A contract is an agreement between two parties. Contract law is the main area which building contracts are administered. The legal aspect of a building contract is contained in written conditions either of a general or special nature. The two parties agree to work within the conditions set down and are obliged to adhere to them or suffer penalties which are either stated within the contract or which are implied by the nature of the contract. Contracts of this nature are legally binding on both parties and a judgment given against either party carries the force of the law under which the contract is enacted. (Mc Langan, 1991).

The law of contract will applies only when either one the of party has breached the contract or do something which is not according to the contract's requirement for example: where the principal fails or refuses to pay for work certified for payment or where the contractor does not proceed with work with due diligence or in accordance with the agreed time and performance programme. Other than taking legal action under the law of contract, courses of action open to the parties in a contract include determination of the contract, discharge of liabilities, release from obligation and variation by mutual consent. (D Khoury et. al, 1992) Any breach of contract gives rise to a cause of action; not every breach gives discharge from liability. This will depend whether the term of breached is a condition or a warranty or whether there has been repudiator y breach. Damages are intended to compensate the innocent party for loss that he / her has suffered as a result of the breach of contract.

In order to establish am entitlement to substantial damages for breach of contract the injured part must establish that the actual loss has been caused by the breach; and the type of loss is recognized as giving an entitlement to compensation; and the loss is not too remote; and quantification of damages to required level of proof. A breach of contract can be established even if there is no actual loss. In that case there will only be an entitlement to nominal damages. Negligence is the most important field of tort law as it governs most activities of modern society.

There are three elements to establish negligence, first is a duty of care must exist between the person injured and the person responsible for that injury. Secondly, must conduct of the defendant fell short of that duty of care. For the last, it's the resultant damages (Cooke, 1989). There are three branches of the law of torts: strict liability for the escape of dangerous substances, private nuisance and trespass. All of these are direct relevance to the construction industry. Strict liability, at common law landowners are protected under the principle of Ryland's v.

Fletcher against damages caused by escape of substances resulting from some 's pe cial use bringing with it increased danger to others, not only the ordinary use of the land or such use as is proper for the general benefit to the community. Private nuisance, it is the action that will cause disturbance to other adjacent building or land. For example, encroaching tree roots and walls, and excavation causing subsidence of adjacent land. For the trespass, in English and Australian law trespass is concerned with deliberate entry of another's land, for example, by building a wall or placing some construction equipment on adjacent land. In very general terms, a tort is an injury other than a breach of contract, which the law will redress with damages. A tort might also be defined as an act by a person who causes harm to another outside of a contractual relationship.

The law of torts concerns more the adjustment of items or losses or the compensation of innocent people. (Fleming 1992). It is less concerned with taking punitive action. Once obligation, fault and damage exist, the law determines who will stand the loss. In the context of a building contract, a tort may be committed if a breach of contract affects a third party. For example, if the negligent action of an architect, builder or engineer results in the collapse of a structure there is a breach of contract and, if someone is injured by the collapse, a tort has been committed, in which case the injured person can sue in tort for negligence.

Negligence claims most commonly made against architects and builders are for negligence. Claims of negligence concern the "duty of care" required by various parties. Duty of care must be determined in relation to the extent of a negligent action, the professional status of the person who has been negligent, the loss or damage caused negligence and what reasonable action was taken to prevent damage to others. Duty of care can be taken against a party for a lack of reasonable care which could lead to injury of another party.

The injured party (plaintiff) must be owed a duty of care by the alleged tortfeasor (defendant). Questions of the plaintiff and defendant and foresee ability of damage will have to be considered (Cooke, 989) The plaintiff must prove the damages claimed and establish a legal link between damages and the alleged breach of duty of care. The injury or damage must come within the test of foresee ability. If the defendant is alleged to have given negligent advice causing financial loss or other damages, the plaintiff must prove reliance on the defendant advice. Contributory negligence on the part of the plaintiff may be an issue. There are many instances in the construction industry where lack of care could result in injury, for example, where a wall is left in an unstable condition in high wind conditions or electrical wiring is not protected.

In such cases, it must be ascertained whether the contractor is fully responsible or whether the superintendent, required by duty to enforce the safety provisions of the contract, is also to blame. (Mc Lagan, 1991).