Contract Administration Flashcards
1
Q
What are the main forms of JCT contract you know?
A
- JCT Intermediate Building Contract, 2016 (+with contractor’s design portion).
- JCT Minor Works Building Contract 2016 (+with contractor’s design portion).
- JCT Design and Build.
- Management Building Contract 2016.
- Measured Term Contract 2016.
2
Q
What kinds of works would be included within the contractor’s design portion of a contract and why?
A
- It is used when the contactor has agreed to design specific parts of the works. They will usually sub-contract the works
whereby a specialist installer or manufacturer is required. Ensures buildability and other factors are taken into account. The
contractor is responsible for the procurement and must adhere to the programme. - Specialist works can include; installation of services, roof replacement etc.
- Takes the liability of the design off the client and design team.
3
Q
What are the responsibilities of a contract administrator
A
- They are not a party to the contract and therefore must remain impartial at all times. Simply there to administer the contract.
- Chair pre contract meeting.
- Issue contract instructions.
- Deal with payment provisions.
- Manage change procedures – design changes etc.
- Involve with dispute avoidance.
- Issue certificates.
- Deal with completion / possession issues.
4
Q
Explain the valuation process and the responsibilities of a contract administrator for a JC intermediate Contract / JCT Minor works contract?
A
- Contractor must issue application for payment no later than the valuation date.
- Valuation date occurs (stated in contract particulars – will change to closest business day).
- Due date (date at which the CA values the works) is 7 days after the valuation date.
- Contract administrator must issue a certificate for payment (interim cert) within 5 days after the due date – the cert = the
amount they deem should be paid at the due date. - Final date for payment in standard contract is 14 days from the due date.
- If the employer intends to withhold any amount from the sum certified, the they must provide written notice of their intention no later than 5 days before the final date for payment.
Note: The contract gives the contractor the right to submit its own payment application - they are not required to and the CA can undertake the valuation without it.
Note: If the CA doesn’t issue a payment certificate within 5 days after the due date, if the contractor issued an application for payment this becomes a payment notice and acts as the cert, otherwise a contractor can send a payment notice to the CA.
5
Q
How does the valuation process differ with regards to the JCT Design and Build Contract?
A
- Essentially the same as the JCT intermediate contract BUT – Due dates can change.
- If the contractor submits their application for payment before the valuation date, then the due date is still 7 days from valuation
date, but if received after the valuation date then the due date is 7 days from the day of receipt of the AFP.
6
Q
How could an employer take part of a site back quickly?
A
- By doing sectional completion.
- Early possession – note: when early possession utilised the works or
section of are deemed to be at practical completion
regardless. - Acceleration.
7
Q
What is practical completion? What happens contractually once PC is certified?
A
- There is no definitive definition for the term Practical Completion. It is when the works are complete to the satisfaction of the Contract Administrator and the contractor has abided with their duties under the CDM regulations. The CA cannot certify PC where there are outstanding works or patent defects, but they also cannot withhold PC for minor outstanding defects.
- HW Nevill (Sunblest) Ltd v William Press & Son Ltd [1981] (the flexible test) – PC will not be prevented where the works have been completed free from patent defects, other than ones to be ignored as diminimus or trifling (very minor in nature).
- What is deemed diminmus or trifling will be different for each project / the intended end use – swimming pool analogy.
Once PC is certified:
- Start of rectification period.
- Liquidated damages cannot be claimed.
- Release of half the retention.
- Client then claims back possession of the site – insures it etc.
8
Q
What is partial possession?
A
- Mechanism to allow employer to take early possession of a site.
- Contract might have provision for sectional completion to allow partial possession.
- Effect of partial possession:
Any part of the works which partial possession is given is deemed to achieve practical completion.
Half retention must therefore be released.
Defects liability begin for that part of the works.
Liquidated damages reduce?
Client is responsible for that part of the works and will need to use its own insurances. - Contractor not obliged to give partial possession but can’t unreasonably withhold it.
- Contactor may not wish to give partial possession due to occupants / other contractors on the site holding up works – may
lead to an extension of time application.
9
Q
What is the difference between a contract being executed as a deed or underhand?
