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RICS Questions > Contracts > Flashcards

Contracts Flashcards

1
Q

What does Design &Build mean

A
  • Type of JCT contract following Deign and Build Procurement route
  • Used when appointing a contractor to design, then construct a project
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2
Q

What is a 2 stage tender procurement route?

A

Used to enable early appointment of a contractor.

First stage, a limited appointment is agreed to enable the contractor to begin works

Second stage, a fixed price is negotiated for the contract.

Used frequently in D&B procurement routes

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3
Q

What is single stage tendering?

A

Traditional route of tendering, used when all available information available is used to produce a fixed price

Tenders are received, reviewed and then a contractor is selected for the works.

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4
Q

What is a contract?

A

A legally binding agreement (between two parties) to provide goods and services within a specified timeframe.

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5
Q

What is necessary to form a contract?

A
  • Offer Acceptance (or counter offer)
  • Consideration Intention (to be legally bound)
  • Capacity (to make agreement) (e.g. power of attorney on behalf of a company)
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6
Q

How is a contract executed?

A
  • Under hand, 6 year limitation period. Means that a party must bring about any claim within 6 years of the breach taking place. Any later and the claim will be time-barred.
  • Under Seal (as a deed), signed and witnessed, 12 year limitation period.
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7
Q

What are common contract documents?

A

The Contract (with any amendments)

  • Preliminaries
  • Contract sum analysis/Pricing Schedule
  • Drawings
  • Specification
  • Planning conditions/agreements - Contractors Proposals
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8
Q

What are the main contract suites?

A
  • JCT
  • NEC
  • FIDIC
  • ICE
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9
Q

Why use standard forms of contract?

A
  • They are cheaper than getting a bespoke contract drawn up
  • Offer a level of familiarity between the parties
  • Tried and tested contracts in court, therefore you should be able to predict the outcome in the courts.
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10
Q

Why wouldn’t you use a bespoke contract?

A
  • Costly and time consuming
  • Not familiar
  • Not tried and tested
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11
Q

What should you consider when selecting the contract?

A
  • Criteria of the client
  • Procurement method
  • Nature of the works
  • Timing (time to spend time producing robust contract?
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12
Q

When is a JCT Minor Works contract NOT suitable?

A
  • Complex works

- Detailed control procedures

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13
Q

When was NEC3 published?

A

2005 Used by both the ICE and Government

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14
Q

What are the perceived problems with NEC3 Contracts?

A
  • Admin heavy

- Requires expertise to operate properly

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15
Q

What is a compensation event?

A

Events that occur during the course of the works that cause the completion date to be changed, or additional cost to the contractor

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16
Q

What might a Compensation Event include?

A
  • Variations
  • Instructions to change contracted services
  • Failure to provide access
  • Late issue of information from client
  • exceptionally adverse weather
  • Acts of God
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17
Q

What is the Contract Administrators/Employers Agent role under JCT?

A
  • Issue instructions
  • Certify payment
  • Issue Extensions of time
  • Consider all Variations, Loss and expense claims, interim applications
  • Assess when practical completion has been achieved.
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18
Q

Who is the Employers Agent?

A
  • Used in D&B contracts to ensure clients interests are met
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19
Q

What is the Main Contractor responsible for?

A
  • Construction of the project
  • Health and safety during construction
  • Construction phase plan
  • Provide welfare facilities
  • Site inductions
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20
Q

What is Novation?

A
  • Where a contract is passed from one party to another.

- Used in D&B for design teams

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21
Q

Is the contractor responsible for the Novated party’s design prior to Novation?

A

No, unless they state they have adopted the design.

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22
Q

What is Assignment?

A
  • Where the contractual benefits of a contract are passed from one party to another.
  • Such as the assignment of a collateral warranty from one tenant/operator to another.
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23
Q

What is a Collateral warranty?

A

A way of forming a direct contractual link between two parties which otherwise wouldn’t have a link, such as between a sub-contractor and a client.

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24
Q

What are third party rights?

A
  • An alternative to Collateral Warranties

- They allow a third party to be written into a contract Introduced as part of the Contracts

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25
Q

What is the aim of Third Party Rights?

A

To give the Third party the benefits of the contract only

26
Q

What is a Letter of Intent?

A

A document outlining an agreement between two parties, before a formal contract has been created

27
Q

What is a Performance Bond?

