Breach of Contract- Contract Management

 

Breach of contract is a violation of any of the agreed upon terms and conditions of a binding contract.

Types of contract breach:

• Material breach of Contract
• Minor/Partial breach of Contract
• Anticipatory breach of contract
• Actual breach of contract

 

 

Remedies for breach of contracts are:

•  Damages

a.       Compensation Damages

b.      Punitive Damages

c.       Liquidated Damage (LD)

•   Rescission

• Reformation

• Specific Performance

 

Arbitration in construction

Arbitration is a process of dispute settlement in which each party to a dispute and its counsel present the positions of the parties before an impartial third party, who renders a specific award.

Generally, contract comprises arbitration clauses which governs the process of arbitration.

Final outcome of arbitration shall be obeyed by both the parties.

Advantages of arbitration in construction are:

·         Process is pre-defined in contract documents.

·         Healthy & confidential communication between parties

·         Less time & money for dispute settlement

·         Involvement of arbitrator or advocates.

·         Final decision of arbitration is binding.

 

Disadvantages of arbitration in construction are:

·         Sometime the process might be dragged to the court.

·         If arbitration is not consolidated, arbitration might end with inconsistent outcome.

·         In construction many parties are involved, thus delaying in gathering witness & information.

Explain mutually beneficial breach of contract

If all parties to a contract mutually agree to replace the contract with a new one or annul or remit or alter it, then it leads to a discharge of the original contract due to a mutual agreement. Mutually beneficial breach of contract occurs when both the parties are benefitted due to the breach.

On 10^th August 2022 Raman Construction had an agreement with Sankar Group to purchase Jagadamba TMT Bar Fe 500 at the rate of AED 250 per Quintal/Bundle. One month later, Laxmi Steel offered Raman Construction to provide the TMT Bar Fe 500 at the rate of AED 230 per Quintal. Due to labor strike, Sankar Group was unable to product enough steel bar which leads Jagadamba TMT shortage in the market. Discussion between representatives of Raman Construction & Sankar Group had been held on 5^th Nov 2022 and both the parties mutually agreed to terminate the contract as both parties were equally benefitted from breach of contract.

 

 General method of dispute resolution in construction

Numbers of parties and stake holders are involved in construction thus there is high probability of occurrence of dispute. There are several methods for dispute resolution which are explain below:

• Negotiation

This is the direct process of dispute settlement by negotiating upon the subject matter. Process involved in negotiation are.

·         Prepare to negotiate

·         Exchange information

·         Bargaining

·         Closing the subject & commitment

• Dispute Review Board

A committee comprising representative of both parties is formed to study the reason for dispute and suggest measures to settle the dispute.

•  Mediation or Conciliation

Conciliation is primarily used for the resolution of disputes in the construction industry where the key distinction between it and mediation is that if the conciliator is unable to facilitate a settlement between the disputing parties, he/she is required to issue a recommendation which will be binding on the parties unless it is rejected by one or other of them within a specified time.

With mediation, parties use the assistance of an independent third party or mediator who facilitates communication between them, helps identify the issues in dispute and to explore the options for resolution in an attempt to reach agreement.

•  Arbitration

•  Adjudication or Litigation

Common breach of contract in construction

A breach of contract occurs when one party in a binding agreement fails to deliver according to the terms of the agreement.

Common breach of contracts are as follow:

              i.            Refusal to carry out work.

            ii.            Abandoning the site.

          iii.            Failure to make payments.

          iv.            Employing others to carry out the work.

            v.            Failure to allow access to the site.

          vi.            Failure to proceed regularly and diligently.

        vii.            Failure to remove or rectify defective works

Mediation/Conciliation in a construction dispute

 Mediator is a person who attempts to make people involved in a conflict come to an agreement and conciliator is a person who acts as a mediator between two disputing people or groups. The process of dispute resolution starts with interview with disputed parties individually. Conciliator acts as a bridge between these parties in order to held dialogue and clarify the matter of dispute and misunderstanding.

But if a party or both intend to escalate the issue, each party appoint a mediator independently. Mediators is provided an attorney just to represent as a dialogue representative of the party but the parties still holds rights to accept the settlement plan.

The process is private and confidential. Information and documentation shared privately with the conciliator cannot be passed to the other party without express permission.