construction law
TRANSCRIPT
i
Acknowledgement
I would like to express my special appreciation to our lecturer Mr.Imesh Pathirana
whose contribution in stimulating suggestions and encouragement helped me to
coordinate my assignment.
I would also like to thank my Friends and want to thank you for letting my defence be
an enjoyable moment, and for your brilliant comments and suggestions, thank you.
A special thanks to my family. Words cannot express how grateful I am to my mother
and father.
Finally, I wish to thank International College of business and Technology (ICBT)
Southern campus, Galle
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Executive summery
This assignment is about Law and Contracts. Under this assignment firstly, introduced
what is law. And then discussed about sources of law. The after that Court system of
Sri Lanka is largely described and mentioned in the assignment by demonstrations
with charts. After that discussed about different between Criminal law and Civil law,
Criminal law and Tort law, Contract law and Tort law. Alternate Dispute Resolution
system which is also known as ADR system is explained and studied with its main
three types Arbitration, Conciliation and Mediation.
In the second task talk about Elements of contracts, and then describe what means
Offer and what means acceptance. Details about Commercial agreements and
Domestic agreements. Responsible parties for commercial contracts and their
responsibilities are discussed in here. Breach of a contract and its remedies are also
included. And then explained about the Expedition theory.
According next task explained about what are the types of companies, registration of a
company. After that explain about different between contract of employment and
contract for employment. Finally describes how European legal requirements affect
the operation of construction companies.
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Table of content
Acknowledgement .......................................................................................................... i
Executive summery ........................................................................................................ ii
Table of content ........................................................................................................... iii
List of tables .................................................................................................................. iv
List of figures ................................................................................................................. v
Introduction .................................................................................................................... 7
02. TASK 01 .................................................................................................................. 8
Question 1.1 ........................................................................................................ 8
Q1.1.1. What is Law? ................................................................................................ 8
Q1.1.2. What are the sources of law? ...................................................................... 11
Q1.1.3. Flow chart on Court System in Sri Lanka ................................................... 14
Q1.1.4. Compare those concepts .............................................................................. 15
Question 1.2 ...................................................................................................... 24
03. TASK 02 ................................................................................................................ 27
Question 2.1 ...................................................................................................... 27
Q2.1.1. Main elements of a contract ........................................................................ 27
Q2.1.2. Offer ............................................................................................................ 29
Q2.1.3. Acceptance .................................................................................................. 31
Q2.1.4. Deference between the commercial agreements and domestic agreements 32
Q2.1.5. Remedies in contract law ............................................................................ 36
Q2.2 Suitable theory ................................................................................................ 43
04. TASK 03 ................................................................................................................ 44
Question 3.1 ...................................................................................................... 44
Q3.1.1 Type of companies ....................................................................................... 44
Q3.1.2 Procedure of registration of company .......................................................... 45
Q3.2. Difference between contract of employment and contract for employment. . 65
04. Task 04 ................................................................................................................... 71
Conclusion ................................................................................................................... 73
Recommendation ......................................................................................................... 74
Reference ..................................................................................................................... 75
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List of tables
v
List of figures
Figure 1.1 Law………………………………………………………………………01
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Introduction
Construction industry is widely spread and fast growing industry in the whole world.
From the ancient times people constructed infarstuctures. So the history of
construction goes to very far back in the evolution of man kind. But day by day this
industry which can also be called as an Art, develoved with the improvements of
techniques and science. Now the construction has many different types and varieties.
So when working with them many difficulties and issues arose regarding several facts
and most of those facts needed a proper organized set of rules. Therefore the Law and
Contract came to interact with the construction industry. Now constrcton project has
so many legal documents and many other legal measures to be taken. So nowadays
Law and Contract is very essential for Construction.
Not only for Construction industry but also many other construction related and non
related fields are come to act with law. For an example Labour law, company law,
Industrial Law, Workmen Compensation, Shop and Office employees act, Maternity
benifit ordinance, etc. Not only those but some special cases in law such as law of
torts, Agreements and Contracts, Liability, Negligence, etc. are also essential when
working in present industries.
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02. TASK 01
Question 1.1
Q1.1.1. What is Law?
It is possible to describe law as the body of official rules and regulations, generally
found in constitutions, legislation, judicial opinions, and the like, that is used to
govern a society and to control the behaviour of its members, so Law is a formal
mechanism of social control.
Legal systems are particular ways of establishing and maintaining social order.
Definition of law - Legal Positivism
John Austin (English jurist born 1790)
"Province of Jurisprudence Determined"
"A rule laid down for the guidance of an intelligent being by an intelligent being
having power over him."
Professor Hart
(Oxford Professor of jurisprudence, born 1907)
"The Concept of Law" (1961)
"A body of rules fixed and enforced by a sovereign political authority."
Hart defined law as a system of rules, a union of primary and secondary rules,
Definition of law - Marxist theory
Marxist theories of law generally define law as a tool of oppression used by
capitalists to control the proletariat.
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Definition of law - Natural Law.
Plato (Greek philosopher born 427 BC)
Aristotle (Greek philosopher born 304 BC)
“An embodiment of Reason”, whether in the individual or the community.”
St Thomas Aquinas (Italian philosopher born 1224)
"Summa Theologiae (Summary of Theology)", Question 90, Art. 4
"Nothing else than an ordinance of reason for the common good, made by him
who has care of the community, and promulgated"
Definition of law - Legal Realism
Oliver Wendell Holmes (American judge and jurist born 1841)
"The Path of the Law" in Collected Papers, 1920
"The prophecies of what the courts will do ... are what I mean by the law,"
Karl Llewellyn
(American legal scholar born 1893)
"The Bramble Bush" 1951
"What officials do about disputes,"
Lord Browne-Wilkinson (Senior Law Lord born 1930)
"The sum of the influences that determine decisions in courts of justice."
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Other definitions
Definition of Law - Max Weber
(German Sociologist born 1954)
"Law…exist if it is externally guaranteed by the probability of coercion (physical
or psychological) to bring about conformity or avenge violation, and is applied
by a staff of people holding themselves especially ready for that purpose."
Definition of law - Thomas Hobbes
(English philosopher born 1588)
Hobbes said of the role and function of law in his polemic work „Leviathan‟ (1651)
"Law is the formal glue that holds fundamentally disorganised societies
together."
Definition of law - Glanville Williams “Learning the law”
"Law is the cement of society and also an essential medium of change.
Knowledge of law increases one’s understands of public affairs. Its study
promotes accuracy of expression, facility in argument and skill in interpreting
the written word, as well as some understanding of social values".
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Q1.1.2. What are the sources of law?
Each country‟s legal system has its own sources of law, with greater weight placed on
some sources than others. In developing an infrastructure project, it is important to
identify which sources of law apply in the host country and their relative weighting.
The following are the most common sources:
Constitution
Legislative Enactment - Statute
Judicial Decisions
Treaties
Other Sources
Constitution/ Code
A country's Constitution is a set of fundamental ground rules setting out the powers
of the different branches of government (i.e. executive, legislative and judicial ) and
how these entities operate and interrelate. The Constitution may also set out basic
principles, such as fundamental freedoms and rights. In Civil Law systems these rules
are usually embodied in "Codes".
All but a very few countries have written constitutions where these fundamental rules
can be easily identified (although their interpretation may be less straightforward).
The remaining few have unwritten constitutions established by long-standing
tradition.
A Constitution overrides any other source of law and it is usually highly difficult to
amend. There may be a separate judicial court which considers constitutional issues,
namely whether any law, regulation or administrative act is inconsistent with the
Constitution and therefore void.
Legislative Enactment - Statute
Legislation is the second key source of law and usually takes priority over sources of
law other than the Constitution. There may be more than one legislative body in a
country - central, provincial or state and municipal authorities may each have separate
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power to legislate. Rules will determine the extent to which and in what areas one
legislative body has priority over another.
Primary legislation may delegate powers to a particular ministry or regulator to
prepare secondary legislation designed to supplement and develop the principles set
out in the primary legislation. For example, tariff setting guidelines for a regulatory
authority that is established by primary legislation may be set out in secondary
legislation. Secondary legislation is usually not subject to full parliamentary scrutiny
guidelines and so is faster to enact. However, it may be more difficult to identify than
primary legislation as it may be recorded in subsidiary documents.
Judicial Decisions
In some countries, judicial decisions are authoritative and develop into a source of
law known as “case law”. Case law may extend the application of legislation and is
deemed to form part of the law.
In other jurisdictions (mainly civil law jurisdictions) judicial decisions are formally
only deemed to interpret the existing law and are not a binding source of law,
although in practice they are often treated as authoritative.
Treaties
The host country may be subject (or may be about to become subject) to laws made
by a regional or world grouping by becoming a signatory to a treaty. Examples are the
laws of the European of Union, trade treaties, rules of the WTO and bilateral treaties.
It is unlikely that a country could amend these rules easily.
An example of laws of a regional grouping is the body of regulations and directives of
the European Union. Regulations have direct application in the respective member
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states legal systems and will take precedence over each member's national laws.
Directives have to be adopted separately into law by each member state, but the
member state must ensure consistency with the underlying EU directive. It is not just
the current members that need to heed EU law. Countries seeking to accede to the EU
(whether their accession has been formalized or not) need to take account of EU laws
and the standards that they impose (particularly relevant to infrastructure).
