Sunday, July 20, 2008

Case Study: Dulieu v. White

Introduction

Tort law provides remedy to people who have been hurt by the actions of the others and have suffered a loss due to the same. In the wide ambit of tort law, the tort of negligence holds a very prominent position where due to the ‘negligent’ actions of other person(s) injury or loss is inflicted. Psychiatric Injury is a relatively new area where developments are taking place at a very fast pace. Dulieu v. White, which was decided in 1901 is like a building block in this field. The reasons that were previously cited by judges for not awarding compensation on this basis was that it is difficult to probe into the magnitude of psychiatric injury caused and the vast number of cases that the courts will have to take care of as the result of the same. But, subsequently this notion changed. This research paper looks into these developments keeping in view Dulieu v. White as a reference point.
Research Methodology

AIMS and OBJECTIVES: The aim of this research paper is to look into the aspect of psychiatric injury with respect to the famous case of Dulieu v. White, and find out the subsequent impact of the judgment in the future cases.

Scope and Limitations: This scope of this research paper lies in determining the development of field of tort of negligence with a specialized area of psychiatric injury. However, the research paper has only probed into those aspects of psychiatric injury which are subsequently related to the case, a holistic view has not been taken.

Mode of Citation: A uniform mode of citation has been followed throughout the paper.

Sources: The researcher has relied only on secondary sources to write this research paper.

Method of Writing: An argumentative mode of writing has been adopted in writing this research paper.

Research Questions:

  1. What were the hurdles before the courts of not recognizing psychiatric injury as a whole a field for claiming damages?
  2. What are the justifications of a person claiming damages who is actually not present at the time of defendants’ negligent act?
  3. Is ‘remoteness to damage’ an important determinant factor for compensation to be granted under psychiatric injury?

Chapterisation:

Chapter 1: The first chapter deals with the aspect of negligence as tort in general, it looks into the various elements of negligence and how psychiatric injury falls under the ambit of tort of negligence.

Chapter 2: The second chapter qualitatively examines the judgment of the case of Dulieu v. White and also critically throws light on various issues that came across judges in this case along with how it were dealt by them. The ‘thin skull’ theory is discussed in this section.

Chapter3: The various principles that were established by the judges have been looked into critically in the third chapter of this research paper. The subsequent judgments and its impact on the development of tort of negligence have been evaluated.


Chapter 1

Psychiatric Injury

Psychiatric injury comes under the ambit of negligence, now the most important aspect that has to be looked at is what constitutes negligence and what is the meaning when it is said that a psychiatric injury has taken place. The term ‘negligence’ has two meanings in the law of torts –

  1. Negligence as a mode of committing certain trots, e.g. negligently or carelessly committing trespass, nuisance or defamation. In this context, it denotes the mental element.
  2. Negligence is considered as a separate tort. It means conduct which creates a risk of causing damage, rather than state of mind.[1]

The causation of a psychiatric injury is of a recent origin in the development of the tort law. It provides relief when a person may get physical injury not by an impact itself. This important element differentiates it from the other aspects of negligence. In the leading case of Victorian Railway Commissioner v. Coultas[2], did not recognize injury caused by a shock sustained through the medium of eye or ear without direct contact.

They thought that an action could not be sustained in the absence of a physical contact or ‘injury’ being caused. In the case of Wilkinson v. Downtown[3] it was recognized that nervous shock could be a possible area where the plaintiff could claim under the tort law. It was also recognized that all the elements of negligence-

  1. The defendant owed a duty of care to the plaintiff.
  2. The defendant made a breach of contract.
  3. The plaintiff suffered damage as a consequence thereof.

Were completely satisfied to conclude that an act of negligence has taken place in the case of a nervous shock or psychiatric injury. In the subsequent part of this project the researcher has tried to find out how the development of tort of negligence in the field of psychiatric injury has taken place before and prior to Dulieu v. White.
Chapter 2

Dulieu v. White [1901] 2 KB 699

The case of Dulieu v. White which was decided by the House of Lords in 1901, is considered to be a landmark judgment in the area of claiming damages based on psychiatric illness.

Facts

In this case, the plaintiff was the wife of A.R. Dulieu, who carried on the business of a licensed victualler at the Bonner Arms, London. On July 20, 1900, the plaintiff was behind the bar of her husband’s public-house, she being then pregnant, when the defendants’ servant so negligently drove a pair horse driven van as to drive it into the public-house[4]. The plaintiff in consequence sustained severe nervous shock and was and continued to be seriously ill, and on September 29, 1900, she gave birth to a premature child. In consequence of the shock sustained by the plaintiff the child born was an idiot. The plaintiff claimed damages in respect of these matters.[5]

The issues of law that have been looked into the matter by court are –

  1. Did the defendant’s servant who was driving on the road owe a duty of care to the plaintiff who was inside her house and not on the road?
  2. Can remoteness of the damage that was suffered and the plaintiff’s act, can it be a valid ground for not being liable?

Let us look into the principles and issues that have been put before the court and the law which existed prior to the case and what implications does it have on the decision of the case itself.

This is an action for the negligence- that is to say, for a breach on the part of the defendant’s servant of the duty to use reasonable and proper care and skill in management of the defendant’s van.[6] In order to succeed the plaintiff has to prove- “a natural and continuous sequence interruptedly connecting breach of duty with the damage as a cause and effect.”

In regard to the existence of duty it was held that, van and horses in a highway owes a duty of care to use reasonable care and skill so as not to injure either person who, like the plaintiff, are lawfully occupying the property. The legal duty of the defendant exists towards all appears to be identical in character and degree. This is the first principle established in this case. Kennedy J. contended that it does not matter where the person is outside or inside the house. The extent of liability does not change for the two, even though the latter is not on the road. Being inside doesn’t make the defendant taking higher degree for the same.[7]

The defendants had pleaded, as a matter of law, that the damages sought to be recovered are too remote and that the statement of claim upon its face discloses no course of action. It was contended by the defendants that the driving of the carriage into the public house of the plaintiff’s husband and she suffering a nervous shock and therefore miscarriage were too remote a possibility for claim to exist. It was also argued that legal validity of the claim in the statement of action for negligence would exist when there is no immediate physical injury to the plaintiff.[8]

The leading case before this case was decided which acted as a precedent for this case was that of Victorian Railways Comrs. v. Coultas[9] where the appellants gatekeeper negligently invited the male plaintiff and his wife, who were driving in a buggy, to enter the gate crossing when the train was approaching, and, though there was no actual collision with the train, the escape was so narrow and the danger so alarming that the lady fainted and suffered serious nervous shock which produced illness and miscarriage. The Privy Council judgment formulated the earlier established principle of law which will be subsequently be changed by the present case in consideration of Dulieu v. White[10].

Damages arising from sudden terror, unaccompanied by any actual physical injury, but occasioning a nervous shock or mental shock, cannot under such circumstances, be considered a consequence which, in ordinary course of things, would flow from the negligence of the gatekeeper.

It was held that “Remoteness”, as a legal ground for the exclusion of damage in tort, surely means, not severance of time, but the absence of direct and natural casual sequence- the inability to trace it, in regard of the damage, the necessary or natural descent of the wrongful act. It was also held previously in Mitchell v. Rochester Railroad Co.-

“That the result may be nervous disease, blindness, insanity, or even a miscarriage, it no way changes the principle. The results merely show the degree of flight of the damages. The right action must still depend upon the question whether a recovery may be had for fright.”

The counsel for the defendants on the argument referred to American case of Mitchell v. Rochester Railroad Co[11]. The court of Appeal in New York held, that no recovery may be had for fright and also that it could not properly be said to be plaintiff’s miscarriage in that case was the proximate result of the defendants’ negligence. The courts in US held that – “were plainly the result of an accident or unusual combination of circumstances which could not have been reasonably anticipated and over which the defendant had no control.”[12]

The judges of the House of Lords in Dulieu v. White[13] case completely deferred from this opinion of the US court. Lord Kennedy further laid out the principle of ‘thin skull’ over here which occupies a very significant influence which is later discussed in the latter section of the project.