A
- The Latent Damage Act 1986 stipulates the limitation period of building contract is (period for which a claimant can bring proceedings against a contractor):
- 6 years from completion for contracts signed underhand.
- 12 years for those executed as a deed.
- The act prevents claimants bringing old cases against contractors and encourages them to do so without delay.
10
Q
What contractual processes need to occur with regards to an extension of time?
A
- The contractor is required to notify the CA whenever it becomes reasonably apparent that the progress of the works or any
section of the works is likely to be delayed by a relevant event. - The contractors notification should be in writing and should identify the relevant event that has caused the delay, request that an
extension of time should be granted and then provide details and evidence of causation of the relevant event. They should also
state whether the delay will impact the completion date and if so the amount of delay anticipated. - Contractually the contractor is also required to mitigate the delay even though it isn’t a result of their actions.
- CA then analyses the contractors’ request for extension of time and to determine whether the identified relevant event has indeed
caused the delay. If this is found to be the case they must then grant the extension of time and agree a new contractual
completion date.
11
Q
What are the two broad groups of relevant events? Give some examples of relevant events
A
- Relevant events caused by the employer / relevant events caused by neutral events.
- Relevant events caused by the employer: variations and instructions, delays handing over possession of the site, suspension of the contract due to non-payment.
- Relevant events caused by neutral events: Force majeure - act of god (war, natural catastrophes), adverse weather conditions, specified perils (fire, floods), civil commotion (acts of terrorism, strikes etc).
12
Q
What is single stage tendering?
A
- Single stage tendering is a tendering procedure whereby a number of pre-selected contractors submit tenders on a competitive basis.
- Each contractor provides a single cost for the whole of the construction works within a predetermined tender period.
- Tenders are then analysed in terms of cost and quality before a single contractor is declared the preferred contractor and enters into a building contract with the client.
13
Q
What are the advantages of single stage tendering?
A
- Ensures only capable and approved contractors submit tenders.
- Tends to reduce the overall cost for the tendering process.
- Client get a lump sum for the entirety of the works.
14
Q
What is traditional procurement?
A
- The design portion of the works is completed by the client’s design team before competitive tenders are invited and a principal contract employed to construct what has been specified.
- The contractor takes responsibility and financial risk for the construction of the works and completes the works for a contract sum
within a contract period which is confirmed at pre contract stage.
15
Q
When would traditional procurement appropriate?
A
- If the design is substantially completed at time of contractor selection.
- The client wishes to retain control over the design and specification.
- When the client needs cost certainty - to get board approval.
- When total programme length isn’t the clients’ main priority.
16
Q
What forms of contract might you use with traditional procurement?
A
- JCT Minor Works, 2016.
- JCT Intermediate
17
Q
What are the advantages of traditional procurement?
A
- Competitive fairness and transparent process – increase value for money
- Design led – can ensure quality
- Price certainty before commencement
- Well known procedures
- Changes are reasonably easy to arrange and value
18
Q
What are the disadvantages of Traditional Procurement?
A
- Increases overall project duration - it is a sequential process with design produced before construction can commence.
- Reduced buildability within the design as contractor has had no input.
- Dual point of responsibility for client for design and construction.
- If the design is not completed at time of tender then cost / time certainty are reduced.
19
Q
What is included within a tender report?
A
- List of tenders received.
- Initial tender return totals.
- Any qualifications identified.
- Post-tender adjustments.
- Revised tender sum.
- Comparison of tender sums.
- Recommendation.
20
Q
What are the key contractual procedures have to occur to enable an employer to claim liquidated damages?
A
- The contractor must have not completed the works or section of works by the contractual completion date.
- The contract administrator must have issued a certificate of non-completion.
- The employer must have notified the contractor in writing that they intend to claim liquidated damages. This may be by ordering
the contractor to pay them or deducting them from the sums owed to the contractor. - If the employer wants the deduct the liquidated damages from sums owed to the contractor then a pay less notice is required to
ensure compliance with the Housing Grants, Construction and Regeneration Act 1996.
21
Q
What is procurement?
