Memorandum of Advice – Construction Law (NSW) Essay

Memorandum of Advice




The NSW government has set the department of Gaming and Racing and vested it with the responsibility of issuing and monitoring tenders with regard to construction of government revenue generating sites and buildings within the gaming section. In the case provided, Mr. Pompous Maximus was in charge of contract issuance and the contractor in this case was Julio Claudian Pty Ltd., a firm headed by Mr. Nero Ceasario. In every contract, the details with regard to the contract may include but not limited to the following; the name of the contractor and the principal, the timeframe within which the construction will take, the site of construction, the estimated cost, materials to be used in the construction process, and the approximate number of employees to be hired for the work.

A standard form of contract applied in the case under analysis; sometimes referred to as an adhesion. It is a form of contract between two parties involved in the construction process where the rules with regard to the construction process are set solely by one party and the other has little or no control over it (Butler, 2014). JC firm, the contractor firm in this case, was at the receiving end, to comply with the guidelines of the department of gaming and racing, failure to which is termed ‘breach of contract’ and legal consequences therefore become applicable. Within the case, various matter of ethical concern arises, matters that defy professionalism. The legal aspects in the case will be analyzed keenly and recommendations made in accordance to the following laws; the law of contract, the law of negligence, and the fundamental issues under professional ethics evident in the case will be highlighted.

The law of contract

The GC21 has provisions that govern contracts under the NSW government; the rules and regulations that should be observed by both parties in a contract. Clause 25 deals with the schedule process, the agreed time limit within which the project will be accomplished. It is common to find that many contractors extend the project completion time without valid reasons leading to delay in the construction process as a whole; clause 25 is therefore a relevant tool that minimizes this behavior. Under this clause, the following is worth noting with regard to contracts; when the scheduled process seems unachievable and there is high probability of time extension, the principal has the right to instruct the contractor to apply any necessary means to ensure the project is accomplished within the set time limit; this is done at the contractor’s cost. On the other hand, clause 77.2 mentions the options for termination of a contract by the principal. That a default in the scheduled process by the contractor is a total breach of contract and the principal has the right under law to terminate the contract.

Clause 77.2 however warns that this can only be done once the principal has weighed all options after discussing the matter with the manager. Termination of contract by the principal will mean loss of compensation to the contractor and the tender is returned back to queue so that newer contractors may apply for the same. With this knowledge in mind, the case at hand is then analyzed keenly below and the options/recommendations available for the new minister in office, Crassus suggested.

Analysis of the case basing on the law of contract

At the time the principal (Mr. Pompous Maximus) communicates to the contractor’s head (Mr. Nero), the scheduled process had been violated, the project was 8 months behind schedule as stated out in the contract between the two parties; this is to mean the latter, contractor, had breached the contract. Mr. Nero is the construction manager at JC Company, the firm in charge of the contract; the head of construction of the Vesuvius Casino, the anticipated NSW government’s revenue generator. The contract agreement between the two in March 2010 was legally done. The contractor, JC firm, presented documents to seal the process. Later, Mr. Nero claims that the documents they presented was solely meant to lure the principal into accepting their tender and that the information contained therein including the scheduled process was not to be taken seriously thus ‘…the project rough sketches we did during the tendering process was just an estimate and should not be taken seriously’. Mr. Nero seems not to consider the bounds of the law; he has neglected the provisions of GC21 with regard to contracts.

The principal is quick to laying out some of the steps available for the contractor to accomplish the project in the required timeframe. Mr. pompous advised Mr. Nero to use multiple construction cranes on the construction site and import some of construction materials from Nevada. These are instructs from the department of Gaming and Racing by Mr. Pompous to JC company in a bid to hasten the construction process. The latter ignores the instructions and the construction process continues.

Recommendations for Minister Crassus

From analysis of the case and the provisions of GC21 clauses 77.2 and 25, the NSW government/Minister Crassus has the following option; to terminate the contract and reassign the project of Vesuvius construction to another firm and fine JC firm for failing to meet the scheduled process. This is argued legally below.