Rules and guidelines may also be imported into law through treaty in relation to such
matters as standards of engineering and health guidelines. For example, a country may
adopt the World Health Organization's standards for drinking water.
Other Sources
There are a number of other sources of law that may be given greater or lesser weight
in a particular country:
Writings of legal scholars - in civil law jurisdictions, academic writings interpreting
the constitution or legislation have considerable influence on decisions of the courts;
Edicts from a king/ ruler;
in the case of certain Islamic countries, "Sharia law" in the form of religious books
and edicts from religious groupings.
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Q1.1.3. Flow chart on Court System in Sri Lanka
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Q1.1.4. Compare those concepts
Compare Criminal law with Civil law
The distinct differences between criminal law and civil law are in the type of action
against the defendant and the type of remedy sought. A civil case involves individuals
in a dispute and generally ends in monetary reward. Criminal cases are considered
crimes against society and usually end in jail or prison time.
Criminal Law vs. Civil Law
In most cases, the difference between criminal and civil law is quite clear. A man runs
into a bank brandishing a gun, demands money and runs off. That is a crime of bank
robbery and is punishable by incarceration. When a man checks into a hotel, runs up
charges at the restaurant and bar and leaves without paying, he is defrauding a
business and is punished differently. He will pay fines and make restitution. There are
several things that set criminal law apart from civil law. In order to better understand
the difference, let's first take a look at criminal law.
Criminal Law Examined
Criminal law is a set of rules and regulations that describe behaviors that are
prohibited by the government. The behaviors generally involve things that would
affect public safety and the welfare of society as a whole. Examples of criminal acts
are:
Murder
Theft
Robbery
Bribery
Embezzlement
When a criminal act is committed and a person is brought to trial by the state or
federal government, it is up to the prosecuting party to prove that the defendant
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committed the crime. This is known as the burden of proof. In criminal cases, the
plaintiff must prove beyond a reasonable doubt that the defendant committed the
crime. This means that the plaintiff must demonstrate that a reasonable person would
agree that a crime took place based on the evidence presented. If there is any doubt on
the part of a reasonable person, the burden to provide further evidence rides on the
plaintiff. The defendant is considered innocent until proven guilty by a judge or jury.
The punishment for criminal acts generally involves incarceration and/or fines and
even death in extreme cases.
Certain rights are extended to defendants:
The right to a speedy trial
The right to counsel
Protection against self-incrimination
Protection against unreasonable search and seizure
Protection against double jeopardy
Felony Crimes
There are two types of criminal acts:
Felony acts
Misdemeanour acts
A felony is a serious crime that is punishable by serving time in prison for more than
one year. In State of Florida v. Zimmerman, it is alleged that George Zimmerman
committed second-degree murder. Zimmerman shot his victim during a routine patrol
of his neighbourhood. The murder was not premeditated, meaning Zimmerman did
not plan on killing anyone that fateful evening. The shooting took place during a
scuffle with what Zimmerman thought was an intruder, and he acted in self-defense.
The state disagrees. This is a high-profile case of murder, and Zimmerman is being
accused of committing a felony.
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A misdemeanour, on the other hand, is a lesser criminal act that is punishable by a
shorter jail sentence and fines. In The State of Oregon v. Hood River Juice, the
defendant was accused of polluting natural resources like streams and other bodies of
water with chemicals used to process juice. The owner of Hood River Juice pleaded
guilty to the misdemeanour crime of polluting and received a punishment of either 80
days of community service or 48 hours in jail. Obviously, polluting a local water
source is less heinous than gunning down an unarmed man, and therefore carries a
lesser punishment.
Civil Law Examined
Civil law deals with disputes between individuals, groups and organizations who seek
an award of compensation for their troubles. Examples of civil cases are:
Fraud
Breach of contract
Negligence
Workers' compensation-related injuries
When two parties disagree on something, they can take it to civil court. The plaintiff
initiates the claim, and the defendant responds by either pleading guilty or innocent.
Unlike criminal law, which requires evidence beyond a reasonable doubt, in a civil
case, the burden of proof is based on preponderance of evidence - or the greater
weight on the meaning of the evidence - not the amount of evidence. In other words,
evidence needs to be convincing even if it is gathered from only one source.
Punishment in civil law generally involves compensation for injuries sustained by the
plaintiff or disposition of property. Incarceration is never a remedy in a civil suit.
Civil Law in Action
In PELMAN V. MCDONALD's, the plaintiff alleged that McDonald's Corporation
was responsible for their obesity and health problems. In Pelman's case, they believed
McDonald's falsely advertised its food as being healthy. The Pelman family
patronized McDonald's quite frequently. This caused the family to develop diabetes,
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obesity and other ailments. For this, the Pelmans wanted compensation and for
McDonald's to change the way it advertises its food choices. Incidentally, the case
was thrown out of court.
Lesson Summary
Criminal law and civil law differ in the type of action against the defendant and the
type of remedy sought. Criminal cases are considered crimes against society that
usually end in jail or prison time. The severity of the crime determines the
punishment. A felony is a serious crime, like murder, and carries a prison term of no
less than one year. A misdemeanour is less serious and may result in a shorter jail
term and fines. Both criminal and civil cases require that the plaintiff prove the case,
but the type of evidence necessary differs. Criminal cases require that the plaintiff
hold the burden of proof that is beyond a reasonable doubt.
A civil case involves individuals in a dispute that generally ends in monetary
reward.
A civil case requires preponderance of evidence. The evidence a plaintiff is
required to present does not have to be lengthy, it just has to be convincing. A
good way to understand the difference between criminal and civil law is to
review actual legal cases. In our lesson, we analyzed real cases to distinguish
the difference between the types of law.
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Compare Criminal law with Tort law
Criminal Law
The overall purpose of criminal law is to provide some basic protection to society
from clearly ant-social acts. Although crimes may have immediate victims (e.g., the
owners of homes burned down by an arsonist), the ultimate victim of crime is society
(e.g., the danger to everyone if an arsonist is not stopped). As a result, the focus of
criminal law is on the person committing the crime. The focus of criminal law is on
deciding if a person is a criminal and, if so, how the person should be punished. There
is a sense in which criminal law is for the criminal..
Tort Law
Tort law is a kind of civil law, like family law, property law, and contract law. Torts
are some general standards of civil conduct. As a practical matter, torts are nothing
more than a collection of theories for suing people for money and, if permitted, other
remedies. The theme is that victims of torts are entitled to compensation for breach of
the particular duties owed to them beyond family law, property law, and contract law.
The focus of tort law is what the victim can do about the financial harm the victim has
suffered.
Comparison
In the criminal justice system there are several different types of laws that will focus
on certain types of events, acts or cases. Criminal law will focus more on the criminal
that committed the criminal act. Criminal law will identify the wrongdoers and try and
find laws that will help in areas such as retribution, deterrence, incapacitation,
rehabilitation, and restitution. Even criminals need some focus when it comes to law.
Tort Law is different because it focuses on negligent behaviour and civil wrongs.
Tort law is different from criminal law because it focuses on different acts that
involve family, property, or contracts. Individuals that are in a contract together and
break a contract will most likely use tort law to help assist in a case.
Both tort law and criminal law will focus on wrong doers and will encourage that
individuals that cannot help themselves get help from others. However when it comes
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to the type of cases or individuals involved each law is different from each other and
serves a different purpose in the criminal justice system.
There are many types of negligent behaviours that can be tied into tort law. Tort law
and criminal laws can be similar in some aspects but are used for different purposes. I
like tort laws because it is good for both sides. In a case there are two sides rather than
only one side being able to file for retribution. Laws are made for a reason now laws
are useful for not only innocent individuals and society but also to help protect the
guilty. Laws are changing for the better.
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Compare Contract law with Tort law
Contract law is that body of rules that govern contractual agreements between
persons or merchants. A contract is basically an agreement between parties outlining
their duties and responsibilities to one another. Contracts can be formed for nearly any
type of interaction. So, contract laws may address various transactions for the sale of
goods and services. Contract laws outline what a person can or cannot include in a
contract, and what the remedies are if a party breaches their contractual duties.
In contrast, tort laws govern situations where one person has harmed or injured
another person. Tort laws cover violations where the party intentionally harmed the
other person, such as in a battery claim. Tort laws also address incidents where the
party may be held liable even if they did not act intentionally, such as in negligence
claims or strict liability claims. Tort laws usually result in the liable party paying the
victim monetary damages to compensate for their losses.
What Are Some Similarities between Tort Laws and Contract Laws?
Contract laws and tort laws share many similarities. At the most basic level, both
contract and tort laws usually deal with a duty that has been breached.
With contract violations, the breach has to do with the duties that have been named in
the contract. For example, a contract may state that one party has the duty to pay the
other for repair services, and the other party has a duty to perform the services. If
either party fails to perform their duties, contract laws will prescribe a suitable remedy
for the breach.
Most tort violations also involve some sort of breach of duty. For instance, personal
injuries usually occur because the liable party has breached their duty not to harm
another person. Other types of relationships may create a duty of care, such as when
shopkeepers have a duty to maintain their premises so that they are safe for patrons.