A
The overall act of obtaining goods and services from external sources (for example a building contractor) and includes decision making with regards to how the goods are to be acquired by reviewing a client’s requirements (i.e time, quality and cost). and their attitude to risk.
22
Q
What is tendering?
A
Tendering forms part of the procurement strategy and involves:
- The bidding process to obtain a cost for the works; and
- How a contractor is appointed.
23
Q
What is the difference between procurement and tendering?
A
- Procurement is the overall act of obtaining goods and services from external sources (for example a building contractor) and includes decision making with regards to how the goods are to be acquired by reviewing a client’s requirements (i.e time, quality and cost). and their attitude to risk.
- Tendering forms part of the procurement strategy and involves the bidding process to obtain a cost for the works and how a contractor is appointed.
24
Q
What is two-stage tendering?
A
- The first stage of the process involves first-stage tender enquiry documentation being issued to preselected bidding contractors at RIBA stage 2 / 3. At this stage the works are still being designed.
- The contractors then submit their bids which do not give a lump cost for the entirety of the works but confirm their preliminaries costs, proposed sub letting of the works (sub contractors) and their overhead and profit allowances.
- The preferred contractor then joins the design team on a consultant basis using a pre-construction services agreement.
- The preferred contractor then works with the design team to complete the design before presenting a bid for the works.
25
Q
What is negotiated tender?
A
- A single contractor is provided with the tender documentation by the client and then submits their initial cost to carry out the entirety of the works.
- The client’s professional team then negotiates the cost of the works with the contractor to achieve a final cost.
26
Q
What are the advantages and disadvantages of single-stage tendering? When would you utilise single stage tendering?
A
Advantages:
- Ensures that only capable and approved firms submit tenders (as they are preselected from an approved list).
- Client gets cost certainty as they are provided with a lump sum for the works.
Disadvantages:
- The full design has to be prepared before the works can be tendered which is not suitable whereby total programme length is important.
27
Q
What are the advantages and disadvantages of two-stage tendering? When would you use two-stage tendering?
A
Advantages:
- Allows the contractor to contribute to the design and early planning of the work (so increases buildability).
- Allow the contractor to commence works on sections before the entirety of the design is complete.
Disadvantages:
- Hard to replace the contractor is second stage negotiations break down.
- Risk of increased cost for retendering works if second stage negotiations have broken down.
- The second stage is not a competitive process so the contractors cost may not be competitive.
Two-stage tendering is suitable for:
- Projects that are complex (require contractor’s input on design).
- When programme length is important.
- Projects whereby the magnitude of the works are yet unknown.
28
Q
What are the advantages and disadvantages of negotiated tendering? When would you utilise negotiated tendering?
A
Advantages:
- The contractor is usually approached because they have carried out similar works and to the required standard before so there is greater certainty of cost and quality.
- Time and cost savings by reducing input into the tendering process because only a single tender needs to be analysed.
- Time saving on tender process allows earlier commencement of the works.
Disadvantages:
- Lack of competitive tendering may increase the cost for the works.
- Negotiation process needs to be structured and controlled otherwise there could be adversity between the parties before works have even commenced.
- You would usually utilise negotiated tendering when overall programme length is a priority over cost and whereby the client wants to replicate the quality of a project that the contractor has delivered before.
29
Q
What are the main procurement routes?
A
- Traditional.
- Design and build (single and two stage).
- Management Contracting.
- Construction Management.
- Framework agreements.
- Partnering.
30
Q
What is design and build procurement? When would you utilise design and build procurement? What contract would you use?
A
- Design and build is whereby the contractor is responsible for the design, planning organisation, control and construction of the works to the employer’s requirements.
I would utilise design and build when…
- The client has a need to make an early start on site as the design can be developed during the construction phase.
- The client wishes to minimise their risk in relation to the design of the works, this may be due to risky nature of the works for example replacement of combustible cladding.
- The design is complex and contractor input is needed to ensure buildability.
- The client does not want to or is not bothered about retaining control over the development of the design.
- The JCT Design and Build, 2016 contract would be used.
31
Q
What is management contracting? When would you utilise management contracting? What contract would you use?
A
- A procurement option whereby a client employs a management contractor to contribute to design and manage the works.