Chapter 3

New Principles and Subsequent Effect

It can only be said that the defendants’ driver negligently driving threatened the plaintiff with immediate bodily injury, and by that threat caused terror which caused the injuries as mentioned. Whether the terror was, in circumstances, a natural and reasonable result of the threat was the question of fact. It may be admitted that the plaintiff, as regard the personal injuries, would not have suffered as she did, and probably not to the same extent as she did, if she had not been pregnant at that time; and no doubt the driver of the defendant could not or never anticipate this condition[14]. But what does that fact matter at all? If the man is negligently run over or otherwise negligently injured to the sufferer’s claim for damages that he would have suffered less injury or no injury at all if he had not had an unusually thin skull or unusually weak heart.[15]

Prior to this case, remoteness of damage was considered to the major ‘loophole’ in seeking remedy under the tort law. But, this case opened up new arena for seeking fair compensation for the damage that has been caused. On the matter of remoteness, the same judge Kennedy J. who propounded the remoteness principle added to it a new essence. It was held in Victoria Railway Co. v. Coultas[16] that : ‘Remoteness’, as a legal ground for the exclusion of damage in the action of tort, surely means, not severance in point of time, but the absence of direct and natural casual sequence- the inability to trace, in regard of damage, the proper hoe in a necessary or natural descent from the wrongful act. He further added in Dulieu’s case that injury to health which forms the main ground of damages in action of negligence, not as a concomitant of the occurrence, but as one of the squeal.

The principle laid out was if the ‘impact’ was not necessary, as if, as must be assumed, the fear is proved to have naturally or directly produced the physical effects so as to ill results of negligence which caused the fears are measurable in damages as the same results would be if arose from an impact? An important limitation has been talked about in the case. The shock, in order to provide action, must arise from the fear of immediate personal injury only.[17] It cannot be contended that seeing other person being killed I had a nervous shock. This was the second principle laid down in this case.

This decision of the courts led to following of a particular trend in the jurisprudence that has taken place in the field of psychiatric injury. From the thin skull principle and the statement that only the person who is directly involved in the incidence can claim compensation was followed until recently. This led to the principle of a primary and a secondary victim whose roots lie in the judgment of Dulieu v. White.[18]

Subsequent Developments

Claimant a witness of danger to others- a secondary victim

The situation here is such that A’s negligence causes injury to B( or puts B in the danger of injury) and C (who is neither injured nor in danger) suffers a shock due to such incident. The leading case in this regard is Alock v. Chief Constable of South Yorkshire[19]. The judges while deciding this case depended upon the principle laid down by the Dulieu v. White case. In Alock v. Chief Constable of South Yorkshire[20], the 10 appellants suffered psychiatric injury as a result of the disaster in Hillsborough Stadium in 1989. As the result of the admitted negligence of the defendants, some 95 people were crushed to death and over 400 physically injured. None of the appellants suffered any physical injury, nor been in the danger of the injury, most of them happen to be not present in the stadium itself were watching the event on the television. Here it was it was felt that there was a need for the law to transform itself into something new and dynamic in order to tackle such situations.[21]

The principles laid down here were beyond the ambit of reasonable forseeability and medical proof of causation on the range of admissible claims. Here three elements were identified[22]

  1. The class of people who should be recognized.
  2. Proximity to those who were involved in the accident
  3. The means by which the trauma to the claimant is caused.

It should also be understood that in practical applications the second and the third points are closely related and should be dealt with close proximity and relationship.

As far as the first element of the class of people the court rejected any arbitrary qualifying test by reference to particular relationships. It was laid down that the “kinds of relationships which may involve close ties of love and affection are numerous, and it is the existence of such ties which leads to mental disturbance when loved one suffers a catastrophe. The question which shall be looked at is the closeness of relationship rather than type of relationship.” But the closeness of relationship is assumed in certain relationships like father and son, mother and son, husband and wife etc. The result is that a mere bystander will not be able to sue.

This was a very important result of the same as the problem of lot of claimed was also touched upon in the case of Dulieu v. White[23] by the judges who cited such reasons for not entertaining many claims.

The second element which must be satisfied is that there must be sufficient proximity of time and place of the event leading to the mental injury. However, there is a considerable extension of this principle to cover the “immediate aftermath” of the event[24]. This was established in McLoughlin v. O’Brian[25] in which a lady whose family met with an accident saw her husband and children after many hours of the accident happening was granted a claim. It was found that circumstance were “distressing in the extreme and capable of producing a effect going beyond grief and sorrow.”[26]

The third element, the means by which the injury is caused, requires that it must be sight or hearing of the event or its immediate aftermath. Notification by third parties (including newspaper and broadcast reports) will not do. In practical terms, a claimant who fails the second element will not be able to satisfy this requirement, though it is possible that there could be a case in which the claimant was in vicinity but failed to satisfy the third requirement.[27]

It can be seen that mental injury only gives rise to cause of action if there is a recognized psychiatric illness. But it is the logical consequence of the second and third requirements that there can be no recovery even if there is there is an illness if it is a product of grief at death of a loved one rather than a reaction causing the death. This may require to carry out the very difficult exercise of “post traumatic stress disorder” and “pathological grief disorder.”[28]

Conclusion

Analyzing the different aspects of the tort of negligence in the ambit of psychiatric injury, it can be said that the case of Dulieu v. White acted as a subsequent light to the future judgments and developments in this field and recognizing the principle of primary and secondary victim whose seeds lie in this case. Dulieu v. White became the second important judgment after Wilkinson v. Downtown which recognized the nervous shock.

Therefore, Dulieu v. White acted as a base to the future development of primary and secondary victim and also laid down the principle of ‘thin skull’ which draws it inference from the American case of Mitchell v. Rochester Railroad Co.

Bibliography

Books:

W.V.H.Rogers, Winfield & Jolowicz on Tort (16th ed., London: Sweet & Maxwell Ltd., 2002)

R.K.Bangia, Law of Torts (18th ed., Faridabad: Allahabad Law Agency, 2005)

G.P.Singh, The Law of Torts (25th ed, New Delhi: Wadhwa & Company, 2007)

Articles

J.Fleming, “The Future of Negligence in Accident Law”, Virginia Law Review, Vol. 53(4)(1967)

Unknown, “Negligence : Duty of Care.”http://www.a-level-law.com/tort/Negligence/duty_lecture.htm

Websites

www.a-level-law.com



[1] (1932) A.C. 562.

[2] (1888) 4 T.L.R. 286.

[3] Supra note 1.

[4] (1901) 2 K.B. 699.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Supra note 2.

[10] Supra note 4.

[11] (1896) 151 N.Y. 107.

[12] Id.

[13] Supra note 4.

[14] Supra note 4.

[15] Supra note 11.

[16] Supra note 2.

[17] Supra note 4.

[18] Supra note 11.

[19] (1991) 4 All. E.R. 907.

[20] Id.

[21] Id.

[22] W.V.H.Rogers, Winfield & Jolowicz on Tort (16th ed., London: Sweet & Maxwell Ltd., 2002) at 107.

[23] Supra note 4.

[24] Unknown, “Negligence : Duty of Care.”http://www.a-level-law.com/tort/Negligence/duty_lecture.htm visited on 16/12/07.

[25] (1982) 2 All. E.R. 298.

[26] Id.

[27] Id.

[28] Supra note 22, at 110.

Should Legislators exercise executive power

Introduction

The question as to whether the legislators should exercise executive powers, the answer is no. The Indian Constitution works on the system of separation of powers and the three organs of the state – Legislature, Executive and Judiciary have been provided with different domain of operation. Although, we find that their domains overlap to a certain extent but in order to achieve a harmonious and independent working of each of the organs, checks and balances have been provided in the Constitution.

This research paper aims at providing an insight as to why legislators should be restrained from exercising executive power and the reasons for it; the Indian Constitution provides them with the power to exercise executive power. By virtue of Article 53, all executive powers of the Union of India are vested in the President who may exercise it through the officers subordinate to him. So, the interaction of the legislature and executive is seen when some of the legislators are acting as the Officers of the President viz. Prime Minister and Council of Ministers. They carry out the executive part of the state and are also a part of the Legislature.

The researcher has tries to analyze with the help of two examples – Office of Profit and Members of Parliament Local Area Development Scheme (MPLADS) to find out the reasons as to what is wrong in a legislator having an executive power.

Interaction between the Executive and Parliament

India has parliamentary form of government which implies that a government itself but by Ministers responsible to the Parliament. The interaction between the legislature and executive arises as the President appoints the Council of Ministers headed by the Prime Minister in order to carry out the executive functions of the state. Therefore, the Council of Ministers is a part of the legislature as well as the executive. Such membership ensures contact between the Executive and Legislative wings, facilitating co-operation and interaction between them and ensures a Parliamentary control over the Executive. Also, the ministers stay in office as long as they enjoy the support of the majority of the Lok Sabha. This helps Parliament in calling the Ministers to account, keeping a constant vigil on them, eliciting information from them on the matters which are related to public importance. The parliament also plays a key role in formulation of policies. E.g. a Legislator has a right to ask questions in the Parliament to any Minister, regarding any matter that concerns the interest of people. It is mandatory on behalf of the Minister to answer the question.

