Contract Practice (Level 3)

Question 1

How do variation requests work?

Answer 1

They are used when there is a need to make changes or variations to the original scope outlined in the contract. You are to:

o Identification of the Variation

o Submission of Variation Request to Contract Administrator which includes details of the event, reasons for change, proposed modifications and associated cost and time implications.

o Evaluation and Approval

o Implementation

o Adjustment of Contract
Sum and Completion Date

Question 2

What are the JCT suite of contract options?

Answer 2

o Design and Build
o Minor Works
o Short Form
o SBC/Q

Question 3

NEC alternatives? How do the two suites differ?

Answer 3

iChemE

o Origin and scope – iChemE are typically used for process based projects assigned to address the unique technical and commercial requirements. NEC was developed by the ICE and is used across various sectors. They are easily adaptable to different project types and procurement strategies.

o Risk allocation – iChemE allocates risk in a manner than reflects the nature of the process. Risk allocation provisions address technical risks and performance guarantees. NEC has a collaborative risk management approach where the risk allocation is shared between the parties. They also have EWN’s, risk registers and CE’s to manage fairly and transparently.

Question 4

How does a standardised form benefit a project?

Answer 4

o Keeps contractual bias to a minimum.
o Proven caselaw
o Saves time and cost for developing a unique contract for each project.

Question 5

What typical amendments have you encountered? & do you agree with them?

Answer 5

o Payment terms
o Change management i.e. CE’s and periods of reply.

Payment terms are agreed on the basis of cashflow availability.
Change management is agreed based on type of work to be carried out and our liability with the client, ensuring no gaps.

Question 6

What if you were asked to provide advice on amendments to the NEC Contract?

Answer 6

o Secondary clauses (X Clauses within NEC) – I can advise on

o Amendments to core clauses – seek legal advice

Question 7

What are the parties’ responsibilities and duties under a contract?

Answer 7

o Performance of work or services in accordance with the specifications and quality standards

o Payment obligations

o Compliance with Law and Regulations

o Communication and cooperation

Question 8

What is the significance of the Local Democracy, Economic Development and Construction Act 2009?

Answer 8

• Adjudication can apply to written and oral contracts
• Mandatory payment notices and other notices following
• Strengthened the right to suspend work for non payment

Question 9

How is adjudication recognised in standard forms of construction contracts?

Answer 9

NEC contracts have been revised to incorporate provisions related to payment, adjudication, and dispute resolution in compliance with the LDEDC Act 2009. For example, NEC contracts include mechanisms for prompt payment, issuing payment notices, and referring disputes to adjudication, as required by the Act.

Question 10

By way of examples can you tell me how the formation of a legal contract find their way into an JCT construction contract?

Answer 10

Offer and Acceptance – JCT contract documents include the contract form, tender documents, contractors’ proposals and terms and conditions of the offer.

Consideration – Agreed Contract Sum

Legal Capacity – Presumed to have the legal capacity to enter a binding agreement.

Mutual Consent – Execution of the contract documents by both parties

Question 11

What are the essential components of a valid contract?

Answer 11

Offer, Acceptance, Consideration, Legal Capacity, Legal Purpose (Non Illegal)

Question 12

What is the principal difference between a parent company guarantee and a performance bond?

Answer 12

o PCG – If a company goes insolvent or is unable to provide the works, the parent company is obliged to complete the works.

o PB – Financial instrument provided by a third party (insurance), the guarantee the performance of a contractor under a construction contract. E.g if a product/ system is not achieving the performance requirements set out in the contract.

Question 13

Can you name 2 types of performance bond?

Answer 13

o Bid bonds.

o Payment and performance bond.

Question 14

Have you dealt with collateral warranties, performance bonds or PCGs on your projects? If so, can you provide details of how you did so?

Answer 14

PCG only, a contract with an MCC supplier, whom we have a framework agreement with, have a parent company. This contract was set to be over £1m therefore our company stipulates that a PCG is required.

Question 15

Have you experience of using letters of intent?

Answer 15

No experience with letters of intent, however I am aware of the risks associated:

o Non-binding meaning there are no legally enforceable obligations

o Ambiguity and lack of clarity

Question 16

How have you dealt with completion of your projects with your sub-contractors and/client?

Answer 16

Yes, I have both awarded subcontractors and been awarded by the client. Once the criteria set out in the contract is met by my company or a subcontractor, we either receive or issue a completion certificate which fully acknowledges that the work is complete and the defects liability period has begun.

Upon completion and issuance of the completion certificate, the parties may proceed to finalize the account for the works, including any adjustments for compensation events

Question 17

What is your process for formally agreeing final accounts?

Answer 17

1. Prepare the final account – all additional costs to the tendered prices scheduled out.
2. Linking the last formal cost report – all costs to this point should be agreed, anything new is all that requires discussion.
3. Final account meetings – agreement on the last few items.
4. Structuring the final account (terms)
5. Execution and release of retention

Question 18

Have you had cause to deal with loss and expense claims on your projects?

Answer 18

No, however I have had experience dealing with compensation events under the NEC Contract.

Question 19

How do you ensure CEs under the main contract and those under sub-contracts are linked, where they need to be, ensuring MWHT isn’t left exposed?

Answer 19

I ensure that any amendments to clause’s 60 to 65 are back to back with the subcontractor’s subcontract. It is important to pass on this risk such that MWH aren’t exposed to all risks set out by the employer.

Question 20

Can you provide an example of a CE not being agreed or accepted?

