3.1 Contract Practice Flashcards
(25 cards)
What makes up a legally binding contract in England?
- Offer & acceptance
- Consideration
- Intention to create legal relation
- Capacity
- Legal
Forms of NEC Contracts?
ECC
Subcontract
PSC
TSC
Forms of JCT Contracts?
PCSA
Design and Build Contract
Standard Building Works Contract
Minor Works Building Contract
What are collateral warranties and give an example?
Creates a direct contractual relationship between two parties not in contract.
D&B - Client can have rights to subcontract design.
What is the Local Democracy, Economic Development and Construction Act 2009?
The Construction Act 2009.
Amend the Housing Grants Construction and Regeneration Act 1996 with the following:
- Contracts don’t need to be written.
- Referring party doesn’t need to pay adjudication fees.
- Pay-when-certified/paid.
- Payment Notice within 5 days of due date.
- Payment Notice must show calc, even when it’s NIL.
- Default notice.
- Pay Less Notice issued 7 days before final date for payment.
What are letters of intent and what do they include?
A letter from Employer to Contractor indicating the Employer’s intention to enter into contract.
- Detailed description of works
- Contract sum
- Date for possession
- Date for completion
- Insurance provision
- Method of payment
- Expiration date of the letter
- Right not to award main contract
- ADR
What are the different types of LoI?
- Comfort : gives assurance that the party intended to act at that particular time.
- Proceed with consent to spend : allows work to Proceed to a certain value.
- Recognition of contract : contract is substantially agreed.
What are the advantages and disadvantages of LOI?
Advantage:
- save cost by starting early
Disadvantages:
-complacency to agree contract
-not as robust as a main contract
-less negotiation power from Client
What is a PCG?
Security for the Client incase of contractor insolvency. Particularly used for smaller companies which a part of a group. The group will be required to meet the smaller company’s obligation.
What are Third Party Rights?
Contracts (Rights of third parties) Act 1999.
- Allows third parties to enforce terms of contracts that they are not party to but that benefit them.
What are advantages and disadvantages of Third Party Rights?
Advantages:
-Save time as you do not need to negotiate multiple CWs
Disadvantages:
-Require careful drafting
-Lack flexibility as they are worded into the contract
What are the CE timescales?
- Three weeks for contractor to issue quotation
- Two weeks for PM to review and comment
- If PM doesn’t, Contractor can issue notice of non response
- After a further two weeks of non response it is deemed accepted
How do you value/assess a CE?
Clause 63
- Change in actual cost DC before dividing date and Forecast DC after
Clause 31
- Programme change is based on accepted programme and CE programme showing impact.
What is disallowable cost?
Costs that are:
-not justified by the accounts/records
-not accepted (subcontractors) or procurement
-not provided for the works or in working area
-correction of defects after completion
What are the differences between a short and a full contract NEC?
- Only has lump sum payment option
- Designed for simple, low risk contracts
- No PM or supervisor, just Contractor and Client
- Simpler requirement for programme
Why would you not use PSC for site works?
Payment are different (no option b, d, f)
- insurances
- comp events
What are the types of Insurances?
Professional Indemnity - cover professional negligence.
-Product liability - cover damage caused by defective product.
-Public liability - covers injury to third parties or damage to their property.
-Employer liability - covers the employees for work related illness or injury.
What is the PI Cover required for Regulated Firms?
Must be
- “each and every claim”
-fully retrospective
- Runoff cover
and based on previous year turnover:
- Minimum cover of 250k for upto £100k
- Minimum cover of 500k for upto £200k
- Minimum cover of 1m for anything over £200k
What are delay damages?
X7 under NEC. These losses due to the delay in completion charged back to the other party:
- Liquidated = estimated and stated in the contract. No need to demonstrate losses.
- Unliquidated = not stated in the contract. Damages must be demonstrated.
What secondary clauses am I aware of?
X1 - Inflation adjustment
X2 - Changes in law
X5 - Sectional completion
X7 - Delay damage
X11 - Termination by Client
X15 - Contractor’s design
X22 - Early contractor involvement(Only used with Option C&E)
What are bonds and the examples?
Securities that offer protection for the holder from non-payment, lack of performance, insolvency or warranty issues.
-Performance bond
-Retention bond
-Advance payment bond
-Tender bond
-Off-site materials bond
Type of perfomance bonds?
Conditional - Must prove a loss due to contractor.
On demand - Available on demand.
Why would an employer require a performance bond?
- Contractor is new or unapproved
- Concerns over contractor’s finances
- A looming recession
- Employer wants to protect their commercial exposure
What is a liability cap?
A contractual agreement that a client can only claim damages up to the amount agreed, even if the law would otherwise award a greater sum in damages. This should not limit liability for actual fraud or liability for death or personal injury caused by negligence