Also both houses of Parliament discuss and debate over a lot of policies. The legislators have a right to criticize and question the policies that are being framed by the executive. Legislature provides an opportunity for Parliament in discussing the executive’s programme as many policies need laws for effective implementation. Each house has a number of committees which constantly scrutinize several aspects of the working of the executive. E.g. The Committee on Estimates, the Committee on Public Accounts, the Committee on Public Undertakings and DRSCs play an important role in exercising a check over governmental expenditure and Policy formulation.

Although there is no particular and dedicated section in the Constitution of India which governs the separation of power but it can be inferred that in India, there is a thin line of distinction between the executive and legislature with some overlaps. These desperate overlaps have been kept by the constitution makers in order to ensure proper scrutiny and efficient working of the government. When questions are raised as regards to defining the domains of different organs the Courts play an adjudicating role.[1]

Now a question which comes to mind is – When the Council of Ministers can hold both legislative as well as executive positions what is wrong about other legislators holding such positions.

Should Legislators hold Executive positions?

The Constitution of India has several provisions which suggest that legislators should not be holding executive positions. Article 102 clearly talks about disqualifications of members who hold office of profit under the government. We need to look into the underlying aspect as to why such a provision was needed and what is the rationale behind such a ‘disqualification’ being discussed in the Constitution of India.[2]

This feature of Office of Profit is there in almost all the democracies of the world. E.g. The English Act of Settlement 1701 and Succession to the Throne Act 1707 are an early example of this principle. The Act of Settlement provided that no person who has an office or place of profit under the King, or receives a pension from the Crown, shall be capable of serving as a member of the House of Commons. The framers of the US Constitution adopted a similar position. The US Constitution provides that “no Person holding any Office under the United States shall be a Member of either House during his Continuance in Office.”

Taking a clue as to why the constitution makers have kept the office of profit under the government as a ground for disqualification, the reasons to it are many.

Firstly, if the Executive at the state or centre wants to silence a critical legislator, now one of these thousand positions can be legally offered. The Bill ultimately offers such silencing weapons to the Executive, which the Constitution expressly prohibited by Article 102. Because it is common for any ruler to win the support by sharing power and public money, Article 102 is a constitutional necessity to limit such allurements. Article 102 also stems from the separation of power principle between the Executive and Legislature.

Also, the critical function of the legislator is to scrutinize the governmental activity or executive function. When a person derives benefit from the executive position which he is holding under the government, he is bound to get affected by it and favor the government and will be unable to give independent views on the subject. If legislators begin to hold offices under the government then It takes away the entire spirit and purpose of provisions of the Constitution, which are to make MPs independent of the political executive and serve the interests of their ultimate masters, i.e., the people.

Secondly, giving legislators executive power shall mean that power shall be concentrated in few hands. E.g. If an MP holds the position of the Chairman, Tirumala Tirupathi Devasthanams Trust Board which has properties worth thousands of crores to an legislator? Is it not power concentration? The answer is yes, the functions of a Board under the government is an executive function of the government and should be independent of the legislature as well as influence of legislature.[3]

Taking the example of Members of Parliament Local Area Development Fund under this scheme the member of Parliament can suggest to the concerned District Collector developmental works of his choice to the tune of Rs. 2 crore per annnum. These works are selected by the sole discretion of the legislator. Now, this can be a good example of understanding the reason as to why the legislators should not be given powers of an executive.[4]

The MPLADS scheme’s discretion acts as direct interference in the working of the executive as a legislator has a power to direct the District Collector to carry out the developmental activity. This interference undermines the authority of the executive, which is against the principle of separation of power. And the courts in Keshavanada Bharti have accepted the notion of separation of power as a part of the ‘basic structure’ of the Constitution of India.

Article 53 vests all the executive powers under the President and he can delegate that authority through officers subordinate to him. So, what is wrong in making all the legislators ‘officers of the President’ and give them executive powers as given to the council of Ministers?

The important function of any legislative body is to scrutinize the working of the executive and raise objections and questions regarding its working. The legislature also acts as a check on the executive. But, if the notion that all legislators should be given executive powers is to be accepted then who will perform the function of scrutiny? The executive and the legislature shall become one and equal. When this is the case, the legislators shall recommend and pass laws that suit them and favor the executive. Therefore, the paramount feature of a Parliament in any Parliamentary Democracy shall be defeated.

The vesting of the choice for indicating the works to be executed leads to favoritism and discrimination vis-à-vis other constituents whom the MP might consider a sure vote bank for future election or whom the MP feels that they did not possibly vote for the support in the election. This is the chief concern to be taken into consideration. When an MP has the sole discretion, he will certainly divert the funds in the areas where he feels that he may get the maximum votes. This means that the people whom he thinks did not vote for him, will not get favors from the funds which will leads to inequality in development. Also, it causes no harm to the MP as he shall be able to win the election on the basis of such a ‘development’.

Also, it is unfair to those people who want to contest the election for that seat. As they know that the sitting Member of Parliament has enough money in his kitty to woo the voters. This causes undue influence in the minds of the voters for the election. Also, most of these programmes cover the subject under Schedule XI and Schedule XII. All these programmes should be implemented by the local self governments. The local self governments should own, manage, monitor and control their programmes and missions. Thus, giving the legislators powers of the executive undermines the power of the local self government.[5]

The rationale that, any executor is not given an unchecked authority to act in situations, he is always under the legislature. Whereas, in case of MPs assuming the executive’s role who shall be responsible for pinning the liability on them. A scrutinizer cannot scrutinize oneself, therefore the executive power should not be given legislative powers.

The problem which arises when the legislators are given executive power is that they get the discretion to act on their own and implement the policies which they themselves have formulated. It is important to executive power to the legislators who are aiding the President in performing the executive functions (like the Council of Ministers) because the members of the legislature have a power to ask questions and scrutinize them in various ways. E.g. Zero Hour, Question Hour. But, a legislator cannot ask a question to a fellow legislator who is not a part of the executive, so the question of scrutiny of his/her individual actions are cannot be questioned.

Also, on the contention that some legislators have executive powers like the Council of Ministers it should be observed that Ministers are accountable to the Parliament, therefore they can enjoy the executive power. But when the matter of providing the executive position to the legislators is concerned, whom will they be accountable to?

Conclusion

The Constitution provides some legislators to be appointed on the executive posts in order to carry out the functions the functions of the government, but this ‘dual’ function is important in order to ensure the smooth functioning of the state. The Council of Ministers are accountable to the Parliament, which in turn is accountable to the people of the country. The legislator’s role in a Parliamentary democracy is to scrutinize the Executive and framing of laws. If we have Legislators performing executive functions (like MPLADS), the legislator’s basic functions cannot be carried out properly.

Secondly, we find that accountability of any organ of the state is very important. If legislators exercise the executive functions who shall be responsible for checking whether the legislator who has executive powers is functioning in a proper way, as there is no mechanism to scrutinize him.

Also, the courts have also been of the view through judgments on Office of Profit, that executive and legislature should be independent and in case of over lap there arises a situation of conflict of interest.

Therefore, in the researcher’s view the legislators should not exercise executive power.



[1] M.P.Jain, Indian Constitutional Law pg. 29 (New Delhi: Wadhwa and Company Law Publishers, 2007)

[2] D.D. Basu, Introduction to the Constitution of India pg. 207 (New Delhi: Wadhwa and Company Law Publishers, 2006)

[3] Sudhirendar Sharma, “Between Sting and Scam”, http://www.indiatogether.org/2005/dec/gov-mpsscam-m.htm

(Visited on: 2/5/08).

[4] Era Sezhiyan, “Working of the MPLADS” http://www.hinduonnet.com/thehindu/2003/04/24/stories/2003042400651000.htm

(visited on: 1-5-08)

[5] Devender Singh, “MPLADS: An Appraisal”, Vol 35 Journal of Constitution and Parliamentary Studies (2001), at p. 91.

Wednesday, May 7, 2008

Construction Contracts

INTRODUCTION

In the present era, there has been a phenomenal growth in the amount of construction work that has started all over India. Construction projects vary in their magnitude from the gigantic infrastructure projects of the government to the relatively smaller construction projects that are undertaken by private parties. With the rapid expansion of construction activity, the need for information about the various rights and obligations of the parties involved in the construction projects has assumed a greater importance. With the growth of the building and construction industry in India, the scope of disputes that may arise due to the same has also increased manifold.

As any construction project necessarily requires the involvement of a number of parties, there exists a complicated set of legal relationships between these parties. The different scenarios that can arise out of a construction project require a vast set of laws to deal with them. As construction work is predominantly an economic activity, the laws that deal with it must be efficient and equitable for them to be effective.[1]

With the increase in the number of disputes relating to construction contracts, there has also been an increase in the number of arbitration cases in both the public and private sector. Therefore, the courts have been hard pressed to formulate a common policy as regards construction contracts and their interpretation in the light of disputes.

