Writing Engineering Specifications

Paul Fitchett, Jeremy Haslam

• Editorial: Routledge
• Año: 2003
• ISBN:
  9781134575299
• Edición: 2
• Categoría: Technology & Engineering
• Categoría: Construction & Architectural Engineering

Engineers need to understand the legal and commercial context in which they draw up technical specifications. This thoroughly up-dated edition of Haslam's successful Writing Engineering Specifications provides a concise guide to technical specifications and leads the reader through the process of writing these instructions, with clear advice to help the student and professional avoid legal disputes or the confusion and time wasting caused by poor drafting. Designers and project managers should find this invaluable, and it should be helpful to insurers, lawyers, estimators and the like.

1 Specifications in context

‘What is the use of a book,’ thought Alice, ‘without pictures or conversations?’

Introduction

This first chapter looks at the work of the specifier (see the Introduction) as part of a commercial arrangement. It discusses contracts, contract and tender documents and pricing strategies. To know how to write a specification, the specifier needs to know how a contract is made and, should anything go wrong (in the legal, not the technical, sense), how the law of contract provides for remedies and assistance. The details of how contracts are actually prepared and how these remedies are obtained are usually left to lawyers.

No specifier is expected to know more than the basic information set out in this chapter, but it is very basic and it is not intended as a substitute for a legal textbook. Should the specifier wish to go further, there are a number of student texts on contract law as well as books on law for engineers, architects, and so on. However, the specifier should not be afraid of dipping into a legal textbook,¹ if only for the reason that most are beautifully written and many provide entertaining historical examples. The law of contract is very old and largely governed by events occurring in the horse-and-cart era—both appear frequently!

Contracts and bargains

A contract is a bargain, but not every bargain is a contract. Such a statement is a reliable guide to adopt when thinking of the background to the writing of any document that forms part of a bargain.

Over the centuries the development of the legal process—the general law—has recognized the need for people to make bargains and to seek the help of the state if the bargain is not honoured. However, in exchange for lending its support, the state, as the ultimate enforcer of the bargain, requires particular conditions (both procedural and substantive) to be met. Procedural conditions are those required by the state when it receives a request from a subject to enforce a bargain, and can loosely be thought of as methods of application to the courts or arbitration, and how those tribunals will hear the request. The substantive conditions are those contained in the common law (i.e. judge-made law) and statute. In these days the substantive law, as it also governs procedure, is always dominant, but this has not always been the case.

Properties of a contract

Not every bargain is a contract. In order to qualify as a contract, the bargain must have particular qualities:

1. an offer has been made;
2. that offer has been accepted;
3. there is an intention that the bargain be enforceable;
4. the parties making the bargain are qualified to do so under the law.
   
   

In the simplest terms, a bargain that exhibits the four qualities listed above is a contract and, as such, remains in existence until it has been performed or terminated.

The concept of offer and acceptance is based upon the legal notion of ‘consideration’—the exchange of some benefit or burden for a corresponding benefit or burden, often in the form of a promise. In the normal course of events one party promises to pay, provided that the other party does something, although equally valid is the promise to pay provided the other party desists from doing something—a forbearance. The elements of a promise for a promise, or promise and forbearance in any combination, constitute valid consideration and make a contract binding in law. To promise unilaterally to do something for any one party (or even the whole world) for no apparent reciprocal action cannot be the basis of a contract; similarly, to forbear from doing something does not make a contract. Should a party wish to make a unilateral promise, he or she does so under a deed that needs no consideration. It used to be the case that a contract which was signed as a deed had to be ‘signed, sealed and delivered’ for it to be properly executed. Now, all that is required is that the parties make it clear, in the wording, that the agreement is intended to be a deed and that the correct signatures and witnesses are entered onto the contract. For a company this will normally require the signatures of two company directors or one director and the company secretary—legal advice should be sought. The other effect of signing a contract as a deed is to extend the period during which the parties may sue for their rights under the contract. The practical aspects of this effect are dealt with later in this chapter under ‘warranties and guarantees’. Various general terms are used to distinguish contracts which are entered into as a deed from contracts entered into in the much more common way of offer and acceptance—‘special’ and ‘simple’ are the usual respective terms.

In addition to the existence of consideration is the question of its value—and that question is ignored by the law. Consideration need have no value; it merely has to exist. If a man wishes to let a house for the rent of a peppercorn a year, it makes a valid contract and consideration is said to have passed. If a building contractor enters into a contract to build something at a considerable loss, he or she cannot claim that no contract exists because of the lack of value (though the contractor may have other rights in contract). The last point is of central importance in engineering contracts in which there is no right to receive ‘adequate’ consideration (though there is a legal remedy against unjust enrichment), therefore any payment benefit has to be set out and received through the contract itself.