The former government’s department of Gaming and Racing was in full compliance with clause 25 and 77.2 of the GC21 that guides contracts. This was a standard form contract where the principal had all the powers to set out rules and regulations to govern the project’s construction; which it did. JC was to comply by the principal’s instructions as per the contract’s agreement. Clause 25 allows the principal to instruct the contractor on the necessary steps to be taken so as to accomplish the construction process in time; Mr. Pompous, the person in charge of the contract gave Mr. Nero instructions but the latter defied. This is a clear indication that JC Company under the head of Mr. Nero violated provisions of clause 25 and should therefore be accountable for the issue arising in the case. It is advisable for Minister Crassus to have JC Company penalized for an amount equivalent to what the Casino business would have generated from its expected date of completion to the present in a court of law.

This may be well related to the Australian High Court case between Murphyores Inc Pty Ltd and Commonwealth dated April 14, 1976. In the case, the authorization of the minister to prohibit exportation of mineral sands was held valid and in accordance with customs Act 1901. Similarly, in any governmental contract, the voice of the minister is paramount; the authority with regard to matters concerning the project should stem from the minister. This 1976 case is significant to minister Crassus; it is a clear sign that his authority to have the two firms; JC Company and Eastern Empire Ltd bear the consequences of the issues arising from the project’s failure will be well effected by the judicial arm of the new NSW government.

The law of negligence

By definition, negligence is failure to take role in a given assignment or task that one has been given the power to oversee. In the construction process for instance, it is the responsibility of the contractor and other subcontractors involved in the construction to monitor the construction of a given project from the start to its completion, any matter arising in the course of construction is their liability. Negligence is a learned behavior, one that individuals adopt from time to time depending on change in their personality. To ensure accountability in the construction industry, the NSW government has provisions included in the GC21 document that spell out measures to be set in case an issue of negligence arises from either party involved in construction of a specified project; this in general is termed ‘The law of negligence’. In the case at hand, the role of the main contractor (JC Ltd.) and that of the subcontractor (Eastern Empire Pty Ltd) in the construction of the Vesuvius Casino with reference to legal provisions in GC21.

Analysis of the case with regard to the law of negligence

Clause 28 and 29 of GC21 relates to inclusion of subcontractors in the construction process by the main contractor. The main contractor in this case was JC Ltd., the company that had been vested with the responsibility of ensuring completion of the whole project by the Gaming and Racing department of the previous NSW government. It is clearly stated that “The contractor must not subcontract all the works of the project but may subcontract some of the works in accordance with clauses 28 and 29 (Seddon, Bigwood,, Ellinghaus,  Cheshire and Fifoot, 2012 ).

From the information provided relating to the case, JC Company, the main contractor in the construction of the Vesuvius Casino extended the subcontract to Eastern Empire Pty Ltd. The latter company signed the subcontract to expand the racing track and construct most of the Maximus amphitheater; not to carry out construction of the entire project. With regard to clauses 28 and 29 therefore, clauses that forbids the contractor from subcontracting the entire project, it can be argued confidently that the former company executed its role of hiring a subcontractor in line with legal provisions.

However, the decision by JC Ltd. to hire a subcontractor without informing the principal violated the law; under the same clauses mentioned above. According to the law, the contractor must inform the principal of the decision to include a subcontractor in the execution of the project before any appointment of the preferred subcontractor(s) is made. The clause highlight that, the contractor must provide the names and addresses of the subcontractors to the principal and the principal may object the appointment of the subcontractor on reasonable grounds; when this happens, the contractor must provide the same information of another alternative subcontractor. It is the responsibility of the contractor to ensure the principal is informed; contrary to which negligence ensues. This was the case with JC Company; Mr. Nero failed to provide the necessary information with regard to appointment of Eastern Empire subcontractor to Mr. Pompous, it was a show of negligence on his. Since the company is a limited liability type, the deeds of Mr. Nero is not attributed to a single individual; it is the entire company. Therefore, JC Company was negligent. The provisions regarding contractors and subcontracting are found in edition 2 of the GC21.

