A breach of contract does not give rise to an entitlement to compensation for every loss sustained by a Plaintiff.

Some losses are deemed too remote for the Defendant to be held responsible for them.

A good example of this occurred in Balfour Beatty Construction (Scotland) Ltd v Scottish Power plc [1994] CILL 743.

The Plaintiff was constructing a concrete aqueduct over a roadway. It established a batching plant to provide the concrete on site, with the Defendant supplying the power to run the plant. The concrete had to be delivered in one continuous process; a hiatus longer than 30 minutes would prevent a re-start and would ruin the work and materials applied. The Defendant’s power supply failed during the batch run. The work done had to be undone and the Plaintiff had to start again.

The court held that the Defendant was not answerable for the cost of demolition and reconstruction because the Plaintiff had not informed it of the need for a continuous pour.

Supposedly, a new era has dawned in Ireland for standard contracts in the public sector. See one new Construction contract HERE and another HERE.

The major change in these contracts is the shifting of risk from the public authority to the contractor. In general, these forms are intended to bring certainty and security to the State; whether they do so for the contractor is another matter.

That aside, these forms indicate an essential for all contracts; the formation and expression of agreement through offer and acceptance. Either side can make an offer which may be accepted by the other side. (Public servants are not free to accept offers which effectively vary the standard public authority terms but private persons, in their contracts, are completely free to do so). An offer which is met by a counter offer is declined, or not accepted.

Offers, and, by the same token, contracts, may be oral or written. It is common that they are both; the oral element may refer to substantial written terms as in “… I accept those terms”.

When the contract is complex (construction contracts are complex) the offer and the acceptance must refer to all the essential terms, and often all the terms, essential or not; otherwise there is no agreement.

For lawyers there are interesting rules about the time of the making of a contract. They relate to the receipt of offer and the receipt of acceptance. If a party tries to withdraw an offer it will be unable to do so after acceptance is communicated. (To withdraw the “offer” at that point is to breach the new agreement). Sometimes, due to delays in communications, a legitimate withdrawal of an offer (no acceptance having been communicated) becomes ineffective if the acceptance is delivered before your withdrawal is delivered.

Sam Goldwyn (of Metro-Goldwyn-Mayer, the US film producers) said of oral contracts, that they were not worth the paper they were written on. He was right, because of the lack of certainty they embody. Inevitably the two interlocutors making the “oral contract” will have differing recollections of the terms agreed. Litigation on such a contract is an unpredictable gamble.

Communication of offer and acceptance (ignoring EU regulation on the issue) can determine the place of the making of a contract. The place of the making of a contract (ignoring EU regulation on the issue) will determine the applicable law of the contract.

Certainty is good for business. Ireland has now produced a series of standard contracts for use in public construction and engineering projects. They are available online from the Department of Finance HERE. The contracts are designed to transfer certain additional risks to the contractors. Provision has been made for the Employer to stipulate the hiring of certain specialists and to assign design responsibility to the contractor.

There will be, presumably no need to trawl the world for good precedents for such projects, as suggested HERE.

Public procurement contracts are very important. See HERE. They are usually complex and involve the expenditure of substantial sums of public money. They are regulated by EU law, the object of which was stated by Advocate General Jacobs as:

[the]…main purpose of regulating the award of public contracts in general is to ensure that public funds are spent honestly and efficiently, on the basis of a serious assessment and without any kind of favouritism or quid pro quo whether financial or political.�?

This quote is from SIAC Construction Ltd. v Mayo County Council [2002] 3 IR 148. SIAC was one of many persons who tendered for the provision of a new sewerage system for the town of Ballinrobe. Its tender, on price, was the lowest. Mayo county Council awarded the contract to the next highest tenderer. In the judgment of the County Council’s engineer, SIAC’s tender would, in due course, be discovered not to be the cheapest.

SIAC took issue with the making of this judgment. The case was fought in the High Court. SIAC lost there. It appealed to the Supreme Court which remitted a question to the European Court of Justice (“ECJ�?). The ECJ found the County Council procedure to be unobjectionable, saying;

…when tenders are being assessed, the award criteria must be applied objectively and uniformly to all tenderers. Recourse by an adjudicating authority to the opinion of an expert for the evaluation of a factual matter that will be known precisely only in the future is in principle capable of guaranteeing compliance with that condition.�?

The Supreme Court (Fennelly J.) noted the difference between the basis for ordinary judicial review and public procurement review saying;

I do not think, however, that the test of manifest error is to be equated with the test adopted by the learned trial judge, namely that, in order to qualify for quashing, a decision must “plainly and unambiguously fly in the face of fundamental reason and common sense.�? It cannot be ignored that the Advocate General thought the test should be “rather less extreme.�? Such a formulation of the test would run the risk of not offering what the Remedies Directive clearly mandates, namely a judicial remedy which will be effective in the protection of the interests of disappointed tenderers. It is significant, I think, that Member States are required to make available, where appropriate and necessary, measures of interim relief ( i.e., potentially halting the public procurement procedure) and damages.�?

Mayo County Council had stipulated that the tenders would be assessed on the basis of what was the most economically advantageous contract. The contract was “a measure and value contract�?. This meant that the contractor was free to do the work and get paid for the work on the basis of work done. Effectively, any tender was an estimate of what the work would cost.

Consequently, Fennelly J. concluded;

It is the fact that the out-turn is uncertain that is decisive. I think that the County Council acted within its margin of discretion. I do not think it exercised that discretion in an unfettered way. It followed objective and objectively verified criteria.�?