Damages awards can be obtained in both contract and tort violations. These are
monetary payments made by the liable party in order to make up for any losses that
result from their breach.
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What Are the Differences between Contract and Tort Laws?
There are several fundamental differences between contract and tort laws. One of the
most important differences is the issue of consent. In a contract, the parties must enter
into the agreement knowingly and without being coerced. In order for the contract to
be valid, each party must consent to the outcome of the contract as stated in the
document.
This means that one party cannot force the other to enter into the contract without
their consent. Therefore, damages in a contract claim usually have to do with a
mistake or a misunderstanding between the parties, since they are typically aware of
what they dealing with in the contract.
On the other hand, the interaction in a tort is never based on consent. Torts generally
involve an intrusion by one party into the safety, health, profit, or privacy of the
victim. In fact, if the victim consents to the tortious conduct, it can serve as a defence
that will prevent them from recovering damages.
This difference with regards to consent is reflected in the way that courts award
damages. For contracts, the purpose of a damages award is to restore the parties to
their position before the breach occurred. In a torts claim, the damages are usually
awarded to compensate the victim for their loss. Punitive damages are sometimes
awarded in a tort suit in order to punish the defendant. Punitive damages are rarely
issued in a contracts claim.
Can a Person file a Contract claim and a Tort Claim in the Same Lawsuit?
Generally speaking, contract claims and tort claims are so different that they must be
filed separately. For example, suppose that one party breached a contract, and the
other party became angry and assaulted the person who breached the contract. The
breach of contract issue must be heard in one lawsuit, and the assault claim must be
dealt with separately.
On the other hand, there are situations where a tort claim and a contract claim can be
so intertwined that they may be heard in the same lawsuit. Usually the tort must affect
the subject matter of the contract in order for them to be filed “concurrently” or at the
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same time. An example of such a concurrent filing is breach of contract and
simultaneous fraud. This is where the breach of contract is based on the fraudulent
conduct of one of the parties.
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Question 1.2
Identify mechanisms to administer and resolve disputes during the construction.
(ADR)
What is Alternative Dispute Resolution (ADR)?
ADR is a term used to describe several different methods of resolving legal disputes
without going to court. The rising cost of litigation is making traditional lawsuits
impractical for many individuals and businesses. At the same time, civil courts face
backlogged dockets, resulting in delays of a year or more for private parties to have
their cases heard by a jury. New types of proceedings have been developed in
response, and they are proving beneficial, saving time and money for everyone
involved. These include arbitration, mediation, and additional kinds of ADR designed
for specific cases and subject matters.
Binding and Non-binding Arbitration
Arbitration is much like a trial, in that the parties can call witnesses, present evidence,
and argue the merits of their case to a neutral decision maker. In many jurisdictions,
civil litigants whose claims do not exceed a certain dollar amount may be ordered to
attend arbitration by the court, in an effort to keep the court‟s docket clear for more
substantial lawsuits. Local court rules may also allow litigants to elect for their case to
be sent to arbitration regardless of the dollar amount at stake. In doing so, the parties
can agree that the results of the arbitration will be binding or non-binding. In non-
binding arbitration, the loser can afterwards request a new trial in the civil court.
The court will appoint a well-established attorney in the local area to perform the
duties of arbitrator. This person will act as a judge at the arbitration hearing, listening
to the evidence and rendering a decision. Parties may be given some amount of say in
the arbitrator selection process. At a minimum, they will be allowed to strike potential
arbitrators with whom they have had prior dealings.
Once a case is sent to arbitration, a conference will be held either by telephone, or in
person at the arbitrator‟s office. Much like a pre-trial conference in civil court, this is
the opportunity for the parties to give the arbitrator an overview of what the case is
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about, and to discuss any evidentiary issues in advance of the arbitration hearing. On
the day of the hearing, the parties will meet in a conference room at the arbitrator‟s
office or in an empty room at the courthouse. Each side will present its case over the
course of several hours. Afterward, the arbitrator can render a decision immediately,
or take the matter under advisement and issue a written decision in the following
weeks.
Using Mediation to Reach a Settlement
Mediation is a much different type of ADR proceeding. Unlike arbitration, it does not
involve an adversarial hearing, and there is no decision-making official present.
Instead, the parties involved in the dispute are brought together in one location, and a
neutral facilitator acts as a go-between. The job of the mediator is to help the parties
reach a voluntary settlement of the case. For litigants and attorneys who have become
antagonistic toward each other over the course of the litigation, or who have
unrealistic expectations concerning the outcome of the case, mediation may be their
only chance to avoid having to go to trial.
A typical mediation begins with everyone meeting in the same room, and each party
giving a short presentation to the mediator. The purpose of the presentation is to give
an overview of the facts and impress upon the mediator the relative strength of that
party‟s case. The parties then split up into two rooms. The mediator goes back and
forth between the rooms, personally relaying the parties‟ settlement offers and
responses. Parties can share information with the mediator in confidence, and the
mediator will give the parties his or her own thoughts about the case. In the end, the
goal is for the parties to agree on how the case should be resolved.
Collaborative Divorce and Specialist Evaluations
Divorce cases have the potential to turn into bitterly contested ordeals. A
collaborative approach to divorce aims to remove the “win-lose” mentality so
common in these cases. Both spouses are still represented by their own attorneys, but
family counsellors, financial professionals, and others are brought into the
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negotiations as well. In a series of group sessions, the parties discuss and reach
agreement on issues such as property division, alimony, and child custody and
visitation.
ADR can also take the form of an evaluation and mediation-type proceeding overseen
by a legal professional with specialized training in the subject of the dispute. For
example, parties in a construction defect lawsuit may agree to present their evidence
to a neutral individual who is both an attorney and an architect. This person will know
more about proper construction techniques than a judge or jury, and may be able to
help the parties resolve their differences at a far lower cost than traditional litigation.
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03. TASK 02
Question 2.1
Q2.1.1. Main elements of a contract
When Does a Contract Exist?
When a party files a suit claiming a breach of contract, the first question the judge
must answer is whether a contract existed between the parties. The complaining party
must prove four elements to show that a contract existed:
1. Offer - One of the parties made a promise to do or refrain from doing some
specified action in the future.
2. Consideration - Something of value was promised in exchange for the specified
action or nonaction. This can take the form of a significant expenditure of money or
effort, a promise to perform some service, an agreement not to do something, or
reliance on the promise. Consideration is the value that induces the parties to enter
into the contract.
The existence of consideration distinguishes a contract from a gift. A gift is a
voluntary and gratuitous transfer of property from one person to another, without
something of value promised in return. Failure to follow through on a promise to
make a gift is not enforceable as a breach of contract because there is no consideration
for the promise.
3. Acceptance - The offer was accepted unambiguously. Acceptance may be
expressed through words, deeds or performance as called for in the contract.
Generally, the acceptance must mirror the terms of the offer. If not, the acceptance is
viewed as a rejection and counteroffer.
If the contract involves a sale of goods (i.e. items that are movable) between
merchants, then the acceptance does not have to mirror the terms of the offer for a
valid contract to exist, unless:
(a) The terms of the acceptance significantly alter the original contract; or
(b) The offeror objects within a reasonable time.
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4. Mutuality - The contracting parties had “a meeting of the minds” regarding the
agreement. This means the parties understood and agreed to the basic substance and
terms of the contract.
When the complaining party provides proof that all of these elements occurred, that
party meets its burden of making a prima facie case that a contract existed. For a
defending party to challenge the existence of the contract, that party must provide
evidence undermining one or more elements.
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Q2.1.2. Offer
“An offer is an expression of readiness to do something which, if followed by the
unconditional acceptance of another person.”
Also
“Given that two or more parties are legally capable of entering into a contract,
and that the contract involves a legal activity, the second component required in
a legally enforceable contract is an offer.”
The offer simply states, in as precise a manner as possible, exactly what the offering
party is willing to do, and what he or she expects in return. The offer may include
specific instructions for how, where, when, and to whom the offer is made.
The offer may include time frames or deadlines for acceptance, which are either
clearly stated or implied. In addition, the offer will generally include the price or
terms of the offer.
When a guest enters a restaurant and reads the menu, he or she is reading a series of
offers from the restaurant manager. While the menu may state, “16 - Ounce
Roast Prime Rib of Beef, $ 22.95, ” the contract offer could be stated as, “ The
restaurant will provide prime rib, if you, the guest, will agree to pay $ 22.95 for it. ”
When a school foodservice director places an order for produce with a vendor, the
offer is similar. The foodservice director offers to buy the necessary products at a
price quoted by the vendor. The reason that an offer is a required component of a
contract is clear. The offer sets the term and responsibilities of both parties. The offer
states, “I will promise to do this, if you will promise to do that.”
Returning to the tree - trimming case referred to earlier in this thread, you can see
why the offer is so important in a contract. In that example, the restaurateur and the
tree service had differing ideas on precisely what constituted the offer. In fact, a great
deal of litigation today involves plaintiffs and defendants who seek the court ‟ s help
to define what is “ fair ” in regard to a legitimate offer, when those offers have not
been clearly spelled out. It is important to note also that the courts will enforce
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contracts that have reasonably identifiable terms, even if those terms are heavily
weighted in favor of one of the parties. Because of this, it is a good idea to clearly
understand all of the terms of an offer prior to its acceptance. By doing so, the
effective hospitality manager can help minimize his or her potential for litigation.