The present research paper aims to analyse and put forward the general position of law on different aspects of construction contracts. The paper deals with the formation, performance and breach of such contracts.

Duties of Architects and Engineers

Architect:

An architect is a person employed by building owner for his technical knowledge ad experience in relation to the construction of the building. The duties of an architect are:

i. Inspect the site proposed for the construction of the building and advice the owner about its suitability.

ii. To prepare the drawings, plans and specifications as per the estimates and wish of the owner of the building.

iii. To prepare the tenders

iv. To supervise the construction work and to settle all matters that arise in relation to the construction and completion of the building.

The architect is employed by the building owner to look after his interest and becomes his general agent for all purposes relating to designing, obtaining tenders for the building work for which he is employed.[2]

An architect is one who is required to possess adequate knowledge, skill and practical experience to design and plan, originate, to arrange for supervision of erection of such buildings or other works calling for skill in design and planning as he might in the course of his business might be asked to carry out or in respect of which he offers his services as specialist.[3]

An architect not only designs it but gives the building owners a preliminary advice on the type of building and the estimate of the same.

It is an obvious matter of fact that the design that exceeds the capacity of the owner of the building is a waste. Therefore it is the duty of the architect of the architect to provide estimates well within the budgets and requirements of the owner in so far they have been made to him.

The architect must inspect the building in the course of its erection. Careless inspections of work in progress may lead to great trouble, even the marring of the architect’s reputation. The objective of having inspection is to ensure that the construction work is carried according to the design and plan. There is another important duty on the architect’s part which is to have a fine acquaintance with the design and specification and the knowledge about the quality of the material used and a quick method of testing it.

Architects as the agent of the Owner of the Building or the Employer

There is no law or a regulation that mentions that the architects or the engineers are the agents of their employers as distinct from the general law relating to agency. The rights and liabilities of the engineers and architects and those who are engaged in supervision of the buildings are same as that of normal agents. [4]

The risk is that if the employer is dissatisfied with the work done, he may sue the engineer or the architect for incompetence or negligence for not having used the ordinary care and skill.

In the case of Lamphier v.Phipos[5] it was held that every person who enters a learned profession undertakes to bring to the exercise of reasonable duty of care and skill; he however does not undertake if he is an attorney in all cases he will gain or win or does a surgeon undertake that he will perform a cure nor does the higher promise to undertake the highest duty of care. In case of certification by the architect or the engineer, he will be liable for all negligent and unskillful measurements, valuations, as the case may be.

The Architect’s Authority

The employer is bound by all acts and admissions done by his architect or engineer so long as they do not exceed the scope of their authority. Even if the architect commits fraud in matters within the scope of authority, the employer is made jointly responsible for the fraud. The employer can ratify any act already done on his behalf by his architect, but if he commits the fraud beyond the scope of his authority he is alone responsible.

He must realize that any undertaking within the scope of employment can make the employer bound by those terms. An architect or an engineer who is guilty of breach of duty due to a bonafide mistake he is still entitled to get his remuneration.

If an architect or an engineer has agreed to work for no compensation, and in case of breach of duty, negligence or lack of ordinary care and skill on his part he can still made be liable for breach of duty. Since he holds himself out of employment for reward and remuneration he is bound to take reasonable care but also be judged as one possessed of and binding him to exercise, reasonable skill and diligence exercised in the ordinary and proper course of similar employment and for which he is receiving remuneration or not.[6]

Rights and obligations of architects and engineers are decided by the terms and conditions of contract between him and the employer. The duty owed by an architect or an engineer arises in contract and not in tort.

The contractor works according to the plans and designs laid by the architect and the engineer and the contract administered by him. However it cannot be strongly emphasized that the architect or engineer unless there is a contractual provision giving his opinion, decision or certificate finality has no authority whatever to waive strict compliance with the contract or to bind the employer.[7]

An architect or the engineer in private practice has no implied authority to make contract with the contractor binding on his employer, or to vary or depart from the concluded contract.

Tenders

Generally building works are carried out by inviting tenders from builders, by the building owners or by architects. Tenders are a very important part of the construction process as the completion of work in question depends on the terms and conditions laid in the tender. A tender should be very thorough and complete in it and should give information about all particulars and details relating to the work as otherwise many disputes and complications are likely to arise.[8]

Tenders, plans and specifications must be made for the work and at the same time it is also very essential that bills and schedules of quantities be prepared which are considered necessary for the contractor to enable him to compete with others which are very crucial for the tender to be considered. The plans should be finally be approved by the employer who should be the final authority in deciding about the proceedings of the work before inviting contractors to tenders.[9]

In India where the works of any magnitude are involved the tender usually describes in detail the work required to be carried out and specifies the period of time for its execution. In this kind of contract the architect or the engineer of the employer designs the proposed works before hand and prepares drawings and specification, or bills of quantities describing the work and identifying or setting out the contractual obligation which the tenderer will be required to assume in carrying out the work.

The substantial amount f work is carried out by the government or by public authorities and the procedure of inviting tenders is the one mentioned above. They have their architects and engineers for preparation of preliminaries for specific remuneration.[10]

Central Public Works Department invites tenders for construction of bridges etc where a lump sum amount is required, the tenderers are required to give their own drawings as well on the basis of the description given to them.

Whatever system of tendering is adopted, it is essential in order to create satisfactory contract for the contractual obligations of the parties to be expressed in a suitable documentary form.

Documents forming the part of the contract

It is always very important to ascertain whether a particular document has been successfully incorporated into or forms a part of the contract. The modern forms of contract specifically list the documents intended to form a part of the contract and make provision for their signature by the parties.

This is clearly the most desirable course of action, but it is again very essential to specify to what extent the document is intended to govern or control the contractual rights of the persons.The offer incorporates the drawings and specifications, and if the time of completion is mentioned in the contract and the once the offer is accepted, time for completion becomes a part of the contract.

A contract may consist of a number of documents, provided they are linked together by references one to another and contain collectively all the essentials of a contract e.g. A written tender referring to written specification, or to a drawing and a written acceptance to a tender. They are still contract documents even if they refer to a formal contract to be prepared subsequently, provided that a formal document is for the purpose of expressing the terms of the completed agreement in more formal language only and not intended to alter or to add to those terms.

The invitation to tender and the tender itself with all documents included therewith must be considered to form the completed contract or agreement, unless the term of the agreement have been incorporated in the formal contract. When the contract contains no provision for varying of work, variations may subsequently be agreed upon, but any such variation should be the subject of a separate agreement in writing and must be if the parties contemplate the work involved will not be completed within a year from the date of agreement.

When it is sought to prove that a contract by correspondence subsequent negotiations thereon will invariably imply on agreement for the confirmation, rescission or setting aside of the original contract if it disagrees with the correspondence, although it must be remembered that, if an agreement has already been reached, it cannot be set aside unless there should be enough evidence to show that the parties had mutually agreed to set aside the terms of the final contract.

It is also possible for the contract documents to limit the ability or control the extent of contractual force of the documents, or modify or affect other documents. Where a document to be incorporated in a formal contract is not in fact incorporated, then if failure to do so to a common mistake or a mistake of one party known to other, the remedy of rectification may be available. But there must be either full agreement, or a mistaken belief (known to other party) that the documents contain an agreed term, before rectification is granted. It is not sufficient to inform a representative of the other party, who neither assents or dissents that a particular term will be required.

When the tender has been unconditionally been accepted, a complete contract is formed, the terms of which are given in the invitation to the tender, the tender and the acceptance thereof and any other relevant documents and either party can successfully object the introduction of any new term.

Where the contract need not be in writing the question whether or not a contract has actually been entered into will be determined by a consideration of all the facts upon which the contract is said to be based.

Consideration

Consideration is essential to the validity of the contract. According to S.25 of the Indian Contract Act 1872, an agreement without consideration is void unless it is expressed in writing and registered under the law for the time being in force for the registration of document. (see S.25 of Indian Contract Act)

A bargain without consideration is a contradiction in terms and cannot exist. A contract without consideration therefore is not binding, nor a promise made out of love and affection or of moral obligation.

Consideration is necessary to support the contract, except in the case of a contract by deed, thus a promise by a building owner or employer to pay extra for work already included in the builder’s or contractor’s contract is made without consideration. But if a party contract for valuable consideration to do something which he already in fact bound to do but at the time of such contract his duty is not definitely known to either party or there is dispute about the liability then the contract is binding.

