Contracts

Contract law provides the framework for business transactions and promotes the conduct of business. It provides a set of rules for individuals entering into business arrangements, large and small, and allows them to plan their business and private lives based on each party acting in what should be a predictable way.

If this does not happen, the terms of the contract should allow one party to demand that another party act in accordance with the terms of the contract and if the other party does not, seek redress through the courts.

In plain English, a contract is a legally enforceable, mutual agreement between two or more capable parties to perform a lawful act for legal payment. There is an offer of a product or service by one party and an acceptance by the other. The offer must be expressed so it can be accepted without anything further being required of the party receiving the offer other than to indicate acceptance. It must also be clear that the party making the offer is prepared to be bound by the contract terms if the offer is accepted.

Contract laws or rules determine how the parties:

  • enter into a contract;
  • manage the contract;
  • discharge (complete) or terminate the contract; and
  • resolve any breaches of the contract.

It is extremely important when signing a contract that each party understand what the contract conditions cover. If a court case were to be brought forward by one of the parties, the courts would proceed on the basis that each party knew and understood the contract.

Closely related to this is the importance of undertaking a thorough risk assessment for the project prior to arriving at a value for the work to be performed.

It is important that the person or organization gets paid for what they and their work are worth. An individual who undertakes an assignment without sufficient remuneration will be faced with a number of constraints that could have an impact on the final outcome of the project. These might include:

  • insufficient funds to make adequate site visits;
  • an inability to pay key suppliers on time; and
  • a natural tendency to focus on other projects when resources are constrained.

There is also a psychological disincentive to apply best-effort to an endeavour when there is an unresolved compensation issue that in turn erodes an individual's sense of self-worth and professionalism.

The responisbility therefore lies with the contractor to negotiate fair compensation for the work to be performed.

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