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Q2.1.3. Acceptance
Because it takes at least two parties to create a contract, a legal offer and its
consideration must be clearly accepted by a second party before the contract comes
into existence. It is important to note that the acceptance must mirror exactly the
terms of the offer in order for the acceptance to make the contract valid. If the
acceptance does not mirror the offer, it is considered a counteroffer rather than an
acceptance.
When an acceptance that mirrors the offer is made, an express contract has been
created. An offer may be accepted orally or in writing, unless the offer itself specifies
the manner of acceptance. In both cases, however, it must be clear that the terms of
the offer were in fact accepted. It would not be fair, or ethical, for a wine steward to
ask if a diner would like an expensive bottle of wine, and then, because the diner did
not say no, assume that the lack of response indicated an acceptance of the offer.
In that circumstance, the diner should not be required to pay for the wine. In the same
manner, a contractor who offers to change the light bulbs on an outdoor sign for a
restaurant cannot quote a price to the restaurant manager and then proceed to
complete the job without a clear acceptance by the manager.
Postal Rule – If it is reasonable to use the post for the offer and acceptance process,
then the contract is formed at the time of posting the letter of acceptance, even if the
letter is lost in the post.
Receipt Rule – When an acceptance is sent by fax, it is deemed to be valid when the
message is received, even if the offeror does not in fact read the fax immediately. This
rule also applies to e-mail messages (see section 17 and section 19 of the Electronic
Transactions Ordinance).
Another important point to note is that a conditional (or partial) acceptance is only a
"counter-offer" and does not constitute a valid contract. In other words, if the person
to whom the offer is addressed only accepts some of the terms or proposes some new
terms, then that person is not accepting the offer but is making a new offer to the other
party. In the business world, there may be a series of counter-offers before a final
acceptance comes out.
32
Q2.1.4. Deference between the commercial agreements and domestic agreements
Domestic agreement
Contract made between relatives of the family are known as domestic contracts.
For example:-
Contract between husband and wife
Contract between parents and children
Law presumes that the parties of a domestic contract do not have an intention to
create a legal relationship; therefore domestic contracts are lacking the basic elements
of a contract. (Intention to create a legal relationship)
Therefore the domestic agreement cannot be enforced by law.
In SPELLMAN V SPELLMAN
As the marriage was becoming unsuccessful, the husband bought a car and registered
it in his wife‟s name. However the marriage was unsuccessful and they were
separated.
The Court held that the ownership of the car should be given to the husband as it was
a domestic agreement.
Commercial agreement
Where the parties of a contract enter in to it with the intension to create a commercial
relationship is known as a commercial contract.
The main objective, to enter into the contract is to own profit or to minimize the loss.
The law presumes that the parties have a serious intension to create a legal
relationship. Therefore these commercial agreements can be enforced by law.
33
Q2.1.5. How a party terminate a contract
Everyday people enter into contracts for all kinds of goods and services. Most times
the contracts are signed without even a glance at the contract or its terms. This often
results in the parties later deciding they don‟t like the terms of the contract and
wanting to terminate the contract. So the simple question we often receive is how do I
get out of this contract? While the question is simple, the answer is not.
First, I must point out that simply because you no longer like the terms of the contract,
or no longer want the goods or services you obtained in the contract, can you simply
terminate the contract. This is true even if the contract is of an ongoing nature. If you
were to simply decide to terminate the contract you would be in breach of the contract
and subject to legal ramifications.
However, there are certain arguments to terminate a contract that may benefit you,
depending upon your facts and circumstances. A few of the examples of reasons to
terminate a contract are: reasons of rescission, breach, or impossibility of
performance.
The first reason to terminate a contract is by rescission. Under some circumstances
one party may have a unilateral right to rescind the contract. For example, a minor can
have legal rights to rescind a contract or there are some purchase contracts that have
an automatic right of rescission to cancel the contract. This is often a three day, or
some similar time frame, right to cancel a contract. This could be included as a term
of the contract or in State laws.
A contract can also be rescinded by both parties agreement. Obviously this is not an
option unless both sides decide to terminate the contract.
You also have the right to terminate a contract if the other side has breached the
contract. If the other party has failed to perform an obligation as expected under the
contract the contract can be terminated by the other party. However, the terms of the
contract should be reviewed because there may be a cure period in the contract before
the contract can be terminated. A breach may occur when a party:
Refuses to perform the contract
34
Does something that the contract prohibits, or
Prevents the other party from performing its obligations
Not all breaches of contract can result in the right to terminate the contract. The law
distinguishes between material and immaterial breaches of contract.
A material breach of contract gives rise to a cause of action in court or the right to
terminate the contract. A material breach is a serious one; it is a breach that goes to
the heart of the contract. The injured party can seek damages; that is, a money
payment adequate to cover economic losses resulting from the breach of contract. For
example, a band shows up at a concert but doesn‟t bring any instruments to play
during the concert. The band has materially breached the contract to perform if they
cannot play.
An immaterial breach of contract is a trivial breach of contract and does not invalidate
the contract. For example, assume a service contract for pest control provides that the
service is to be performed on the first Thursday of each month. Contrary to the
contract, the service person arrives on a Wednesday. This act is a technical breach of
the contract but it is immaterial, unless for some reason the service needed to be done
on Thursday as opposed to any other day.
Impossibility of performance is also a reason to terminate a contract. However, this is
a rarely used reason and is often difficult to use as the requirements are very stringent.
The impossibility standard is a true impossibility standard. More difficult than
expected, or more costly than expected do not qualify as impossible. Simple put
difficult is not enough. The performance must truly be impossible. For example, you
contract with a famous painter to do your portrait and the famous painter dies. The
obligation to paint your portrait cannot be completed. The contract to paint your
portrait is terminated by impossibility of performance. It is this type of contract that
can be terminated by the impossibility of performance doctrine.
These are simply a few of the reasons to terminate a contract. There are other reasons
that a party may be able to terminate a contract depending upon the particular terms of
the contract and the facts and circumstances surrounding the contract. To see if you
have any legal rights to terminate a contract you should consult with an attorney who
is experienced in contract law. Or, ideally, contact that attorney before you enter into
35
the contract and need to terminate the contract. Early involvement of an attorney can
often save you substantial time, headache, and money.
36
Q2.1.5. Remedies in contract law
Various remedies exist in contract law. These include:
Damages
Repudiation
Rescission
Specific performance
Injunctions
Restitutionary awards
Damages in Contract Law
Damages in contract law are a legal remedy available for breach of contract. Damages
are an award of money to compensate the innocent party. The primary purpose of
damages in contract law is to place the injured party in the position they would have
been in had the contract been performed.
Addis v Gramophone [1909] AC 488
An award of damages in contract law is subject to the application of the rules on
causation, remoteness and a duty to mitigate loss.
Causation:
The Monarch Steamship v Karlshamns Oljefabrika [1949] AC 196
Remoteness:
Under the rules of remoteness of damage in contract law set out in Hadley v
Baxendale, a claimant may only recover losses which may reasonably be considered
as arising naturally from the breach or those which may reasonably be supposed to be
in the contemplation of the parties at the time the contract was made:
Hadley v Baxendale (1854) 9 Ex Ch 341
37
The application of this principle can be seen in the following cases:
Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528
Kpohraror v Woolwich Building Society [1996] 4 All ER 119
Pilkington v Wood [1953] Ch 770 Case summary
Jackson v Royal Bank of Scotland [2005] 1 WLR 377
Czarnikow Ltd v Koufos (The Heron II) [1969] 1 AC 350
Parsons v Uttley Ingham [1978] QB 791
Duty to mitigate loss
The claimant is not permitted to allow their losses to mount up. They are under a duty
to take reasonable steps to reduce their loss:
Payzu v Saunders [1919] 2 KB 581
Pilkington v Wood [1953] Ch 770
Heads of damages
There exist various heads of damage in contract law under which an amount can be
claimed to reflect different types of loss. These include loss of bargain, reliance loss,
discomfort or disappointment, inconvenience, diminution of future prospects,
speculative damages and liquidated damages.
