Facilities Manager's Desk Reference, 3rd Edition

14Contracts and Contract Management

14.1 Introduction

A contract may be defined as an agreement enforceable by the law, between two or more persons, to do or abstain from doing some act or acts. Its intention must be to create legal relations and not merely to exchange mutual promises. Both parties must have given something or have promised to give something of value as consideration for any benefit derived from the agreement.

The essential elements of the formation of a valid and enforceable contract can be summarised according to the following principles:

• There must be an offer and an acceptance.
• There must be an intention to create legal relations.
• There must be an agreement about the same thing.
• The parties must have the capacity to contract.
• There must be possibility of performance.
• There must be certainty of terms.
• There must be legality of objects.
• In the case of simple contracts, there must be a consideration that has a value (i.e. the consideration is the exchange between two parties in a simple contract; there must be a loss to one party and a benefit to the other).

Most of the contracts entered into by FMs (facilities managers, or facilities management) are ‘simple contracts’. Simple or ‘parol’ contracts are ‘informal’ contracts and may be made:

• Orally.
• By implication from conduct.
• In writing.

Most maintenance and service contracts are in writing.

Formal agreements, for example for the supply of electricity, are contracts ‘under hand’.

14.2 Consideration