To many people there may appear to be some missing quality in all of the above: that a simple contract must be signed and be in writing. There is no legal requirement that a contract (except one relating to the sale of land) needs to be in writing. In fact, thousands of contracts are made every day on the Stock Exchange without any paper passing between the parties making them; the later ‘contract note’ is only evidence that a contract was made. And, as an extension to that idea, a contract can be varied by the parties making the original contract in the same way that the original contract was made. Indeed, many people have unwittingly made contracts by bargaining under the mistaken impression that, provided nothing is in writing, no contract exists. The point of written contracts will, hopefully, become clearer later in this book.

Returning to the four qualities of a contract, listed above, it is necessary to understand them all clearly to appreciate the process of turning a bargain into a contract. An offer must be made, and this is the easiest part. A person who offers to sell a car to another for £1,000 has made an offer. The recipient of the offer can do one of five things: he can reject it; accept it; make a counter-offer; make an enquiry; or ignore it. In order that the outcome is clear in a legal sense, the response to the offer must be specific. The necessary clarity is exhibited in these replies:

1. ‘Not likely/I can’t afford that/No!’—these are clear rejections.
2. ‘OK/fine/here’s the money/I’ll give you a cheque/agreed’—these are clear acceptances.
3. ‘I’ll give you £950/will you take £500 plus my hi-fi set?’—these are counter-offers.
4. ‘Can my dad see it first?/it’s a bit pricey/will you take less?/what about part-exchange?’—these are enquiries.
5. ‘I’ll let you know’/[no reply]—this is ignoring the offer.
   
   

Thus, (1) and (2) are both final—the first cancels the offer; the second gives rise to a binding contract. Once an offer has been rejected, it is no longer open for acceptance by the person who rejected it.

The counter-offer in (3) is merely an offer by the person to whom the original offer was made; it serves to reverse the offer-acceptance process. The counter-offer is therefore likely to produce any one of the five responses, including a counter-offer. This is the true bargaining process and is very common in any commercial transaction. The problem is knowing when the process has come to an end and a contract has been made.

The responses in (4) are in the nature of an enquiry into the attitude of the person making the offer. Unlike the counter-offer, an enquiry does not destroy the original offer, which is still open for acceptance when the enquiries are concluded. Thus, the making of enquiries is an uncertain process because the dividing line between an enquiry and a counter-offer is somewhat blurred.

To ignore an offer has no effect upon that offer, then, except that time (which may be a condition of the offer) is passing. The examples in (5) cannot be taken as acceptance or rejection. To state in an offer that the absence of response will be taken as acceptance is a futile gesture. The law does not recognize that a contract can be made by silence—except in rare cases in which the offer and response is already the subject of a binding contract.

An offer can be withdrawn at any time before it has been accepted, but after acceptance it cannot be withdrawn or modified. In order to be effective, the withdrawal of the offer must be communicated to the person to whom the offer was made. In some cases, a notice of withdrawal forms part of the offer, for example ‘This offer is open for acceptance until noon on Monday, 22 October 2001’, in which case no further notice is required. In addition, such an offer can still be withdrawn earlier, or the period of acceptance lengthened, simply by telling those to whom the offer was made. The term most commonly used for such a period is the ‘validity period’.

Discharge of a contract

Once a bargain has been made, it must be performed by both parties in order that it can be considered as discharged. When both parties have carried out their obligations, neither can be required by the other to do anything else. Paradoxically, the process of cancellation, if allowed for in the contract, can be taken as part of its performance; the exercising of the right to cancel is merely performing the contract. To understand what constitutes performance, it is necessary to look at the terms of the actual contract to determine whether those terms have been performed.

Legal remedies

If the obligations under a contract have not been discharged either within the time allowed or in the manner required, then one of the parties is likely to have been at fault, that is in breach of contract. In such a case, the party who suffered has three remedies open to him or her under the general law:

1. damages;
2. performance;
3. repudiation.
   