Reliance loss
Where it is difficult to quantify the position the claimant would have been in it may
be possible to recover expenses incurred in reliance of the contract:
Anglia TV v Reed [1971] 3 All ER 690 Case summary
38
Discomfort, disappointment
Damages to reflect discomfort and disappointment can only be claimed where
enjoyment was part of the bargain of the contract eg holidays or a meal out or
entertainment. This most commonly seen in holidays which fail to meet the standard
the holiday maker was lead to believe would be enjoyed:
Jarvis v Swann Tours [1972] 3 WLR 954
Jackson v Horizon Holidays [1975] 1 WLR 1468
Inconvenience
Where the claimant has been put to physical inconvenience rather than anger or
disappointment that the defendant has not met his contractual obligation, the court
may award a sum to reflect such inconvenience:
Bailey v Bullock [1950] 2 All ER 1167 Case summary
Diminution of future prospects
Where a breach of contract adversely affects the claimant's future prospects, for
example a contract promising training and qualifications, a sum can be awarded to
reflect the loss:
Dunk v George Waller [1970] 2 QB 163 Case summary
Speculative damages
Chaplin v Hicks [1911]2 KB 786 Case summary
39
Liquidated damages/Penalty clauses
Parties to a contract may legitimately agree the amount of damages to be paid in the
event of a breach and provide for this in their contract terms. This provides certainty
to each party so that they know exactly what they are liable to pay should they be
unable to perform their obligations. Such a clause will be enforceable by the courts
only in so far as it is a genuine pre-estimate of loss. If it is a genuine pre-estimate it is
known as a liquidated damages clause. If however, the amount specified in the
contract is not a genuine pre-estimate but is aimed at deterring a breach of contract or
punishing the party in breach, this is known as a penalty clause which is not
enforceable:
Dunlop v New Garage [1915] AC 79
Cine Bes Filmcilik v United International Pictures [2003] EWCA Civ 1669
Murray v Leisureplay Plc [2005] EWCA Civ 963
Euro London Appointments Ltd. v Claessens [2006] EWCA Civ 385
Repudiation
Repudiation is a remedy available for breach of contract. Repudiation involves
bringing an end to the contract. It is only available for breach of condition as oppose
to breach of warranty:
Bettini v Gye (1876) QBD 183 Case summary
Poussard v Spiers (1876) 1 QBD 410 Case summary
It may also be available for breach of an in nominate term, where the breach
substantially deprives the claimant of the whole benefit of the contract.
Hong Kong Fir Shipping v Kawasaki Kisen Kaisha [1962] 2QB 26
40
Rescission
Rescission is an equitable remedy available at the discretion of the judge. Rescission
seeks to place the parties back in their pre-contractual position and thus represents an
unraveling of the contract. Rescission is available where a contract is voidable as a
result of a vitiating factor such as misrepresentation, undue influence or duress. The
right to rescind may be lost if the claimant affirms the contract, where a third party
acquires rights in the goods, through lapse of time or where restitutio in integrum is
not possible.
Car & Universal Credit v Caldwell [1964] 2 WLR 600
Long v Lloyd [1958] 1 WLR 753
Leaf v International Galleries [1950] 2 KB 86
Specific performance
Specific performance is an equitable remedy available at the discretion of the judge. It
is an order by the court requiring one party to perform their contractual obligation.
Whilst it is often said that contracts are made to be performed and parties should be
held to their contractual obligations, the courts are often reluctant to order a party to
unwillingly perform the contract and specific performance is only available in limited
circumstances. In considering whether to grant specific performance the courts look to
whether damages would be an adequate remedy, the type of contract and whether
equity requires such an order.
41
Where damages are an inadequate remedy:
If the claimant could adequately be compensated by an award of damages for the
breach of contract, the courts are unlikely to order specific performance.
Compare the cases:
Nutbrown v Thornton (1805) 10 Ves 159
Cohen v Roche [1927] 1 KB 169
Type of contract
Specific performance is most commonly ordered for contracts for the sale of land
The courts are unlikely to order specific performance for contracts for personal
service.
Equity
Clean hands:
Walters v Morgan (1861) 3 DF & J 718
Lamare v Dixon (1873) LR 6 HL 414
Hardship:
Co-op insurance v Argyll Stores [1997] 2 WLR 898
Patel v Ali [1984] 1 All ER 978
42
Injunctions
Injunctions are another form of an equitable remedy available only at the discretion of
the judge. There are three types:
Interlocutory or interim (temporary injunction until a court hearing)
Prohibitory (a court order that a party must not do something)
Mandatory (an order that a party must do something)
There is an overlap between mandatory injunctions and specific performance which
has been recognised by the courts. The courts will not grant an injunction in
circumstances that would in effect be an order for specific performance where it
would not generally be allowed:
Page One Records v Britton [1968] 1 WLR 157
However, this does not prevent the ordering of a prohibitory injunction which may be
an indirect way of ensuring compliance with contract:
Lumley v Wagner (1852) 42 ER 687
The court may sever terms and only order an injunction in respect of partial
obligations:
Warner Bros v Nelson [1937] 1 KB 209
43
Q2.2 Suitable theory
Postal rule of Expedition Theory has been acceptance by Court for the issues of
acceptance by post according to Expedition Theory. The contract is completed as
soon as the letter of acceptance is post.
In the light of the above facts let‟s deal with the instant Question.
As the Question on provides,
Kera makes the offer and Liam post the acceptance on 9th
January according to
Expedition theory. The contract has been made on 9th
January when Liam posted the
letter of acceptance. This view was adapted.
In, Adams V Lindsell
On 2nd
September dependence wrote to plaintiffs offering a quantity of wool. The
letter reached the plaintiff on 5th
September. The same night plaintiffs posed the letter
and dependence got it on 9th
September. Meanwhile as there was no reply plaintiff
sold the wool on 7th
September. Court held the contract came into existence on
September 5th
when the plaintiff posted their letter of acceptance.
According to contract law a contract can be terminated if both parties agree.
Liam sends a fax to Kera making an offer to terminate the contract, which was made
on 9th
. Kera agrees to the offer and terminate the contract. After the contract was
terminated, on 11th
January she sells her goods to Max on 11th
January.
In the light of the facts discussed about it could be respectfully submitted that the
contract was terminated at the time Kera sold the goods to Max and Kera is not guilty
for breach of contract.
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04. TASK 03
Question 3.1
Q3.1.1 Type of companies
The companies in Sri Lanka are established and administered by companies Act No
07 of 2007. According to the Act there are three types of Companies,
1. Limited Companies
2. Unlimited Companies
3. Private Companies
Limited Companies
The limited company is the most commonly used method for establishing companies.
Here the liabilities of shareholders are limited only up to the amount paid for the
shares. Shareholders have no further liability for the debts of the company after the
share is fully paid. Once the shareholders have paid for their shares, the company
cannot increase their liability or compel them to buy further shares.
Public limited companies are required to comply with the rules of the stop exchange.
Unlimited Companies
The Act recognizes and established unlimited companies. Shareholders of such
companies have an unlimited liability to contribute to the assets of such companies
under their articles.
Private Companies
Most business do not need large amount of capital and therefore have a limited
number of shareholders or are costly held by members of a family or group in such
situations a private company may be established.
The basic features of a private limited company are the restriction on the increasing of
permitted shareholders. The shares of private companies cannot be offered to the
public. A private company‟s limit the number of shareholders up to fifty. Those who
obtain shares based on employment are not taken into account in calculating the
number of fifty.
45
Q3.1.2 Procedure of registration of company
Any person or persons may apply to register a company by making an application to
the registrar in a given module sign by shareholders together with the following
documents.
1. Stating that to the best of the knowledge, the companies propose company
does not have an identical name of an existing company.
2. Article of Association of the Company.
3. Consent from the directors, to Act as a director of a company.
4. Consent from the initial secretary, to Act as the secretary of the company.
A company shall have not less than two shareholders. After receiving such
applications the company registrar upon the receiving of such applications may,
Enter the particulars of the company on the registrar
Assign the quick that number to that company
Issue the certificate in cooperation in the prescribe to the applicant company.
46
Procedure for the Registration of a Company in Sri Lanka
HOW TO OBTAIN A NAME APPROVAL
Private, Public, Public Quoted, Guarantee , Foreign, Off-Shore, Unlimited Companies
& Associations should get name reservation .
Step
1. You must first search the database of the registered companies through this portal
or using the books kept on the information counter of Registrar-General of Companies
(ROC) for possible similar names..
2. After you verify the availability of the Name, fill the Name search form ( ie A16) in
this portal or manually using the form collected from the information counter of the
ROC
3. The form A 16 is examined by at the public information counter (if you hand over
the form). More information may be requested depending on the manner in which the
forms have been filled. This may be done by e-mail if portal is used. If the name
includes initials please indicate what those initials stand for.
4. You can either send a Name search application using this portal paying Rs. 581.00
(fees Rs. 1000/= + 12% VAT + Processing charges) (only Sampath e-Wallet, Mater
and Visa cards are accepted) or submit manually paying Rs. 1120.00 (Fees Rs1000/=
+12% VAT) to the Shroff counter at the Department of ROC
5. The Name verification document is sent to the database administrator who will run
a search for similar names which he will list and submit send it to the Registrar-
General of Companies
6. The Registrar-General of Companies (or his Officers) have the sole discretion to
approve the name s delegate authority to approve. He may approve the name OR
request more information OR a change to the proposed name. If the name is approved.
47
Approval Number can be collected over the information counter of ROC or if sent
through the portal will be e-mailed the following day.
This Reservation valid only for a period of 3 months from the date of application
How to Register a Private Company
1.Obtain a name approval (as above)
2.(a) After obtaining the name approval, Form No. 1, 18, and 19 together with two
copies of Articles of Association should be prepared (on A4 paper). All forms
should be printed or typewritten. (Section 475) . Hand written forms will not be
accepted
Form 1 - REGISTRATION OF A COMPANY
Form 18 - CONSENT AND CERTIFICATE OF DIRECTOR)
Form 19 - CONSENT AND CERTIFICATE OF SECRETARY / SECRETARIES
. Articles of the Association -
(b) May be prepared according to the First Schedule
(Model Article) in the Companies Act No. 7 of 2007(Page 414).articles of
association set out in the First Schedule hereto (hereinafter referred to as “model
articles”)shall apply in respect of any company other than a company limited by
guarantee, except to the extent that the company adopts articles which exclude,
modify or are inconsistent with the model articles.