The subcontractor too bears negligence to some extent. The NSW engineers realized the development of some fractures across the columns of support and have the capacity to believe that the igneous rocks used by the subcontractor in the construction process is different from the intended one, it simulates the volcanic environment. They state that the materials used in the construction of the columns may be unsuitable for the construction of the structure in question. It is evident that the work was not done to perfection as had been intended by the contractor, JC Company. As Smith and Hinze (2010) note, clause 51 in the first edition of GC21 is very clear, “the contractor, in its discretion has the right to spell out the defects that need not be made by the subcontractor whether before the due construction process has begun, is ongoing or over”. Subject to this, the subcontractor has the responsibility to ensure no defaults arise in the construction process unless due to unforeseen happenings which should be communicated to the main contractor. The fact that Eastern Empire Ltd decided to use ‘fake’ materials for construction is enough to demonstrate their negligence in the construction of the Maximus amphitheater and expansion of the racing track. They should be found guilty of the issues arising in the poor construction of the Casino.

“The Subcontractor remains liable for Defects whether known or not known at the time the Contractor accepts that defined Defects need not be made good under this clause 51” (Fleming, 2012). From this provision, the subcontractor in the case above should be found negligent.

Recommendations for Minister Crassus

Since a new government has come in power and the information with regard to the construction of the Vesuvius Casino may not tally, it is advisable for Minister Crassus to request concrete information from the engineering department on the alleged observation of fractures in the supporting columns of the structure. The type of rocks used in the construction process must too be determined to gauge whether they meet the requirements of the structure as was set out by the principal. Additionally, the relevant data concerning the contractor and the principal should be presented to Minister Crassus. Once this has been done, the minister ought to confirm that indeed the two parties; the contractor and the subcontractor were negligent. From clause 51, the valuer should determine the estimated amount incurred by the subcontractor and the exact value of the structure. The difference between these values should be borne by it. Since the contractor failed to inform the principal of the change in the contract agreement, it should be evident to the minister that the party violated clauses 28 and 29 that forbid it from doing so. Legally, the minister should gather all this information and present it to the relevant judiciary branch of the new NSW government so that the two parties; the contractor and the subcontractor in this case are found guilty of negligence, and the necessary penalty imposed on them.

The court ruling of the Duffy v Salvation Army (Vic) Property Trust case held on September 20, 2013 at the County Court of Victoria is the best illustration of how the judiciary handles a show of negligence. In this case, Duffy, the complainant claimed she was a worker of Salvation Army Property Trust and was injured in the course of duty due to failure of the company to provide a safe system of work; negligence. The court sought compensation of the appellant, Duffy, of the damages and the loss accumulated thus far. More particulars of this case are available at It is crystal clear that in a similar way, negligence of the contractor and subcontractor in the case at hand will see the two compensate the government an amount that will be determined by the court; Minister Crassus should proceed to have this take effect.

Professional ethics and other legal issues

Professionalism is a description of the personal, corporate and work behavior expected from an individual that has been assigned a given task for which they have the necessary competence in executing it (Orlik, 2014). Professionals need to have some characteristics in carrying out their duties, a slight difference might be evident in different individuals but the expected ultimate management of tasks and duties is the same. The following are some of such characteristics that define a professional: autonomist, the ability to make decisions independent of others’ opinions; compliance with instructions with regard to the demands of the tasks assigned to them; respect the privacy of other employees; accountability and transparency; and shy away from corrupt acts in the course of their duties. The case presented highlights some unprofessional behavior; deviation from professional ethics from the three parties involved in the contract process; the gaming and racing department of the previous NSW government, the main contractor and the subcontractor. These are analyzed in detail below.