- The management contractor has direct contractual links with all of the works contractors and has the responsibility for the works without carrying them out.
- The management contractor breaks down the project into suitable works packages and selects works contractors through competitive open book tenders.
- The client then then reimburses the cost of the works packages to the management contractor in addition to their fee.
- I would utilise this procurement route when:
1. The client values an early start and overall project length over cost.
2. The works are extensive.
3. The works are complicated. - I would use the JCT Management Contract, 2016.
32
Q
What are the advantages and disadvantages of design and build?
A
Advantages:
- There is a single point of responsibility for the design and construction of the works.
- Works can commence earlier on site as the design and construction process can overlap.
- Contractor involvement with the design ensures buildability and expertise are incorporated into the design. It also promotes innovation in design (contractor’s not constrained by detailed design) which leads to cheaper and faster construction.
Disadvantages:
- It may be hard for a client to prepare a sufficiently comprehensive brief.
- Harder to compare tenders as the contractors each have their own designs rather than pricing for fully defined and designed works.
- Designs submitted may also be uninspiring as contractors may emphasise quickness of construction over quality.
33
Q
What is construction management? When would you utilise construction management? What contract would you use?
A
- A procurement strategy whereby the client engages directly with specialists for the design of the works via individual contracts. A construction manager is then employed on a consultant basis to plan, coordinate and monitor the works.
- The construction manager coordinates the design team and has no contractual links with the specialist contractors or the design team. They prepare the programme, determine prelims and then break down the project into suitable works packages and obtain and evaluate tenders.
- I would utilise construction management when:
1. The client is uncertain of the extent of works to be carried out.
2. Those clients that want to commence works on site quickly and is less concerned about cost certainty.
3. The client is an ‘expert’ and would benefit from the simple and direct legal relationships as they allow for effective redress of latent defects should they arise. - JCT Management Contract, 2016.
34
Q
What are the advantages and disadvantages of the construction management procurement route?
A
Advantages:
- The construction manager can be appointed early on and can contribute to the design and planning process.
- Project duration is shortened as there is an overlap between the design and planning.
- Offers flexibility in design and the works as specialist contractors are let in stages.
- The simple and direct contractual link between the client and expert contractors allow easy redress regarding latent defects.
- Cost for the works packages may be lower due to direct contracts between the client and expert contractors.
Disadvantages:
- Client needs to be an ‘expert’ to manage the various contracts between them and specialist contractors and consultants.
- Can be difficult to select a suitable construction manager as selection is based on skill and not cost of a tender submission.
- Puts risks of the performance of specialist contractors largely on the employer as the construction manager has little responsibility.
- There is little incentive for the construction manager to reduce costs associated with the works as their payment is fee based.
- The price of the works is not confirmed until the last package of works has been let.
35
Q
What are the advantages and disadvantages of the management contracting procurement route?
A
Advantages:
- Overall project duration is shorter due to overlapping design and construction
- There is contractor contribution to the design and planning process
- Changes can be accommodated in packages not yet let if they have no further
impact - The works are let competitively at current market prices on a firm price basis
Disadvantages:
- Can be difficult to select a suitable construction manager as selection is based on skill and not cost of a tender submission.
- Puts risks of the performance of specialist contractors largely on the employer as the construction manager has little responsibility.
- There is little incentive for the construction manager to reduce costs associated with the works as their payment is fee based.
- The price of the works is not confirmed until the last package of works has been let.
36
Q
What are framework agreements? When would you utilise them? What contract would you use?
A
- Framework agreements allow client’s that are consistently instructing construction work to invite tenders from contractors to be carried out over a prolonged period of time on a call off basis as and when required.
- Could use JCT FA, 2016.
37
Q
What are the advantages and disadvantages of framework agreements?
A
Advantages
- Reduces costs related to tendering works.
- Allows quick start on site.
- Integration of supply chain.
- Continuity of finishes end product.
- Allows development of long term and strong relationships.
Disadvantages
- Reduced competition resulting in higher overall project cost.
- Contractors must be able to undertake all types of work - this may not be the case if not considered before creation of framework agreement.
38
Q
How does a framework agreement last for?