(a) prohibit the company from offering shares or other securities issued by the
company to the public; and
(b) limit the number of its shareholders to fifty, not including shareholders who are―
48
(c) The articles of a private company shall include provisions which―
(i) employees of the company; or
(ii) former employees of the company who became shareholders of the
company while being employees of such company and who have continued to be
shareholders after ceasing to be employees of the company.
3.Submit the above mentioned documents to the information counter to check whether
they are in the correct format. If it is 'ok' submit it to the Shroff counter. The
registration fees are Rs 16,800.00 including VAT (Form 1 - Rs. 15000/= , Form 18 -
Rs. 500/= , Form 19 - 1000/= , Articles of Association - Rs 1000/= +12% VAT)
4.If contents of the forms & articles are correct the certificate can be collected over
the counter by producing the payment receipt next day.
5.A company shall within thirty working days of its incorporation under this Act, give
public notice*of its incorporation, specifying
(a) the name and company number of the company ; &
(b) the address of the company‟s registered office.
(*public notice- Where public notice of any matter is required to be given under
this Act, that notice shall be given by publishing a notice of that matter―
49
(a) in at least one issue of the Gazette; and
(b) in at least one issue of a daily newspaper in the Sinhala, Tamil and English
(three papers) languages, circulating in the area in which―
(i) the company‟s place of business;
(ii)if the company has more than one place of business, the company‟s principal
place of business; or
(iii)if the company has no place of business or the location of neither its principal
place of business nor any other place of business is
known to the person required to give the notice, the company‟s registered office,
is situated. (Extracted from 530th clause of
Companies Act No. 7 of 2007)
Further information If one would like to a register private company with shares
issued to a foreign investor, it should be either get BOI approval or can be register
without getting BOI approval if it is not violating the limitations under section 3 of
the extraordinary gazette notification No. 1232/14 dated 2002.04.19 published under
the exchange control act (chapter 423 of the CLE). When preparation of articles for
these, inclusion of Primary Objects are mandatory
50
HOW TO REGISTER A LIMITED COMPANY
All the steps above should be followed. Only exception is that
when preparing Articles of the Association you need not include text under Step2(c)
The current prescribed fees for registration of Private/
Public Companies are :-
Form 1 Rs.15000.00
Form 18 Rs. 1000.00
Form 19 Rs. 1000.00
Articles of Association Rs. 1000.00
12% VAT is payable on all registration fees
RULES AND GUIDELINES TO REGISTER AN OVESEAS COMPANY IN SRI
LANKA – UNDER PART XVIII OF THE ACT
1. COMPANIES THAT MAY BE REGISTERED
Any company or body corporate incorporated outside Sri Lanka, whose business has
been granted permission for the purposes of the Exchange Control Act, subject to the
exclusions, limitations and conditions published in the Government Gazette No.
1232/14 of 19th April 2002; and
(a) has after the appointed date established a place of
business within Sri Lanka; or
(b) has before the appointed date, established a place of
business within Sri Lanka and continues to have an established place of business
within Sri Lanka on the appointed date.
51
2. DOCUMENTS TO BE DELIVERED FOR REGISTRATION
Every company that has established a place of business
in conformity with 1 (a) or (b) above shall within one month from the date of
establishment of its place of business within Sri Lanka, deliver to the Registrar for
registration -
(i) a certified copy of the charter, statutes or memorandum
and articles of association of the company or other instrument constituting or defining
the constitution of the company and where that instrument is not in the official
language of Sri Lanka or in English, a translation of that instrument in such language
as may be specified by the Registrar
.
(ii) a list of the directors of the company, containing such
particulars with respect to the directors as are by this Act required to be contained
with respect to directors in the register of directors of a company in the prescribed
manner [FORM 45]
(iii) the names and addresses of one or more persons
resident in Sri Lanka authorized to accept on behalf of the company, service of
documents and of any notice required to be served on the company in the prescribed
manner [FORM 46].
(iv) a statement containing the full address of the registered
or principal office of the company in the country of origin and the principal place of
business of the company within Sri Lanka; [FORM 44]
(v) a certified copy, certified of recent date, of any
document affecting or evidencing the incorporation of the company
(vi) A valid Power of Attorney authenticated by the seal of
the company authorizing the persons or person resident in Sri Lanka to act on behalf
of the company.
52
3.Where an overseas company has established a place of business within Sri Lanka
before the appointed date and has complied with the requirements of Part XIII of the
Companies Act No. 17 of 1982 in relation to the delivery of documents and
particulars, such company shall be deemed to have complied with 2 above.
4.Where it appears to the Registrar that the corporate name of a registered overseas
company would be precluded from registration under Section 7 of the Act had it been
formed under this Act, the Registrar may take appropriate steps in terms of the Act to
issue notice on the company to register another name approved by the Registrar.
Note
1.A document shall be deemed to be duly certified if the document is certified to be a
true copy -
i) by an official of the government of such foreign country
to whose custody the original is committed ; or
ii) by a Notary Public of such country; or
iii) by some officer of the company before some person
having authority to administer an oath in that country; and
by the signature or seal of that official, Notary Public or person being authenticated
by an official of the Sri Lankan Embassy in that country.
In the case of a country where there is no Sri Lankan Embassy the signatures may be
authenticated by the Trade Commissioner; or any representative of the government of
Sri Lanka in that country; or any member of the judiciary of that country; or
any other person acceptable to the Registrar General of Companies
53
2. Prescribed forms may be purchased from the department or downloaded from the
website http://www.drc.gov.lk
3. The current prescribed fees for registration are :-
For registration of an overseas company Rs. 50,000.00
For registration of any document Rs. 1000.00
12% VAT is payable on all registration fees
4. All forms must be printed or typewritten.
PROCEDURE TO APPLY FOR A LICENCE UNDER SECTION 34 OF THE
COMPANIES ACT No 7 of 2007
1. Subsection (1) of Section 34 provides – “Where the Registrar is satisfied that an
association about to be formed as a company limited by guarantee is to be formed for
promoting commerce, art, science, religion, charity, sport, or any other useful object,
and intends to apply its profits, if any, or other income in promoting its objects, and to
prohibit the payment of any dividends to it members –
54
1. the Registrar may by licence direct that the association be registered as a
company limited by guarantee, without the addition of the word „Limited‟ to the
name; and
b. the association may be registered accordingly, and
shall on registration enjoy all the privileges and subject to
he provisions of this section, be subject to all the obligations of a limited company.
2.The grant of a licence under these provisions is entirely within the discretion of the
Registrar.
3.In the exercise of his discretion the Registrar reserves to himself the right to call
upon the association seeking registration for evidence of its ability to carry out its
objects and sustain itself financially.
4.The applicants should in the first instance:
(a) make an application for approval of the company name
on the prescribed form together with the search fees payable. Approval of a name is
subject to the restrictions in section 7(1) and where applicable subject to the consent
of the Minister as provided for in subsection (2).
(b) In the case of names requiring the Ministers‟ consent
applications for approval must be supported by a written request giving reasons for
the use of any of the words listed in Section 2(a), (b), (c), or (d).
(c) submit a draft of the proposed Articles of Association
which set out the objects of the company and the amount which each member
undertakes to contribute to the assets in the event the company is put into liquidation
55
5.
The draft Articles of Association (Model Articles in the First Schedule
may be adopted with appropriate changes) must include
(a) the objects of the company;
(b) the rights and obligations of the members of the
company; and
(c) the management and administration of the company.
If investment powers are to be included it should be in
the form of the following standard clause appropriately numbered .
To invest the moneys or funds of the Company not
immediately required for its purposes in or on such investments, securities and/or
property as may be thought fit subject nevertheless to such conditions as may for the
time being be imposed by law.
Provide that –
(i) the Company shall not support with its funds or
otherwise any object of a partisan political nature;
(ii) the Company shall deal with or invest in any property
devolving upon it from a trust solely in a manner allowed by the terms of the trust and
the relevant provisions of the law, having regard to such trusts;
56
(iii) the Company shall not support with its funds any object
or endeavour to impose on its members or others any regulation, restriction or
condition which if an object of the company would make it a trade union.
(iv) the Company shall not sell, mortgage, charge or lease
any immovable property which it may hold without the written consent of the
Registrar and without such authority, consent or approval as may otherwise be
required by law and as regard such property the directors of the company or other
governing body shall be chargeable for any such property that may come into their
hands and shall be answerable and accountable for their own acts, receipts, neglects
and defaults and for the due administration of such property in the same manner and
to the same extent as such directors or body would have been if no incorporation had
been effected.
The following terms and conditions subject to which a
Licence is granted shall also be included in the articles and appropriately numbered.
The company shall apply the income and property when
so ever derived solely towards the promotion of the objects of the Company as set
forth in these Articles of Association, and no portion thereof shall be paid to or
transferred directly or indirectly, by way of dividend, bonus or otherwise howsoever
by way of profit, to the members of the Company.