Answer 20

W&B Wigan (Restricted working access over MH01)

• Unable to progress with works due to tracking over existing chmaber
• Temporary works solution required to enable tracking
• Use of grab wagon over standard equipment

Rejection for
- Chamber always been shown in contract drawings
- Subby required to produce temporary works
- Health and safety risk in accordance with mentioned specs in contract

Question 21

How do you ensure compliance with the contract and legislation for payments?
The contract

Answer 21

The contract sets out the requirements that of the relevant legislation for payments:

o Payment notices in accordance with the statutory requirements of Section 110 of the Construction Act.

o Issuance of a payment certificate in accordance with section 111 of the Construction Act. This also refers to issuing payless notices if you intend to pay less than the notified sum.

o Dispute resolution process - Section 108 of the Construction Act provides for statutory adjudication to resolve payment disputes quickly and cost-effectively.

Question 22

Have you issued a Payless Notice? Explain how and why you would use it.

Answer 22

Yes, on the Forton project a civil subcontractor had applied for various accepted CE’s, of which the quotations were not yet agreed. However, as a gesture of good will, and that the work was complete, I certified their applied amounts in full (on account) until we had agreed a price.

Subsequently, we had agreed a value for each of the CE’s. I revised the payment certificate and issued them a payless notice within the time frames set out in the subcontract.

Question 23

How was your advice received by MWHT and the sub-contractor for the welfare building package amendments?

Answer 23

I held a meeting with the subcontractor to discuss the proposed amendments, which concluded in agreement on most.

Then, I set up another meeting with senior management advising them on the position of the project, the contract and potential implications of said changes.

Question 24

How did you persuade senior management to depart from the standard risk position for the welfare building package?

Answer 24

I explained the nature of the works required by the contract and advised that, despite the amendments differing from the standard risk position, our exposure is minimal subject to the contract being drafted correctly.

Question 24

Can you give examples of the risks you cite that led to the sub-contractor suggesting an Option E sub-contract on Williamsgate?

Answer 24

o Unfinished design – there were small elements of work with unfinished design which would have to be captured at a later date.

o Potential interface with other subcontractors on site – it was a large site with multiple subcontractors on it. They were concerned that this would cause them delays. However, we stipulated that if their programme is correct and the contract is written accordingly, this can be captured by the compensation events listed in an Option A subcontract.

Question 24

How did you advise the sub-contract to be amended such that it would deal with these risks?

Answer 24

o I advised that we include the current information relating to the works into the subcontract and to add wording into the works information addressing that further design work is required in this area which will be subsequently instructed by the contractor.

o For the interface concerns, we advised them to draft their programme carefully with what areas they needed access too and when. If we delayed them access to this area, it would be captured under Clause 60.1 (3).

Question 24

In addition to considering the cost of providing temporary power, did you advise of any other implication to the project in terms of cost and programme?

Answer 24

Yes, we advised on the costs to install and deinstall the temporary power facilities as well as a proposed assumption that if the electrical supplier is further delayed, we are to receive another compensation event. The PM accepted both.

Question 25

What certificates are issued on both JCT and NEC Contracts?

Answer 25

JCT:

• Practical Completion
• Sectional Completion
• Non-Completion (Contractor fails to complete and LD’s begin)
• Defects Certificate
• Final Certificate (Final account)
• Interim Certificate of Completion of Making Good Defects (Defect rectification before Final Certificate)

NEC:
* Payment Certificate
* Completion
* Sectional Completion
* Defects

Question 26

Compare the difference of a CA to a PM.

Answer 26

**CA responsibilities: **

Role is** administering the contract **on behalf of the Employer

• Issuing instructions and certificates
• Managing variations and changes to the works
• Administering payments
• Handling contractual correspondence

They could also have a **dual role **such as the consultant, employers agent, PM.

PM responsibilities:

Role is managing the overall project delivery, including administering the contract and overseeing construction activities.
* Administers the contract in accordance with NEC procedures
* Issues **instructions and deals with CE’s and EWN’s**
* Ensures compliance with **project objectives, timelines and quality standards **

PM holds more authority than CA

Question 27

Role of a CA, EA & QS under JCT?

Answer 27

CA handles contractual matters, issues instructions and certificates, manages variations, and oversees compliance with contract terms.

EA manages and coordinates the project on behalf of the employer, including liaising with the design team, contractors, and other stakeholders.

QS** prepares cost estimates, manages budgets**, evaluates tenders, and administers financial aspects of the project.

Question 28

What are the different payment provisions between NEC and JCT?

Answer 28

JCT - Contractor does valuation
NEC - PM makes assessment

JCT has the dates for various notices in accordance with HGRA but NEC only has it as an option under YUK2

Question 29

What is the difference in a JCT and NEC contract?

Answer 29

Question 30

How is novation different to assignment?

Answer 30

2 different methods of transferring contractual rights and obligations.

Novation is substituting one party with another. Complete transfer of both rights and obligations. CLEAN BREAK.

Assignments is the transfer of contractual rights to a new party. The original party remains liable for their obligations under the contract.

Question 31

What is a collateral warranty and when may one be used?

Answer 31

They create contractual relationships between the main parties of a contract and a third party.

One may be used when investors are involved.

Question 32

What is the Housing Grants Construction and Regeneration Act?

Answer 32

Significant piece of legislation in the United Kingdom designed to regulate payment practices and dispute resolution in the construction industry.

Question 33

Do you know of any construction works the HGCR excludes?

Answer 33

Assembly, installation, and demolition of plant or machinery on water treatment works sites.

Question 34

Under the HGCRA, what are the payment timeframes?

Answer 34

21 day payment cycle (NEC)

Assessment Date (7 calendar days before Due Date)
Payment Notice due (5 days after Due Date)
Final Date for Payment (9 days after the Payment Notice)
Payless Notice (7 days before Final Date for Payment)

Question 35

What is the period for reply for CE’s under NEC?

Answer 35

61.4 states two weeks from Notification
62.3 states 1 week to submit a quotation, 4 weeks to assess it.