A
- Will depend on the client or sector but the public sector is governed by EU procurement rules which limit a FA to 4 years.
39
Q
How would you choose contractors for a framework?
A
- Suppliers are appointed on the basis of their capability & capacity to carry out the
works. - I would first discuss the scope of work & size of packages likely to be involved
throughout the FA & would then draw up a list of potential capable contractors either
from an internal list of approved contractors which the Client may have (Network
Rail) or from my own knowledge & experience & discussions with colleagues. - I would invite the contractors to pre-qualify for the Framework, requesting information
such as the financial standing, work load, number & quality of staff, previous
experience in the potential projects under the FA, H&S & QA procedures in place. - Appointment would be assessed based on quality & capability rather than price.
40
Q
How would you ensure framework prices remained competitive?
A
- Carry out random audits & benchmark with the industry data (BCIS or internally against other projects recently tendered).
- Bid some of the work competitively outside the framework & invite framework
contractors to tender.”
41
Q
What are contract documents?
A
- Documents that evidence the details of the building contract.
42
Q
What documents would make up the contract documents for a JCT Design & Build Contract?
A
- Employer’s requirements: Can be a brief written performance statement, sketch drawings, planning permission drawings or detailed drawings and bill of quantities.
- Contractors proposals: These can be equally as brief or extensive as the employer’s requirements.
- Contract sum analysis: The CSA could be a full bills of quantities produced in accordance with NRM2 schedule of rates, or a simple elemental cost breakdown.
- The building contract: JCT Design and Build, 2016.
- A BIM protocol (if applicable): This creates the requirement for the contractor to provide specified BIM at defined levels of detail and incorporates provisions which supports the production of deliverables for ‘data drops’ at defined project stages.
43
Q
What documents would make up the contract documents for an Intermediate Building Contract?
A
- Drawings.
- Specification.
- Schedule of works.
- Contract sum analysis.
- Employer’s requirements for any contractor designed portions.
- The building contract.
44
Q
What happens if the employer intends to withhold any amount of a sum certified by the contract administer in a payment certificate?
A
- The contractor must be given written notice that the employer intends to pay them less than the sum certified no less than 5 days before the final date for payment in the form of a Pay Less Notice.
45
Q
What is a Letter of intent / a pre-construction services agreement?
A
- A letter of intent or a pre-construction services agreement is a document that is used when two parties wish to commence construction works immediately prior to negotiation and formation of the final building contract.
- There are two main types of letter of intent, these are:
- Non-binding letters of intent:
- Intended to give rise to a contract but confirms the parties intention to enter a contract at some point in the future.
- It does not create liability for either party to enter into a contract afterwards if they not wish to.
- The contractor is under no obligation to complete the works in a certain timeframe / complete them at all.
- There are limited remedies under this form of letter of intent - the employer has no counterclaim for damages for where there isn’t a contract in place, but they can deduct the cost from the value of the works. - Contractual letters of intent:
- It creates some limited reciprocal rights rights and liabilities between the parties - e.g carrying out works within a timeframe etc.
- It is usually limited in scope - for example the amount of time the contractor or money the contractor can take / expend.
- Whether this form of letter of intent is contractually binding will depend on whether:
+ Offer and acceptance
+ Consideration
+ An intention to create legal relations and
+ Certainty as to the essential terms.
46
Q
What is good practise to include within a letter of intent / pre-construction services agreement?
A
- Limit the scope of the letter - limiting the scope by time or money encourages the contractor to agree to a full contract within a certain period of time / once a certain value has been reached. This also protects the employer should a contract not be agreed or signed.
- State whether or not the contactor should stop works once the limit has been reached and if not then on what terms and confirm the payment provisions.
- Identify the works to be carried out.
- Insurance: state the level of public and employer’s liability in addition to all risks insurance. If the contractor is carrying out design works then level of professional indemnity insurance should be stated.
- CDM Regulations requirements: state that the contractor is to act in accordance with the regulations.
- Payment provisions: clearly state payment provisions. If not then Scheme of Construction Contracts default payment provisions apply.
- Warranties: depending on the type of works, third parties may require collateral warranties from the contractor / sub contractors.