Provided that nothing herein shall prevent the payment
in good faith, of reasonable and proper remuneration to any officer or servant of the
Company, or to any member of the Company, in return for any services actually
rendered to the Company, but so that no member of the Board of Directors or
Governing Body (by whatever name called) of the Company shall be appointed to any
salaried office of the Company or any office of the Company paid by fees; and that no
remuneration or other benefit in money or moneys worth shall be given by the
Company to any member of the Board of Directors or Governing Body for such office
except repayment of out of pocket expenses or reasonable and proper rent for
premises demised or let to the company provided that the provision last aforesaid
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shall not apply to any payment to any company of which a member of the Board of
Directors or Governing Body may be a member and in which such member shall not
hold more than one hundredth part of the capital and such member shall not be bound
to account for any share of the profits he may receive in respect of such payment.
No addition, alteration or amendment shall be made to
or in the provisions of the Articles of Association for the time being in force, unless
the same shall have been previously submitted to and approved by the Registrar.
The above two paragraphs (appropriately numbered) of
these Articles of Association contain conditions subject to which a Licence is granted
by the Registrar in pursuance of Section 34(1)(a) of the Companies Act No 7 of 2007.
The Articles must include the following clauses:-
Every member of the Company undertakes to contribute
to the assets of the Company in the event of the same being put into liquidation while
he/she is a member, or within one year after he/she ceases to be a member for
payment of the debts and liabilities of the Company contracted before he/she ceased
to be a member, and of the costs, charges and expenses of winding up, and for the
adjustment of the rights of the contributories among themselves such amount as may
be required not exceeding Rupees (State the amount)
if upon the dissolution of the Company there remains
after the satisfaction of all its debts and liabilities, any property whatsoever, the same
shall not be paid to or distributed among the members of the Company, but shall be
given or transferred to some other institution or institutions having objects similar to
the objects of the Company. Such institution or institutions to be determined by the
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members of the Company at or before the time of dissolution and if and so far as
effect cannot be given to such provision, then to some charitable object.
If the company is an organization formed by a group of
persons on a voluntary basis and:
(a) Is of a non-government nature;
(b) is dependent on public contributions, charities, grants
payable by the government or donations local and foreign, in carrying out its
functions;
(c) has as its main objectives, the provisions of such relief
and services as are necessary for the mentally retarded or physically disabled, the
poor, the sick, the orphans and the destitute, and the provisions of relief to the needy
in times of disaster;
and includes a community hostel.
The following clause must also be included and
appropriately numbered
* The Company / association being a „voluntary social service organization‟ as
defined under the Voluntary Social Service Organisation (Registration and
Supervision) Act, shall take steps to register under the said Act after incorporation.
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6.On approval of the draft by the Registrar the applicants will be required to publish a
notice in a national daily newspaper (on a given format) at their expense stating the
objects and inviting objections, if any, to be forwarded to the Registrar before a given
date not less than 3 weeks from the date of publication.
7. Acceptance of the application for registration will thereafter depend on whether or
not objections have been received and subject to disposal of such objections.
8. The application for registration must be made on the prescribed form [FORM 5]
together with the registration fees payable, to which must be attached:
(a) 2 bound copies of the Articles of Association which
should be typed or printed as specified in the regulations;
(b) a consent under section 203 on the prescribed form
[FORM 18] from each of the initial directors to act as a director; and
(c) a consent under section 221 on the prescribed form
[FORM 19] from the initial secretary to act as secretary of the company.
COMPANIES Act No. 7 of 2007
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RULES AND GUIDELINES TO REGISTER AN OFF-SHORE COMPANY IN SRI
LANKA – UNDER PART XI OF THE ACT
1. COMPANIES THAT MAY BE REGISTERED:
Any company or body corporate incorporated in Sri Lanka or under the laws of any
foreign country may make an application to the Registrar General of Companies
(hereafter referred to as Registrar) to be registered as an Off-shore company and to be
referred to as such. Registration of the company will be subject to the Registrar being
satisfied that –
(a) Winding up or liquidation of such company has not commenced
(b) A receiver of the property has not been appointed;
(c) There is no scheme or order in force suspending the rights of creditors; and
(d)in the case of a company incorporated abroad, there is no legal impediment in the
country of incorporation to the company engaging in the business of an Off-shore
company; (A certificate from the registering authority or a reputed law firm in that
country to that effect would be required).
(e) The issue of the certificate of registration will not render defective any legal or
other proceedings instituted or to be instituted by or against the company.
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2. GRANT OF CERTIFICATE OF REGISTRATION
(a)The issue of a certificate of registration will be subject to the above and the
discretion of the Registrar that the registration will be in the national interest or in the
interest of the national economy and any conditions that the Registrar may embody in
the certificate.
(b)The grant of a certificate of registration as an off-shore company shall entitle the
company to carry on its business outside the shores of Sri Lanka and exempt the
company from complying with any other provisions of the Act.
3.DOCUMENTS TO BE DELIVERED FOR REGISTRATION
An application for registration must have the following documents attached to it.
(a)a certified copy of the charter, statutes or memorandum and articles of association
of the company or other instrument constituting or defining the constitution of the
company and where that instrument is not in the official language of Sri Lanka or in
English, a translation of that instrument in such language as may be specified by the
Registrar.
(b) a list of the directors or those managing the affairs of the company, containing
their full names, addresses, occupations and the offices they hold in the
company.[FORM 45]
(c) The names and addresses of one or more persons who are resident in and are
citizens of Sri Lanka who is or are authorized to represent the company; [FORM 46]
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(d) Statement containing the full address of -
(i)the registered or principal office of the company in the country of incorporation;
[FORM 44] and
(ii) The office of the company in Sri Lanka; [FORM 44].
(iii) A certified copy (certified of recent date) of the incorporation of the company.
(e) A valid Power of Attorney (authenticated by the seal of the company if applicable)
authorizing the persons or person resident in Sri Lanka to act on behalf of the
company.
(f)Produce to the Registrar a certificate from a bank, that the prescribed sum to defray
the expenses of the off-shore company for the purposes of its office in Sri Lanka has
been deposited to the credit of an account at the bank in the name of the off-shore
company.
(g)Where an off-shore company intends to continue its business as an off-shore
company it must produce not later than 31st day of January each year (or such later
date as the Registrar may approve) -
(i) proof of payment of the prescribed fee in the prescribed manner; and
(ii) a certificate referred to at (f)
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4. PROHIBITION
An Off-shore company shall have power to carry on any business outside Sri Lanka
but shall not be entitled to carry on any business within Sri Lanka.
An Offshore company is not precluded from securing any benefits or advantages
available under any written law applicable to it.
CESSATION OF BUSINESS
5. An off-shore company may cease carrying on business as an offshore company by
giving notice to the Registrar on the prescribed form of its intention to do so.(Form
24)
6. Prescribed forms may be purchased from the department or downloaded from the
website http://www.drc.gov.lk
7. The current prescribed fees for registration are:-
Amount to be credited to a bank to defray
Expenses of an off-shore company in Sri Lanka
For the purpose of its office US$ 100,000.00
For registration of an offshore company Rs. 100,000.00
For registration of any document Rs. 1000.00
15% VAT is payable on all registration fees
Note
1. A document shall be deemed to be duly certified if the document is certified to be a
true copy -
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i) By an official of the government of such foreign country to whose custody the
original is committed; or
ii) By a Notary Public of such country; or
iii) By some officer of the company before some person having authority to
administer an oath in that country; and
by the signature or seal of that official, Notary Public or person being authenticated
by an official of the Sri Lankan Embassy in that country.
In the case of a country where there is no Sri Lankan Embassy the signatures may be
authenticated by the Trade Commissioner; or any representative of the government of
Sri Lanka in that country; or any
Member of the judiciary of that country; or any other person acceptable to the
Registrar General of Companies
2. All forms must be printed or typewritten.
Issued by the Department of the Registrar General of Companies,
400, D.R.Wijewardena Mawatha,
Colombo 10,
Sri Lanka.
Dated ………..
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Q3.2. Difference between contract of employment and contract for employment.
In the business world there are many different types of work relationships between
companies and individuals. Some positions come with benefits provided by the
employer as well as certain legal obligations required of both the employer and the
employee. Other types of positions might be temporary in nature or based on a
specific contract drawn between the two parties. Employers and employees should be
aware of the differences.
Contracts of Employment
A contract of employment is a formal agreement in which a company or organization
hires a person as an employee. A contract of employment stipulates that the employer
is extending an offer of employment to an individual. The contract will generally
outline the duties and responsibilities of the position, the salary or wages the
employee is going to receive in consideration of those duties and the required hours
and other time commitments necessary for the position. If the contract is for a
specified term, the expected length of employment will be indicated, or it could state
that the employment is "at will," meaning it can be terminated by either party at any
time.
Contracts for Service
A contract for service generally states that a service provider will perform certain
duties for a business or organization, although the service provider is not actually an
employee of the hiring party. The service provider is usually referred to as an
independent contractor. Generally, the service provider would be a self employed
individual or a firm that offers services such as landscaping maintenance, office
cleaning, childcare or other domestic service. Contracts for service can also be created
for traditional office work or other business services. The service contract may be
provided on a temporary or occasional basis. Often the contract allows either party to
end the relationship at any time.