A

A form of financial Security, used to cover the client against the contractor failing to fulfil their contractual obligations

28
Q

What are the typical values of a Performance bond?

A

10% of the contract value to the client

29
Q

What are the two types of bond?

A
  • Default bond

- On demand bond

30
Q

What is the difference between a Default Bond and an On demand bond?

A
  • A default bond can be called in when the contractor defaults on their contractual obligations however the client will have to prove that the contractor has defaulted.
  • An on demand bond can be called in at any time, without having to satisfy any of the pre-conditions.
31
Q

What is a Retention Bond?

A

A Bond taken out instead of taking retention from interim valuations, improving contractor cash flow.

32
Q

Why would you use a Retention Bond?

A

If a Contractor had poor cashflow, a retention bond means that no retention is taken from interim payments, improving cashflow.

33
Q

What happens with variations to a Contract in relation to a retention bond?

A

The bond value will need to be updated to suit, or the additional retention can be deducted as usual from interim payments.

34
Q

What is a Parent Company Guarantee?

A

A parent company guarantee is an alternative form of surety for the client, whereby a parent company to the subsidiary company will warrant the subsidiary’s companies work

35
Q

What is Professional Indemnity Insurance?

A

A form of insurance that covers professional negligence

36
Q

What is Employers Liability Insurance?

A

A form of insurance that covers the injury and death arising from business activities

37
Q

What is Contractors All Risk Insurance?

A

A form of insurance that covers for subsequent loss or damage

38
Q

What is the real name for the construction act?

A

Housing Grants, Construction and Regeneration Act 1996

39
Q

What is the name of the Act which amended the Construction Act?

A

Local Democracy, Economic Development and Construction Act 2009

40
Q

What is a payless notice?

A

a notice a payer under a construction contract can issue in order to pay less than the payee has applied for

41
Q

What provisions did the Construction Act introduce?

A
  • the right to be paid in interim, periodic or stage payments
  • right to suspend performance for non payment and to claim costs incurred as a result
  • Pay when certified clauses are not allowed
  • Release of retention cannot be prevented by another contract
42
Q

What are the payment provisions under JCT?

A
  • interim or staged payments
  • advance payments with advance payment bonds as a security
  • final payments at the settlement of the final account
43
Q

What should be included within interim valuations?

A
  • Prelims
  • Measured works
  • Valuation of variations
  • Re-measurement of prov sums
  • Materials on/off site
44
Q

Is retention released upon sectional completion?

A

Yes, proportional to the section value

45
Q

How much retention is release upon PC in JCT?

A

50% upon practical completion

46
Q

When is retention released in full?

A

Upon receipt of certificate of making good

47
Q

What is change (variation)?

A

An alteration to the scope of works in a construction contract

48
Q

Who instructs changes under JCT?

A

Contract administrator

49
Q

Who instructs changes under NEC?

A

Project manager

50
Q

What is an Extension of Time?

A

where there is a delay that is not the contractor’s fault.

51
Q

What can cause an extension of time

A
  • Variations
  • Adverse weather conditions
  • Delay in possession of the site
52
Q

What is a concurrent delay?

A

where more than one event occurs at the same time, but where not all of those events enable the contractor to claim an extension of time or to claim loss and expense

53
Q

What is a relevant matter?

A

client is responsible that materially affects the progress of the works.

54
Q

What is loss and expense?

A

the additional costs incurred by a contractor as a result of disturbance to the regular progress of the works

55
Q

What is Sectional Completion?

A

practical completion of a section under a building contract

56
Q

What is practical completion?

A

completion of construction works on a project

57
Q

What happens when Practical Completion is awarded?

A
  • Release half retention
  • Ending contractors liability for LAD’s
  • Beginning of defects liability period
58
Q

What is Partial Possession?

A

When a client takes possession of part of a building or site

59
Q

What happens when Partial Possession is awarded?

A
  • Area is deemed to have achieved practical completion
  • Half retention for that area must be released
  • Defects liability for that part begins
  • LAD’s reduce proportionally
  • Client has to insure that area
60
Q

What is a contractors design portion?

A

It is an agreement for the contractor to design specific parts of the works

61
Q

What are Liquidated Damages?

A

pre-determined damages the client can recover if a contractor fails to meet completion date

62
Q

What happens if they are construed as a penalty?

A

They are unenforceable

RICS Questions (25 decks)

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