The House of Lords in Dunlope v. Selfridge[11] proposed that consideration is an act or forbearance of one party or the promise thereof is the price for which the promise of the other brought and the promise thus given for value are enforceable.

There can be no manner of doubt that the giving up or forbearing to exercise an actually existing and enforceable right is a good consideration.



Compromise is a very common transaction and so is agreement to forbear prosecuting a claim or other party’s request for a definite or a reasonable period of time. Also abstaining or promising to abstain form dong anything which one would otherwise be lawfully free to do or not to do is a good consideration.

If an intended litigant forbears a right to litigate a question of law or fact which s not frivolous to litigate does give up something of value. It is a mistake to suppose it is not an advantage which a suitor is capable of appreciating to be able to litigate his claim even if turns out to be wrong.

There is no requirement of law that consideration should be adequate or that a person giving the promise should receive fair and reasonable return for the promise. The slightest action or forbearance by the promise can be sufficient consideration. In normal commercial contracts, however if the consideration is obviously so inadequate as to be derisory the burden of establishing the contract is correspondingly greater. Nevertheless, there is no law that will protect the people who enter into disastrous and fools bargains.

The inadequacy of consideration may be taken up by the court if it is established that the consent was not freely given. Under that situation the contract becomes voidable at the option of the aggrieved party.

Completion of contract

A contract is complete as soon as acceptance of the tender is communicated to the tenderer. In case of tenders invited by the government, a tender received from contractor, after scrutiny is accepted and acceptance written thereof is written on it according to requirement of law, which is communicated to the contractor. The tender after communication of the acceptance becomes a contract. On completion of the tender as above and the communication of its acceptance to the contractor, a valid, legal and binding contract is formed.

Implied terms in a Contract

A term which is not included in the contract cannot be implied unless the courts come to a clear conclusion that both the parties must have intended that the term must be intended. The plaintiffs and the defendants entered into a contract which recited that the defendants had purchased the site and intended to create a theatre thereon, and whereby the plaintiffs agreed to pay for the construction of the building in consideration of becoming the managing directors for a fixed salary. It was held that no covenant to build the theatre could be implied. And this is specially the case where the original contract is drawn technically and with obvious attention to details.

A contract implied requires the meeting of minds, an agreement just as much as an express contract.

There are some terms that are implied in construction contracts. For example if the date of completion in the contract has passed, an implied obligation to complete within a reasonable period of time will be granted. In addition an obligation to carry out work with reasonable diligence and due expedition, throughout the period of construction will also be implied, consistent with the time of the contract. Architects have no general ostensible authority to bind their employers in contract and no authority to vary the terms of the contract in any way.

The Dominating Factor of Contract

In some cases the court may reject certain words or even provisions where it seems that they are contradictory with the main purpose of the contract.

All documents, plans, specifications, designs etc should be construed together one with the others. The formal contract which the parties subsequently execute in order to carry their meaning into effect to be consistent with the intention and with what the parties meant when the tender was made and accepted. The conduct of the parties, the circumstances of the case and the consideration of other preliminary discussions which lead up to and were intended to be gathered up, included or explained in the contract itself, must be considered in construing it.

Rule of “Contra Proferentum”

This rule relates to the interpretation of documents. If there is an ambiguity in a document which all the other methods of construction have failed to resolve so that there are two alternative meanings to certain words the court may construe against the party seeking to rely on them and give effect to the meaning more favourable to the other party.

OBLIGATION OF THECONTRACTOR TO COMPLETE THE CONTRACT

Most of the construction contracts do contain an express obligation of the contractor to carry out and complete the works in accordance to the previously laid out plans and specifications. There are some very important aspects of this obligation of the contractor which are not specifically mentioned in the contract. Nearly all contracts contain an express or implied undertaking by the contractor to complete the whole of a particular project upon which depends his right to payment or further instalments.[12]

It should be noted that if the contract requires completion to be certified by an architect or an engineer, as is the usual practice, different principles may apply. Sometimes, in such cases, the final certificate may bind both the parties and the actual degree to which the work has been completed may not be relevant. In some contracts, clauses conditional upon completion such as the time periods in certain defect clauses and which are usually conditioned upon the date of certified completion may also be binding upon the parties.[13]

An Entire Contract is a type of contract which is indivisible and one in which, the entire fulfilment of the promise by either party is a necessary condition precedent to the right to call for the fulfilment of any part of the promise by the other.[14] Therefore, it is opposed to divisible, severable or apportionable contracts.[15] The essence of a building contract is a promise by the contractor to carry out the work in consideration of a promise by the building owner to pay for it.[16] In most contracts for major construction works, the contractor is given a right to payment by instalments on account of the contract price as the construction work proceeds and no question in this sense of an entire contract arises.[17] In cases, where entire performance is a condition to be fulfilled for payment, the builder, in order to recover his costs, must either prove entire performance or acceptance or else acceptance of the building by the owner amounting to the waiver of the condition.[18]

A builder who has undertaken work under a special contract which he has not performed cannot in the absence of new contract throw over the special contract and sue on a quantum meruit basis for the work that he has performed. In a lumpsum contract, it is not necessary for there to be entire performance as to be a condition for payment. In cases, where a contract provides for specific payments to be made to the contractor on the completion of a specific part of the construction, the courts have generally interpreted the contract in a manner that would not deprive the contractor of payment simply because there are certain defects or omissions in the construction.[19]

However, if the builder does enter into an entire contract in the strict sense and fails to complete the work, then he cannot claim payment on a quantum meruit basis for what he has done or maintain a suit in equity for an account or other equitable relief. If parts of the specified sum are ascribed to different parts of the works it does not necessarily mean that the contract is severable, so that payments may be recovered for such parts as are complete.[20]

A lumpsum contract is a contract that requires the completion of the whole work for a lumpsum and if extra work is carried out, the builder may be able to recover for the extra work done. If the construction work is not completed, detailed clauses may provide for the amount that is to be paid.[21] Invariably, the more usual methods of letting contracts on a measured or lumpsum basis are only practicable if the works have been designed in sufficient detail to enable them to be defined and priced in sufficient detail by the builder.[22]

In the contracts that are entered into with the Government, though the drawings, rates and specifications may be prepared before the tender is invited, it might occur that certain changes have to be made after the work has started and there might be some items, the rates of which, have not been included in the original contract. In such cases, there is always a deviation clause that lays down the method to be adopted to work out the rates of the changed or substituted items.[23]

It may sometimes happen that the contractor expressly undertakes to carry out work which will perform a certain duty or function in conformity with certain plans and specifications and it happens that the work done in conformity of those plans does not perform the function it was meant for. In such cases, generally, the obligation to construct the building so that it is able to perform the specified function overrides the obligation to conform by the specifications and the contractor will be liable for the failure. Nor will the contractor be entitled for extra pay upon correctional work.[24]

Sometimes it might occur that unexpected difficulties may arise necessitating a change from the expected method of working and in extreme cases may mean that completion of the work according to the original plan is impossible. In addition, damage to works while under construction may occur as a result of an unforeseen event or the acts of a third party needs to be mad good if the works need to be completed.[25] Most of the contracts contain a provision making such risks and contingencies the responsibility of the contractor. But where in a contract the contractor only undertakes to complete the work “save in so far as it is legally or physically impossible”, he is not liable to protect the works against damage due to reasons for which he is not responsible. And furthermore, under such contracts, he will be liable for payment for the extra work that he has done which were not foreseeable at the time of contracting.[26]

When the employer desirous of carrying out a major project engages the service of an engineer or an architect, he relies on their skills and not that of the contractor, and in such cases, there is no implication that the work designed will fulfil its purpose. If however, the plans have been drawn by the contractor, then it shall be his responsibility to ensure that the purpose of the construction is fulfilled.[27]

Building and engineering contracts usually define the specification of materials that are to be used in the construction work. The materials that are used for construction purposes is one element of the design of the project and there can be an implied warranty on the part of the contractor to as to the suitability or effectiveness of the construction work done by the contractor using the materials specified for the same.[28] However, the contractor’s liability will not extend beyond the supply of a material that conforms to the express descriptions of the same in the contract.

In the case of Adcock’s Trustees v. Bridge R.D.C[29]., the specification for the quality of bricks was met with by the contractor and the sample of the same was also approved by the architect. However, the manholes that were constructed using the same were not watertight and were condemned by the engineer. It was decided by Philmore J. that as the specifications had been met with by the contractor, no complaint could be made against him and he was entitled to his payment.

