Entire Contract 2

Advantages & Disadvantage of Using Entire Contract

In my opinion, the use of entire contract tends to benefit the employer rather than for both parties. In the employer’s point of view, this kind of contract can be very beneficial for him. First of all, the employers can avoid paying contractors for their partly performed works. They also can use their allocated money for some other works first. Moreover, if there is a breach of contract, they may not pay the contractors for their uncompleted works, while they still can benefit from the performed works done by the contractors. The only disadvantage is that not all contractors want to deal with this kind of contract. Contractors willing to involve in this kind of contract are usually experience contractors.

 

The Doctrine of Substantial Performance

When a discharge of an entire contract occurs, the older reported cases such as Appleby v Myers [1867] and Whitaker v Dunn [1887] require complete performance by contractors as a condition precedent to his right of payment under an entire contract. If the contractors do not complete their work at the time of contract termination, then they cannot be able to claim their rights for services that they have done.

However the common law has since been modified by later judicial pronouncements which seem to be fairer to both parties. The doctrine of substantial performance is now been applied. It is said that a contractor who has substantially performed his obligations of the contract may claim on the contract for the agreed sum, though he remains liable in damages for his partial failure to fulfill his contractual obligations.

Therefore, substantial performance is an alternative principle to entire contract. This principle is relevant when a contractor’s performance is in some way deficient, through no willful act by the contractor, yet is so nearly equivalent that it would be unreasonable for the owner to deny the agreed upon payment. If a contractor successfully demonstrates substantial performance, the owner remains obligated to fulfill payment, less any damages suffered as a result of the deficiencies in workmanship by the contractor.

Entire Contract

Definition of Entire Contract

An entire contract can be defined as a contract in which there is legally binding agreement, implicit or explicit, that neither party may demand performance until he is ready to fulfill, or has fulfilled, his promise. The major effect of this entire contract application is that the promisor’s promise is condition precedent for the promisee’s duty to perform his obligation.

 

According to Gill Judge, an entire contract is one in which the entire completion of the work by the contractor is a condition precedent to payment.  To him, a contract in respect of which progress payments are made from time to time is not an entire or lump sum contract. Moreover on the principles of English law laid down in Cutter v Powell (1795) 6 TR 320 and other cases, the contractors having contracted to do an entire work for a specific sum, can recover nothing unless the work be done, or it can be shown that it was the employer’s fault that the work was incomplete, or that there is something to justify the conclusion that the parties have entered into a fresh contract. In an entire contract, if there is an accident not by fault of both parties, which causes the end of the contract, the contractor cannot claim for the payment since both parties bear their own damages and no party gets any benefit of the contract.

 

 

Entire Contract & Divisible Contract: The Differences

Performance of contract can be distinguished between a divisible contract and an indivisible (or entire) contract. In a divisible contract, the obligations of the parties are independent of each other. Therefore one party can demand performance by the other without rendering performance himself. For example, a landlord though liable to be sued by his tenant for not carrying out a repairing covenant, is not prevented by his own default from enforcing the tenant’s covenant to pay rent to him.

However, most of construction contract are indivisible or entire contract. It means that the obligations of the parties are interdependent. Neither party can demand performance unless he himself either has performed or is ready and willing to do so. At common law, complete and precise performance was originally required, so that a party who rendered anything short of this (for example, a builder who carried out the contract work, but defectively in some respects) could recover nothing for his efforts. This extreme position was subsequently modified by the doctrine of substantial performance.[1]


[1] Taken from Oxford Dictionary of Law 7th Edition, pg 402.