Entire Contract Principle in Construction Industry Essay

5714 Words Dec 26th, 2011 23 Pages
Entire Contract Principle in Construction Industry

Entire contract principle is an understanding and agreement that has always been a concern of many parties in the construction world. Construction activity is activities that constitute a complete unity and hard to be done partially. A variety of factors make a construction contract different from most other types of contracts. These include the length of the project, its complexity, its size and the fact that the price agreed and the amount of work done may change as it proceeds. In Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689 at 717 Lord Diplock described a building contract as an entire contract for the sale of goods and work and labor for a lump sum
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The resulting meaning as determined by the court is called the construction of the contract. Lord Diplock in Pioneer Shipping v. BTP Toxide, The Nema [1982] AC 724 at 726 said that the object in construing any commercial contract is to ascertain: ‘What each [party] would have led the other to reasonably assume were the acts he was promising to do or refrain from doing by the words in which the promise were expressed.
The entire contract principle is “an essential and necessary sanction to discourage the deliberate breaking or abandonment of contracts, which would be absent if in such cases the builder, was entitled to demand partial payment notwithstanding his own breach”: see Hudson’s Building & Engineering Contracts (Sweet & Maxwell 1995, 11th Edition at p 476, 4.007). Thus, according to Hudson (at pp 476–477, 4.008): the vast majority of priced building contracts, sophisticated or simple, for the construction of a block of flats or a garden shed, will be construed as being entire, even where there is no express undertaking to complete, or whether the job is to be cost-based. Only contracts of a day-to-day jobbing character are likely to escape such an interpretation, which in the absence of express provision will depend on examination of the ‘matrix’ or ‘genesis and aim’ of the transaction between the parties. If we perform an initial analysis of the exposure of several cases that have been mentioned

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