It is now a well established position of law that the obligation to use good materials is absolute.[30] The true view is that a contractor contracting to do work and to supply materials warrants that the materials that he uses will be of good quality and will be fit for serving the purpose they are meant for unless the circumstances of the contract are such as to exclude any such warranty.[31]

Where there is a contract between two parties to supply certain articles, to be used for some particular uses, in consideration of a pecuniary payment, there is an implied contract that the articles supplied shall be reasonably fit to perform the functions it is meant for.[32]

A liability on the part of the contractor may arise for the design of a construction notwithstanding the presence of an architect or engineer in charge of the design of the work due to the existence of an implied obligation on the part of the contractor to carry out the work with sound workmanship and materials.[33]

A contractor will be liable under an implied term for the suitability or design whenever it can be shown that there was substantial reliance on his skill and knowledge in that regard. Unlike a warranty of good workmanship, a warranty that the work will answer the purpose for which it is constructed is not implied in every contract for the work. The essential element for the implication of such a term is that the employer should be relying, to the knowledge of the contractor, upon the contractor’s skill and judgment and not upon his own or that of his agents.[34]

Apart from the obligations with respect to the nature and quality of the goods used, the builder must also complete the whole work according to plans in order to entitle himself to payment, and if he does not complete the same, he can be held liable for damages for non completion. The builder, before he tenders for the work, must inform himself of all the particulars connected with the work and specially the practicability of executing every part of it contained in the plans, drawings, specifications etc. and it will not be open to him to assert at a later stage of the work that the nature of the work turned out to be more difficult than as was expected at the time of tendering.[35]

Apart from the abovementioned responsibilities of the contractor, there are also certain duties of care of the contractor towards the employer. Such a duty may arise in tort or by statute or as an implied term of the contract. It is the contractor’s responsibility to ensure that the site is reasonably safe for the employer to visit.[36] It is also the contractor’s responsibility to ensure that the employer’s property is reasonably safe during the course of construction.[37] The contractor can also be held liable for the loss occurred to the owner’s property due to negligence if he has expressly or impliedly accepted to the responsibility of the same.[38]

OBLIGATIONS OF THE EMPLOYER

The obligations of an employer are clearly not just limited to pay for the work done though in many contracts this is the only express obligation cast upon the same. The employer also owes many other obligations to the contractor during the course of construction.[39]

The first obligation of the employer towards the contractor is to give the latter possession of the site on which the proposed construction has to be accomplished. Delay on the part of the employer to hand over the site to the contractor may exonerate the latter from completing the construction project within the time period stipulated for the same.[40] In every building contract, there is an implied condition that the site shall be made available to the contractor immediately upon the making of the contract. The handing over of possession of the site is clearly a condition proceeding to the commencement of the contractor’s work on the project.[41] In the absence of any express stipulation, the whole site must be handed over immediately upon the signing of the contract, and the possession that is given must be uninterrupted and exclusive, or at least such as to permit the contractor to carry out the work unimpeded and in the manner he thinks best.[42]

In the case of Freeman & Son v. Hensler[43], the plaintiffs were not given possession of the property immediately and possession was given out in a piecemeal manner so that the plaintiffs did not get possession of a part of the property till about a month before the date of completion of the contract. It was held that it was an implied term of the contract that the defendant should give possession of the whole site to the plaintiffs within a reasonable time and that a reasonable time period had been crossed in this case.

Where a contract has stipulated that possession is to be given to the builder, the owner has no general right to come upon the premises after possession has been given.[44] After possession has been given to the contractor it would be seen as an exclusive possession subject to an implied right of access for the architect and engineer or any other person who, by the contract, has to supervise the work.[45]

Where the contract does not mention anything about possession of the site, the implication would not necessarily be that of exclusive possession for the contractor. However, the contractor must still be permitted such use of the land as he requires for the purpose of carrying out the construction work as he thinks best. If it is intended that the possession should remain with the owner of the site and the contractor and his agents should have access for special work, then such a provision should be made in the contract.[46] In the absence of any stipulation to the contrary in the contract, the builder is, prima facie entitled to possession of the whole of the site until practical completion and the employer is not, in the absence of an express right, entitled to take parts of the works under his possession before the completion of the whole.[47]

Where the specification provides that the contractors should be given possession of the site immediately after the acceptance of their tender, but the formal contract reserves to the employer the right to appoint the day of handing over of the site and provides for an extension of time to meet any delay in the completion due to their putting off the date of handing over, it is generally held that the terms of the formal contract dominated, and the contractors cannot find any claim due to the delay of the employers in handing over the site.[48]

The question as to the degree of possession that should be given to the contractors has persistently popped up in front of the courts. It is obvious that the builder can only carry out the work at the site, apart possibly from manufacturing certain items that are to be ultimately incorporated into the work, which may be carried out elsewhere. Accordingly, the employer is always under an implied duty, if not an express one, to give the contractor the right to occupy the site insofar as is necessary for the execution of the work. In the case of a new project, the main contractor is normally entitled to exclusive possession of the entire site in the absence of any express stipulation in the contract to the contrary. One common express exception in such contracts is the term allowing the presence of other contractors on the site who have also been employed by the owner. Another exception is the provision permitting the owner to engage other contractors to do a part of the contract work if the contractor refuses to comply with any relevant instructions of the architect.[49]

The ‘site’ shall include not only the actual area to be covered by the constructed building, but also a sufficient area surrounding it to enable the work to progress in a proper manner.[50] This right to occupy the site continues as long as the work under the contract requires to be done in the absence of provisions for sectional handover.[51]

Another duty of the employer to the contractor can be to have the site ready for constructional work for the contractor or sub-contractor.[52] In general, the employer owes no duty to the contractor to do work to render the site easier to work upon, or to conduct surveys or sink boreholes or make other investigations. The employer may know or suspect that the contractor has underestimated the difficulties, but is under no obligation to warn the latter, and, in the absence of fraud, will not be liable even for a representation as to the state of the site, however, under the general principles of the law of damages, damages can be awarded for such an innocent misrepresentation.[53]

Where there are no express provisions for handing over the site to the contractor, the implication is certainly not that of handing over exclusive possession of the site. However, the contractor must be given adequate control over the property so as to enable him to carry out the construction properly.[54]

Apart from the obligation of handing over the property to the contractor, the owner is also under the obligation to pay for the work of the contractor. The obligation of the employer to pay for the work does not arise in cases of entire contracts until the whole of the work is entirely performed, subject to the mitigating effect of the doctrine of substantial performance, whereas in some rare cases of a contract of general employment payment becomes pari passu with the execution of the work.[55] An obligation to pay by instalments or on account at specified stages can only arise from the express terms of a contract. Whether a failure to make payment when due amounts to the repudiation of a contract will depend upon the intention of the employer which can be gathered from the particular circumstances.[56]

Where the work is to be carried out under the supervision or to the satisfaction of a skilled person to be employed by the owner, the appointment of the same is a condition precedent to the contractor’s obligation to carry out the works. Where, however, the employer merely reserves to himself or a third party a liberty to superintend, it is not a condition precedent to the contractor’s obligation that actual superintendence should be furnished.[57] The employer is also under an obligation to provide instructions as to the manner according to which the work has to be carried out. These instructions also include the supply of the necessary plans, drawings etc. required for the construction work. In addition to the details of the work, the contractor may frequently require instructions upon other matters such as the depth to which the ground has to be dug for foundations, and the same principles will apply as in the case of details.[58]

Chapter 3

The Breach of the Contract

The breach of a contract is the failure or refusal to perform it. Any breach of contract any one party to it gives the other party an immediate cause of action and a right to damages as compensation for the loss flowing from the breach. It is the violation of an obligation by one party, by which the rights of the other party under the contract are thereby converted into a right to obtain a remedy for the breach in an action for damages. But this right does not release the injured party from performing his part of the contract except where the breach goes to the root of the contract which has been agreed upon.[59]

The breach may occur before the time fixed for performance has in fact been reached; as where one of the parties renders himself incapable, by some definite act, of performing his part of the contract.[60] In this instance the injured party may treat the contract as an end of the contract and sue for damages at once without performing his part of the contract; but, before there is an actual breach it must be shown that the offender has refused to perform something which goes to the root or essence of the contract[61].

On the breach occurring, the contract cannot be terminated except by an agreement between the parties, which, however, need not be in writing unless the contract was under seal.[62] The question, whether an agreement has been reached is one of fact, not of law.

A breach occurs where a party repudiates or fails to perform one or more of the obligations imposed upon him by the contract.[63]

If the document relied upon as constituting the contract contemplates the execution of a further contract is a condition or a term of the bargain or whether it is a mere expression of desire of the parties as to the manner in which the transaction already agreed to, will in fact go through. In the latter case, it is a binding contract and reference to the more formal document may be ignored. In such cases of refusal to execute formal agreement cannot be treated as a breach of contract giving rise to action.[64]

A breach of contract may take any of the three forms[65], namely –

1) Where a party fails to perform his obligation upon the date fixed for the performance of the contract.