   

The first remedy is the most common—obtaining money to compensate for the loss suffered. The amount of damages can be provided for in the contract as a pre-estimate of the damages that would be suffered in the event of a breach of contract. The term used to describe this type of damage is ‘liquidated damages’. Alternatively, the damages can be left to be assessed (unliquidated damages), also referred to as ‘damages’ or ‘damages at large’. Damages have to be related to the loss suffered to the extent that if no loss is suffered no damages are payable. The other point to bear in mind is that the loss is calculated as if the contract had been performed, not on the basis of it never having been made.

The second remedy of performance is rarely sought. Termed ‘specific performance’, it is a declaration by the courts or arbitrator that a party must perform its obligations or suffer a penalty imposed by the tribunal. As it requires a degree of supervision by the tribunal (for which it is not usually equipped), it is not often granted, and damages are awarded instead. The tribunal has thereby taken the line that money is sufficient compensation.

Repudiation, the third remedy, is the unilateral act of one party in cancelling the whole contract as a result of the other’s breach. Although recognized in law as a valid course of action, the instances in which it can be successfully used are rare, coupled with the fact that repudiation itself may bring an action for breach of contract by the party who suffers the repudiation.

Contractual remedies

In addition to the remedies of damages, performance and repudiation under the general law of contract, the contract itself may contain some (or all) of the remedies open to an aggrieved party. Liquidated damages is one such remedy, and there are many others. In fact, the parties may agree to any remedies they choose, provided that they are not penalties. Parties to a contract are not allowed to seek punishment, only compensation for a loss. The common remedies are liquidated damages, offers of substitutes, reperformance of the unsatisfactory action to correct it and cancellation.

Limitation of rights

Whether or not a party is able to have remedies under the contract and under the general law of contract depends on the actual terms. Unlike consumer contracts, those in the business world may limit the rights of the parties to the terms of the contract only. Consumers are a special class of contracting person who have statutory rights which cannot be taken away by contract. Another class of person who may not be limited by contractual rights is one who suffers physical injury or death as a result of the actions of the other party to a contract in the course of its performance.

Warranties and remedies

The law provides remedies for those who have failed to receive what they were entitled to under the contract—common law rights. Additionally, there are remedies laid down in Acts of Parliament—statutory rights. But both rights in the general law and statutes are not, by their very nature, explicit. When buying a generator delivering 480 V, the buyer has no common law or statutory right to receive a generator with an error range of ±10%, but there is a right to receive the item contracted for. If the contract specifies a generator with those properties, then the right is contractual.

The right to receive what has been contracted for is limited in time. The law (at present) states that a party has a right to sue within 6 years of when the fault was discovered or could reasonably have been discovered by the wronged party. This can be extended to 12 years if the contract is made as a deed. Although the law is somewhat fluid on the point, the trend is towards fixed liability periods.

Warranties and guarantees are contractual in nature and are intended to clarify the common law. How warranties (and guarantees—the words are synonymous) are intended to operate depends on which party is putting them forward. Typically, warranties offered by contractors are limited in nature, especially with respect to time. Any warranty that leaves the client with no redress for faulty equipment after a time which is less than the 6 years after the discovery of the fault has had the effect of limiting the client’s common law rights. Any warranty which specifies the nature of the allowable claim (in technical terms) has the same effect. For example:

X’s industrial thermometers are guaranteed to ± 1 °C, valid for two years. No liability will be accepted by X for any loss or damage caused by errors outside the limit. X shall only be liable for a replacement thermometer up to the end of the warranty period, and shall have no liability thereafter. This guarantee substitutes all other rights of the purchaser.

Such a guarantee is commonly offered in industry. Note that it is absolutely limited in time to less than 6 years; the purchaser has no legal right to claim for damages if the thermometer fails to record the temperature accurately, even within the stated limits; the supplier is only liable for a replacement; and the purchaser cannot rely on his common law rights. Consider the effect when such a thermometer is bought by a business which stores germinating seedlings at a constant temperature, and the thermometer is inaccurate by ±5 °C. However, if the thermometer was purchased by Mr Consumer for use in his greenhouse, then he would be protected by statute, which, although allowing for the time limitation, provides that the item must be fit for its purpose (it must actually record the temperature); the supplier is liable for the cost of the replacement thermometer including installation, delivery and return of the defective items with parts and labour; and any clause restricting his common law rights is invalid, thereby leaving the way open for consequential damages.

Obviously, the ordinary consumer is better off than the industrial client. This is intentional because it is recognized in law that consumers individually have limited bargaining power and therefore need statutory protection. Businesses, on the other hand, operate as equals in the bargaining process. The specifier must, then, be aware of what he is doing if he intends to obtain a specific warranty on the performance of any item. The advantage of c...