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Who is an employee?
An employee is anyone who has agreed to be employed, under a contract of service,
to work for some form of payment. This can include wages, salary, commission and
piece rates. This includes:
Homeworkers
People who have been offered and have accepted a job
Fixed-term employees
Seasonal employees
Casual and part-time employees
Employees on probationary and trial periods.
An employee is not:
A self-employed or independent contractor
A sharemilker
A real estate agent whose agreement says they are an independent
contractor
A volunteer who does not receive a reward for working
In some cases, a person who is engaged in film production.
Contracts of Employment.
A contract of employment is a formal agreement in which a company or organization
hires a person as an employee. A contract of employment stipulates that the employer
is extending an offer of employment to an individual. The contract will generally
outline the duties and responsibilities of the position, the salary or wages the
employee is going to receive in consideration of those duties and the required hours
and other time commitments necessary for the position. If the contract is for a
specified term, the expected length of employment will be indicated, or it could state
that the employment is "at will," meaning it can be terminated by either party at any
time.
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Contract for employment.
A contract for service generally states that a service provider will perform certain
duties for a business or organization, although the service provider is not actually an
employee of the hiring party. The service provider is usually referred to as an
independent contractor. Generally, the service provider would be a self-employed
individual or a firm that offers services such as landscaping maintenance, office
cleaning, childcare or other domestic service. Contracts for service can also be created
for traditional office work or other business services. The service contract may be
provided on a temporary or occasional basis. Often the contract allows either party to
end the relationship at any time.
Different between contract of employment and contract for employment.
There are some clear differences between a contract of employment and a contract for
services. In a contract of employment, the individual is legally considered to be an
employee. As an employee, she may be entitled to employee benefits like paid time
off, training, health insurance, and she normally would be covered by state programs
like worker's compensation and unemployment benefits. In contrast, a service
provider is not an employee under a contract for services and normally is not entitled
to any employer-provided benefits. Most service providers are responsible for their
own taxes and insurance.
There are several tests developed in our court system in order to identify the type of
relationship exist between the parties and the type of contract.
1. Control Test.
The control test was introduced in Ready mix concrete V Minister of pensions. The
following criteria were laydown in determining the master and servant relationship.
Selection.
Order.
Control.
Right to dismiss.
Payment of remuneration.
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2. Integral Test.
As the control test was not sufficient to meet the complex relationship in labour
industry. The integral test was introduced by Steven, Jorden and Harrison V MC
Donalds and Evens.
According to this test under the control of service a man is employed as a part of the
business whereas under a contract for service a man is employed as an accessory to
the business.
In Bank scheepraart V Salford. The test of being a servant depends on whether a
person is part and parcel of the organization.
3. Economic Reality Test.
The Economic Reality Test was introduced in US V Silk. In this case it is examine
whether a person Acts as a matter of economics reality. In other words whether the
person performs his duties in the institution on his own account.
In DE Silva V associated newspapers of Ceylon.LTD . The court had to decide
whether a person was a group correspondent and the written agreement stated that he
was an independent contractor. However he was to cover an important part of the
institution. Court apply Economic Reality Test held that he was an employee.
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Discuss whether Ajith is entitled to any relief as an employee of the company.
Ajith hired his car for “Jet Cab Co.”. Ajith maintained the car and his payment were
calculated on the basis of hires he undertook during the month. He had to paint the car
in company‟s colours with the logo of the company. He was required to wear
company‟s uniform. He had to use the car exclusively for company‟s service. Jet Cab
Co. terminated the contract with Ajith without adding any reasons.
In Ready mix concrete V Minister of pension also contains a case like this.
Mr Thomas Latimer had worked for Ready Mixed Concrete Ltd as a yard batcher
from 1959 to 1963. The company delivered concrete, but had a policy of hiring
independent contractor businesses to do the haulage because according to their policy
documents, this allows
"speedy and efficient cartage, the maintenance of trucks in good condition, and the
careful driving thereof, and would benefit the owner-driver by giving him an
incentive to work for a higher return without abusing the vehicle in the way which
often happens if an employee is given a bonus scheme related to the use of his
employer's vehicle."
However they had become dissatisfied with their contractors and had started offering
the jobs to current staff, with a set-up for hire-purchase for people to buy their own
Leyland Lorrie (through a related company called "Ready Mixed Finance Ltd"). Mr.
Latimer took up this chance. He went into the hire-purchase to buy his own lorry, and
was under a contract to haul concrete for the company. Mr. Latimer's contract
described him as an "independent contractor" and he paid all the lorry running costs.
But he had to put the company colors on his truck. He also had to wear a company
uniform while he was working. He could only use the lorry for Ready Mixed
purposes. His remuneration was calculated on mileage and load. The question about
whether he was an "employee" or an independent contractor arose because the
company was not paying national insurance contributions on his behalf under the
National Insurance Act 1965. If he was self-employed they did not need to, but if he
was an employee they did.
The Minister had found that Mr Latimer was employed under a contract of service.
The case went to the Court of Appeal and McKenna J disagreed, saying that Mr
Latimer was a 'small business man' so working under contract for services.
Other facts found were-
He did not work set hours and had no fixed meal break
The company did not tell him how to drive the truck or what routes to take
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The nine owner-drivers in the depot arranged the dates of their own holidays to ensure
that only one driver was away at any time and between them. They engaged a relief
driver contributing equally to his weekly wage of £25.
During the busy season the company engaged three or four additional drivers under
contracts of service.
As the question states,
Ajith did not have a fixed monthly salary he paid for the hires that he is going. An
employee works for a fixed salary and a fixed time period.
Ajith maintains his vehicle by his own money. Company is not paid for maintains of
the vehicle.
By conducting those facts it could be deferentially that Ajith is not an employee but
an independent contractor. Because of that there is not any relief as an employee of
the company.
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04. Task 04
Open spaces to be provided
In every building to be erected on a lot wherever an open yard or space is provided for
in and around the building, the position and the dimension of it shall be in accordance
with the plans approved by the Authority under these regulations and provisions of
regulation 35 and 'Form "C ".
In the case of building where an open space is intended to be provided on the site for
purpose of access, maintenance of the building in separating it from adjoining
properties, such open space shall in no case be less than 1.0 m. in width.
Boundary Clearance
The boundary clearance required to be provided in building shall be as stipulated in
Form "C” of Regulation 35 and as required by the Code of Fire Precaution for
Buildings.
Overhangs and other sun-shading devices for buildings
Notwithstanding the provisions of regulation 40 the overhangs, canopies, wings or
other sun-shading devices of a building shall be permitted to project up to 1.0 m.
beyond the building line, provided that the roofing materials used are of the non-
combustible type.
Rear space
For the purpose of this regulation the rear of the building shall be deemed to be the
face which is further from any street on which the building is situated; provided that
where the building is situated on more than one street the rear of the building, unless
the Authority, authorizes or directs, shall be deemed to be the face which is
furthermost from the widest portion of such street.
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Irregular Shape
In sites of irregular shapes where it is impracticable to provide an open space to the
entire width of the rear, the Authority may direct that the open space of the rear shall
be left as it deems appropriate, having regard to the circumstances of the case.
Width of footway required to be provided
Any uncovered footway or (arcade) verandah-way required to be provided and
constructed shall be,
Located within the building lot;
Continuous along the entire portions of the building lot abutting the street or
as otherwise directed by the Authority.
Access from a Street
Every building to be erected on a lot which does not about a public street shall have
access from a private street and the means, nature and width of the access shall be in
accordance with a sub-division plan and private streets approved by the Authority.
The owner of such building lot shall have legal right over such street.
Splayed corners
Where a building is erected at the junction of two streets and in the case where the
degree of splay or rounding off is not shown on the Development Plan or any
statutory document the corner of such building shall be splayed or rounded off as
provided in Section 32, to a height of not less than 6.0 m above the street level.
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Conclusion
Construction industry is widely spread industry in the world and in present the law
and contract has a major role to play in this industry as there are many issues and
matters rise in the field. So to keep order Laws and regulations are needed. some
special cases in law such as law of torts,criminal laws, contract law. Agreements and
Contracts, etc. are also essential when working in present industries. These laws
maintain the order in construction fiels and when studies were daon it was clearly
seen and concluded that law and contracts are very essential for this field and it
maintains the order of the works and helps to minimize defects.
Also initial studies on Judiciary system is Sri Lanka and Court System in Sri Lanka
proved that sri lanka has a mixture of laws and most of them were a result of
evolution through time from english and Roman Dutch law. But it can be clearly
concluded that Sri Lanka‟s common law is Roman-Dutch Law.
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Recommendation
The written sources or the books on Law and Contract for construction and the built
environment to get information and knowledge were insufficient in the Galle campus
Library. It was very difficult to find books on the subject.
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Reference
http://www.drc.gov.lk
http://www.ehow.com/list_6554438_differences-contracts-employment-contracts-
services.html#page=0
http://jec.unm.edu/education/online-training/contract-law-tutorial/remedies-for-
breach-of-contract
http://www.companylawclub.co.uk/topics/types_of_companies.shtml