2) A breach may arise from express repudiation i.e. where a party states expressly that he will not perform his promise

3) There is a breach if a party does some act which disables him from performing his obligations. Of these three forms of breaches, second and third may occur before the performance is due.

Building Contracts

The same principles as mentioned above are applicable to cases of building contracts. Where the employer has wrongfully repudiated his contract and prevented the builder who contracted to construct a building from proceeding with his work[66], the measure of damages which the builder was entitled to recover from the employer would be profits which the builder would have made if he would have been permitted to perform the work assigned to him, in addition to what was due for work already done.[67]

In cases where the contractor fails to keep to the specifications and in collusion with the engineer builds it not according to the plan and the building was found to be unsightly and unfit for use, the measure for damages, no doubt to the injured party is as good as position as that which full performance would put him.[68]

Nature of Construction projects and problems involved

The special features of the construction industry can be thus enumerated[69]:

(a) The industry itself is a specialised one, with its own patterns and practices.

(b) Planning and execution of a construction project involves numerous parties and organisations, who must work in unison - though temporarily. A small deviation (real or alleged) affects numerous parties.[70]

(c) A construction project is a continuous one, usually spread over a number of years. A dispute that operates as an impediment at any single stage may upset the entire time-table, unless the dispute is speedily resolved.[71]

(d) Some of the problems that arise in the working of the project are not foreseeable or, even if they are foreseeable, their magnitude may not be foreseeable. If litigation is resorted to, then such problems may increase (rather than resolve) the tension generated by the emergence of various problems.[72]

Proper approach

When a legal question arises pertaining to a construction contract, one has first to study and apply the provisions or rules of the general law of contracts, and then to see whether any special or peculiar approach (in applying those rules) is needed, in the light of the fact that one is concerned with a construction contract. And, of course, the specific terms of the particular contract under consideration have to be kept in mind.[73]

Breach by the Employer

If the employer does not provide the site at the appointed time, or does not appoint an architect, or otherwise does not observe some condition precedent to the contractor’s liability to commence the work, the contractor can at once omit the contract and bring an action for damages for breach of contract by the employer. If, however, the contractor elects to proceed with the work, he may, according to circumstances, be relieved for stipulation in the contract as to completion to time, liquidated damages etc. and still have an action for damages.

It is well established that if a promisor under a contract, even before the time for performance has arrived, declares an intention not to perform it, the promisee may immediately treat this as a breach and elect, if he chooses so, to bring action. This is in accordance to grounds of general convenience.

A party to an executory agreement may, before the time of executing it, break the agreement either by disabling himself from fulfilling it or by renouncing the contract, an action will lie for such a breach before the time for fulfillment of the agreement. If a party, communicates his intention he might subsequently repent, the other party can act on such an act and maintain the action for damages.

A claim for wrongful repudiation of a contract can only succeed where the language used by the repudiating party amounts to a declaration of intention not to perform or such that the other party is justified in his inference of such intention, and the language used must be construed together with the circumstances of the case to see whether there is renunciation.

The employers’ breaches are of two kinds from the point of view of damages depending upon whether on the one hand they have the effect of bringing the work to an end, or preventing it from starting, in which case the builder will be deprived of the right to his profile upon work never actually carried out. Whether on the other hand, they merely reduce profits upon (or increase cost of) work done by him. Such a conduct will amount to prevention either total or partial.

A party who by his own act disables himself from fulfilling the contract makes himself liable for a breach of it, and dispenses with the necessity of any request that he will perform it by which the contract is made.

Failure to perform condition Precedent

If the employer does not give possession of the site at the appointed time, or does not appoint the architect or otherwise does not observe the working conditions precedent to the contractor’s liability to commence work, the contractor may at once abandon the contract and claim for the breach. If however, the contractor elects to commence the work, he may, according to the circumstances, be relieved from stipulations in the contract as to completion on time, liquidated damages etc. and still have an action for damages.

Breach during Performance

If a breach by the employer occurs during the progress of work, it depends on the particular circumstances of the case whether the breach goes to the root of the contract or not; if it does; the contractor can abandon the contract and claim damages. As a general rule, the longer the works have been in progress and nearer to the completion, the less likely is that a breach of some particular stipulation will act as an abandonment or rescission of the contract. As to limitation on the right to rescind where restoration of status quo is impossible.

There is no rule that fundamental breach of contract nullifies an exceptions clause. It is a matter of construction whether the clause was intended to apply when such a breach of contract has occurred or not. According to Lord Upjohn, “It is different with the breach of a fundamental term that gives the party not in breach an absolute right to repudiate.”

If the employer gives notice to the contractor not to do any more work, that amounts to total breach and contractor is thereupon entitled to treat the contract as rescinded; the notice, however, must be final.


Rights of Contractor

A Contractor has always an option to treat a breach by the employer which goes to the root of the contract, thereby entitled him to consider it as ended, as a partial breach, and to continue the works to completion before seeking his remedy in damages as an addition to the contract price.

It has been held that the exclusion of two of the contractor’s workmen from the building site by the employer did not repudiate the contract on part of the employer. But where a contractor compiled with the architect’s verbal instructions to vary the works contract, and such instructions were never given in writing, it was not a breach of contract on part of the contractor and could be maintained as a defense to the claim for the breach of contract damages claim.

Breach by the Contractor

Entire abandonment of the work by the contractor will justify an employer in treating the contract as having repudiated by the contractor. It has been said by Lord Blackburn

“Where there is a contract in which there are two parties, each side having to do something, if you see that a failure to perform one part of it goes to the root of the contract, goes to the foundation of the whole, it is a good defense to say: ‘I am not going on to perform my part of it when that which is the root of the whole and substantial consideration for any performance is defeated by his misconduct.”

The same principle applies to the case of breach of particular stipulations by the contractor as in the case of a similar breach by the employer. Where the contract provides that the contractor shall observe particular stipulations of the contract, such as prescribed rate of progress, completion on time, etc. under the forfeiture of the contract, the breach of such stipulations by the contractor may entitle the employer to exercise his powers of forfeiture.

Part II

Damages for Breach of Contract

Where there has been a breach of contract by a party who has been successfully sued by the other party to the contract, the court shall award the injured party to the contract damages as indemnity against any loss likely to arise in usual course of things from the breach of contract. The court will also award damages to indemnity the injured party for any loss outside the usual course of things as was contemplated by the parties at the time of the contract and likely to arise as a result of breach of it. Such are the general principles of law laid down in Mid-Victorian times, which still govern the subject of damages for the breach of contract.

Where Right to Damages Exists

Although the employer has paid the contract price, he may still bring an action for damages for an incomplete performance of contract. Where the price paid under an entire contract has not been paid, the contractor cannot recover it unless he has performed the contract, and he will be liable to the employer in damages for a breach. In estimation of damages, however, the value of the employer of the work done would have been taken into consideration.

Where an employer has accepted work has not been performed in strict conformity with the terms of the contract and has reserved any claim he may have defective performance, the employer may be entitled, depending on the terms of reservation, to a reduction of the price payable to the contractor. According to the Limitations Act, lapse of time does not absolve the contractor from his liability for defective work.

Measure of Damages

The measure of damages for failure by the contractor to complete a building or engineering contract will include first, the difference between the price of the work as agreed upon in the contract and the cost of completion is actually put to it its completion, and cost of completion means cost of contracting work itself. In a leading case, the House of Lords has held that the proper measure of damages is the cost of re-instatement, such cost be assessed at the time when the defects are discovered and put right. Secondly, any loss of rent of the buildings or any loss of profits of rent of the building or any loss of the use of the business or in appropriate circumstances the loss of business profits, which may accrue to the employer in consequence of any delay in obtaining the completed building or works through contractor’s breach of contract. A right to recover the second item of damage is dependent on whether the use for building works was intended within contemplation of the parties at the time the contract was made.

In certain cases the measure of damages may be due to loss of interest in the cost of the contract works and the land thereon they are erected. But note that where a builder used improper mortar, in consequence of which local authority caused the building to be pulled down, the building owner recovered not only the cost of pulling the building down and rebuilding, but also the ground rent for the time occupied in doing so.

The real nature of the employer’s rights to damages when the contractor sues for price must now be considered as a defence to the claim of the contractor. For if the right to damages exceeds the claim, it may be said to have failed, in a Canadian case, it was held that where there is defective work, and the contractor sues in quantum meruit, nothing is payable or due for such defects, nor would a claim be successful for payment of other work left unfinished because of the defective works.