Communication is an important factor in execution of duties for any professional; the flows of information from a contractor to the principal for instance and observation of courtesy in conversation processes are some professional behaviors with regard to construction works. Poor communication skills may hamper the whole process in completion of assigned projects since it determines whether the parties involved in the project are in agreement or not; sometimes it may hinder receipt of instructions by the appropriate party. Mr. Pompous wrote an e-mail message to the head of JC company with regard to the progress of the project; a show of concern to speed up the entire construction process. In the message, it is evident that courtesy was observed and it can be argued beyond reasonable doubt that the principal acted ethical in this case. The receiver of the information on the other end, Mr. Nero, the head of JC Company on the other hand responded unethically. In a bid to defend himself, He stated that the documents presented in the tendering process ought not to be taken seriously, that such documents are meant to ‘fool’ the principal to appointing their company. This was a total show of unprofessional behavior, an aspect not expected from a company in a position to take a government tender. Professionally, it is required that the contractor stick to the sated timeline in completion of the project as is in the legal tendering documents; JC Company failed to comply with this without any valid reason, rather responding rudely to the principal upon enquiry of the same.

Corruption is evident in the case. When the principal changes the plans of the construction, Mr. Nero of JC Company contacts his uncle Julius. In this case, it is obvious Mr. Nero breached the bounds of professionalism since Mr. Julius was not an employee of JC Company and had no role to play in the construction of the Vesuvius Casino. JC Company relied on the advice of an outsider and went ahead to hiring a subcontractor, Eastern Empire Ltd to construct the amphitheater and expand the racing track. The head of the latter company was an old friend of Mr. Julius; it is the reason JC Company gave the subcontract to the stated company, this is termed nepotism, an aspect of corruption. Such behavior is not expected from a professional. Legally, JC Company should have advertised the subcontract and have a list of probable applicants from which the best company would have selected based on merit, not any other factor.

As mentioned earlier, one characteristic of professional ethics is compliance with instructions. The contractor and the subcontractor violated this. It was the principal’s instruction that necessary steps be taken by the contractor to ensure the project was completed in due time. The latter failed to follow this and construction of the Casino went on. On the other hand, the subcontractor defied the instructions of the contractor to use the materials that were initially meant for construction of the structure; instead it opted for materials whose quality was in question. Both companies demonstrated lack of professional ethics in the whole process; and most of the issues with regard to the project arose from this area.

Other legal matters

The circumstances surrounding the tendering process did not proceed legally. Normally, the tender process should proceed in a specified period of time, enough time to allow keen scrutiny of the applicants so that the competent company to carry out the construction of the project is chosen. This did not happen in this case; the department of Gaming and Racing is responsible for this. It is evident that the tender process was rather brief than usual. The consequent was appointment of JC Company that later led to eruption of many issues in the construction. The timeframe of the tender process should have followed the legally allowed provision with no adjustment.


From analysis of the entire case, it is evident that all the parties involved in construction of the Vesuvius Casino hold some responsibility for issues arising therein. However, the department of Gaming and Racing only acted unethical in shortening the tender timeframe. The contractor and the subcontractor are largely responsible. It is recommended Minister Crassus appoints a committee to gather enough evidence of the facts stated therein and have the parties prosecuted legally in a court of law.


Australia. (2013). The Australian construction industry pre-qualification criteria for contractors     and subcontractors. Sydney, N.S.W: Construction Industry Development Agency.

Australian Society of Authors. (2009). Australian book contracts. Strawberry Hills, N.S.W:           Kessing Press.

Butler, D. A. (2014). Contract law.

Contract management – GC21 | ProcurePoint. (n.d.). Retrieved from         construction/contract-management-gc21

Fleming, Q. W. (2012). Project procurement management: Contracting, subcontracting,                            teaming. Tustin, CA: FMC Press.

GC21 Edition 2 | ProcurePoint. (n.d.). Retrieved from   0/standard-form-documents/gc21-edition-2

McGuinness, J., & Wiley InterScience (Online service). (2007). The law and management of         building subcontracts. Oxford: Blackwell Pub.

Orlik, D. K. (2014). Ethics for the legal professional. Boston: Pearson.

Seddon, N., Bigwood, R., Ellinghaus, M. P., Cheshire, G. C., & Fifoot, C. H. (2012). Cheshire    and Fifoot law of contract. Chatswood, N.S.W: LexisNexis Butterworths.

Smith, J. G., & Hinze, J. (2010). Construction management: Subcontractor scopes of work. Boca Raton: CRC Press.

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