006) General Specifications for Civil Engineering Works.
4. HONG KONG. CIVIL ENGINEERING AND DEVELOPMENT DEPARTMENT.
(1992) Standard method of measurement for civil engineering works.
(Continuously updated version incorporating corrigenda posted in the
official webpage of the Department)

70
References
Technical Documents
1. HONG KONG. DEVELOPMENT BUREAU. (1999) General conditions of
contract for building works, 1999 edition.
2. HONG KONG. DEVELOPMENT BUREAU. (2004) General conditions of
contract for term contract for building works.
3. HONG KONG. ARCHITECTURAL SERVICES DEPARTMENT. (2001) Standard
method of measurement for building elements.
4. HONG KONG. DEVELOPMENT BUREAU. (1999) General conditions of
contract for design and build contract.
5. HONG KONG. DEVELOPMENT BUREAU. (1999) Administrative procedures for
use with general conditions of contract for design and build contract.
6. HONG KONG. DEVELOPMENT BUREAU. (1999) Note on administrative
procedures for use with general conditions of contract for design and build
contract.

71
End

72

You might also like