Special Damage

Where an employer intends to use the building for some special purpose which is unknown to the contractor, the employer is entitled to recover the damages for the breach of contract the loss of the use of buildings for the purpose for which the contractor might have reasonably supposed it was to be used if the employer has actually sustained a damage. If by reason of the construction not being such as was stipulated for in the contract, the work is not only useless to the employer, but actually cause damage to him. It should also to be understood that the claim cannot be made after a stipulated period of time.

Non-Completion to time

Damages for non-completion to time will include a sum sufficient to compensate the employer for not having the use of building or works between expiration of the time limited by the contract and the date when the work was completed. No damages can be recovered unless such a purpose can reasonably supposed to have been in contemplation of the parties when they entered into the contract; this is on the analogy of the tenant who convents to give up in good repair and fails to do so, being obliged to compensate his landlord for the loss of rent during the period occupied by the execution of repairs.

When Damages Recoverable

Such sums are recoverable in cases where the contract does not provide for liquidated damages for delay, or where such are provided for but the stipulation to that effect has ceased to be applicable; in the latter case, however, loss must be, estimated from the date when, having regard to all circumstances, the contractor ought to have completed.

Mode of Claiming Relief by the Employer

If defective work is done by the contractor, the employer may defend an action for the price on the ground of breach of the contract, and he may counter-claim for damages caused to him. The reduced value of the work owing to its defective construction may be an element of such damages, or he may bring an independent action against the contractor, and the fact that employer has not attempted to counterclaim in a previous action by the contractor will not operate to preclude him from bringing an independent action.

Illustration: A ship owner bought sheathing from a copper manufacturer and it was put on the ship; instead of lasting four or five years, as is usual, it corroded in four months. Held: Plaintiff could recover damages notwithstanding his acceptance.

Arbitration Clause

The element of contracting

A good deal of construction activity has been going on in the country, for the last four decades. Both the public sector and the private sector have been engaged in projects of varying magnitude. One feature common to most construction activities is, that they involve a good deal of "contracting". There may be only one contract, if the work is small in magnitude.[74] Or, there may be a number of contracts, where the project is a large one - a case of "horizontal multiplicity". If the contract is a complex one, then there may be a hierarchy of contractors, involving several "sub-contractors". That can be called an instance of "vertical multiplicity".[75]

But, whatever the nature and magnitude of the contract involved, it is obvious that the transaction is a consensual one, intended to have "defined legal consequences". In terms of the Arbitration and Conciliation Act, 1996, it is a "defined legal relationship", which is contractual in nature. It is in this respect, that the law of contracts becomes very relevant.[76]

However, certain aspects of the law of contracts acquire special relevance in the context of construction contracts. So do some aspects of the law of dispute resolution and the law of arbitration (as will be dealt with, presently). In particular, in a construction contract, the number of persons interested in its successful completion would be large. Hence, the number of persons who can benefit from prompt and peaceful settlement of disputes, is also correspondingly large.[77]

Quantity of work and escalation

A question may, for example, arise as to the quantum of work. In a recent case decided by the Supreme Court of India, involving a construction contract with the State, the drawings and designs were changed in the course of construction of the works. This resulted in an abnormal increase in the quantum of work and, consequently, the contractor claimed a higher amount, which the arbitrator awarded, after a consideration of all relevant materials.[78]

When the award was challenged (under the Arbitration Act, 1940 then in force), it was held that the court cannot interfere, in the circumstances.[79] The argument of the State, that under the terms of the contract, the contractor was not entitled to a higher rate, was not accepted, as there had been a material change of drawings and designs. The case is State of U.P. Vs. Ram Nath International Construction Private Ltd.[80]

Escalation claimed for increase in wages

Escalation may also be in issue, where an increase in the wages of laborers (engaged by the contractor in the construction work) is put forth by the contractor, as a ground for proportionate enhanced payment (to the extent attributable to statutory or departmental increase in wages). How far such a claim is legally justified will depend on the language employed in the particular contract.[81]

It is obvious, that if the contractual clause refers, say, to the wages fixed by the Public Works Department, and the latter Department increases the wages after the particular contract is signed, the contractor would be entitled to claim a proportionate increase. In such a case, the judges do read a "meeting of the minds" (of the parties), in so far as the claim of escalated payment on account of increase of wages is concerned, because of the wording of the contract.[82]

Unjustifiable claim

A claim by the contractor which is unjustifiable cannot be granted by the arbitrator. Thus, in an Allahabad case, the arbitrator had awarded certain amounts in contravention of the contractual provision. He had awarded to the contractor a certain amount for "de-watering", even though the Schedule of "bids and quantities" clearly stipulated that the rates included de-watering.[83] The award was set aside, as suffering from illegality. State v. Allied Construction Engineers & Contractors.(Case under the 1940 Act).

CONCLUSION

The present paper has attempted to analyse the general principles of contract law and their application and interpretation by the courts with respect to the disputes arising out of construction contracts. The courts have to deal with a large variety of parties in such disputes and they have to perform the job of balancing the rights of one of them vis-à-vis the other.

Through the course of the project, it has been seen how construction projects can be formed, performed and breached. It has been seen how the rights and obligations of one of the contracting parties affects that of the other. In the case of builder-owner contracts, it has been shown that in order for there to be a valid performance of the contract, the rights and obligations of the builder are governed by those of the owner and vice versa throughout the course of the construction.

It can be concluded that the general principles of contract law are applicable to this area of contracts as well and the courts look into the efficiency and equity of such contracts while dealing with their validity or any other aspect.



[1] P.1

[2]

[3]

[4]

[5] (1838) 8 C & P 475.

[6]

[7]

[8]

[9]

[11] (1915) A.C. 847 at p. 855.

[13] McCarthy v. Visser, (1905) 22 Cape of Good Hope Rep. 122.

[14] Cutter v. Powell, (1795) 2 Sm. L.C. 1.

[16] P. 209.

[17] Id.

[18] Id.

[19] Hoeing v. Isaacs, (1952), 2 All ER 176.

[20] P. 210.

[21] P. 212.

[22] Id.

[23] P.213.

[24] Commel Laird Limited v. Manganese, Bronze and Brass, ( 1934) 50 TLR 350.

[25] P.217.

[26] Id.

[27] P.219 also see Duncan v. Blundell, (1820) 3 Stark. 6.

[28] P.221.

[29] (1911) 15 J.P. 241.

[30] Hancock v. Brazier (Anerley) Ltd., (1966) 1 WLR 1317;also see Young & Marten v. McManus Childs, (1969) 1AC 454.

[31] GH Myers & Co. v. Brent Cross Service Co., (1934) 1 KB 46.

[32] Francis v. Cockerell, (1870) LR 5 QB 501.

[33] P.226.

[34] McKone v. Johnson, (1966) 2 NSWR 471.

[35] P.230.

[36] Nabarro v. Cope & Co., (1938) 4 AER 565.

[37] Stansbie v. Troman, (1948) 2 KB 48.

[38] James Archdale &Co. Ltd. v. Com-services Ltd., (1954) 1 WLR 459.

[39] P.243.

[40] Id.

[41] Roberts v. Bury Commissioners, (1870) LR 5 CP 310.

[42] P.243.

[43] (1900) 64 JP 260.

[44] Supra note 25.

[45] P.244.

[46] Id.

[47] Id.

[48] Mackay & Son v. Leven Police Commissioners, 20 Ct. of Sess. (4th Ser.) 1093.

[49] P.247.

[50] R. v. Walter Cabbot Construction Ltd., (1975) 69 DLR (3d) 542.

[51] P.247.

[52] A.M.F. (International) Ltd. v. Marshall, (1968) 208 EG 851.

[53] P.247.

[54] P.248.

[55] Id.

[56] Id.

[57] Jones v. Cannock, (1850) 5 Ex. 713.

[58] P. 251.

[69] P.M. Bakshi, “Construction Contracts: Some legal aspects.” http://www.ficci.com/icanet/quterli/oct-dec2000/ICA_oct1.htm (visited on: 17 Dec. 2007).

[70] Id.

[71] Id.

[72] Id.

[73] 1966 1 All. E.R. 961.

[74]Supra note 11, at p. 4.

[75]Supra note 11, at p. 4.

[76]Supra note 11, at p. 5.

[77] Supra note 11, at p. 5.

[78] Supra note 11, at p. 6.

[79] Supra note 11, at p. 6.

[80] AIR 1996 SC 782, 784, 785.

[81] Supra note 11, at p. 8.

[82] Tarapore & Co. v. State of M.P., (1994) 1 Arbi. LR 341,351 (SC).

[83] AIR 1996 All. 295, 298, 299.