- Copyright: if contractor carrying out design work, the letter should provide for a licence to be given to the employer allowing it to use any design documents following termination of the contractor’s involvement with the works.
- Termination: letter must provide for the employer to terminate the contractor’s engagement and confirm that the employer has no obligation to enter into a full contract come the end of the letter of intent.
47
Q
What are the main pitfalls with letters of intent?
A
- Both parties can have numerous commercial issues to be resolved before the contract is fully negotiated which leads to parties neglecting these issues meaning that full execution of the contract is never undertaken meaning a contract may never be fully negotiated / executed. This can lead to future disputes and exposure of the parties as the letter of intent does not contain detailed provisions.
48
Q
When ideally should a letter of intent be utilised?
A
Stated by Judge in Cunninghame V Collet [2006]:
- Where contract work scope and price are agreed or there is a clear mechanism in place to reach an agreement.
- Where terms and conditions are (or are very likely) to be agreed.
- Where start and finish dates and the outline programme are broadly agreed.
- Where there are good reasons for the works to be commenced in advance of contract documents being finalised.
49
Q
What the Scheme for Construction Contracts (England and Wales) Regulations?
A
- A scheme that that applies when construction contracts do not comply with the Housing Grants, Construction and Regeneration Act.
- The scheme either supplements or replaces provisions of a contract where it has deficiencies relevant to the Housing Grants, Construction and Regeneration Act. Ensures that construction contracts remain capable of performance whilst allowing regulatory control over their provisions.
50
Q
What is an Extension of Time?
A
- A contract provision that allows adjustment of the contractual completion date.
- It reserves the right of the employer to claim liquidated damages in the event that the contractor is unable to complete the works by the completion date for a reason that is partly due to the employers
- if the completion date could not be adjusted then the contractor would only have the complete the works with a ‘reasonable time’ (time at large).
- It also protects the contractor as if granted it relieves the contractor of their liability to pay liquidated damages.
51
Q
What are the extension of time procedure for a JCT Intermediate contract?
A
- Contractor must notify the CA as soon as it becomes apparent to them that a delay has occurred or will likely occur:
- Notification required even if contractor is not seeking an EoT.
- Notice doesn’t need to confirm whether the delay is a relevant event. - Contractor must provide CA with any further information reasonably required by the CA to assess the delay.
- CA then assesses if there is a delay and notifies the contractor if an EoT has been granted.
- No defined timeframe for the notification but the CA must notify “as soon as he is able”.
52
Q
What are the extension of time procedures for a JCT Design and Build contract?
A
- Contractor notifies the Employers Agent / the Employer as soon as it is apparent that a delay has or will occur.
- Notification required even if EoT is not being pursued.
- Notice needs to confirm the cause of the delay AND confirm whether the delay is the result of a ‘relevant event’ and confirm the anticipated delay caused to the works / works section. - Employer’s Agent / Employer must assess the delay.
- Notice must confirm whether an EoT has been granted or not.
- Contractor must be notified within 12 weeks from receipt of the contractor’s notice / contractor must be notified before the completion date if there are less than 12 weeks until the completion date.
53
Q
What is a concurrent delay with regards to an extension of time?
A
- A concurrent delay is caused two or more delays occurring at the same time. It is not to say that the delays occur simultaneously but their effects are apparent at the same time. For example exceptionally inclement weather occurs alongside a contractor’s inability to source site labour.
54
Q
What would you do if you had two or more concurrent delays occur at the same time?
A
- Customary to grant an extension of time for the ‘dominant reason’ but only where it begins and ends after the other reasons.
- Even if the dominant reason is not a ground for a loss/expense claim this may still be awarded over other concurrent delays that could lead to a claim.
- H Fairweather and Co Ltd V London Borough of Wandsworth [1987].
55
Q
What would you do whereby you had concurrent delays where one is deemed a ‘relevant event’ and the other is not?
A
- The contractor would be granted an extension of time for the full length of delay caused by the relevant event.
- Henry Boot Construction (UK) Ltd V Malmaison Hotel (Manchester) Ltd [1999]:
+ Malmaison appointed Henry Boot to construct hotel in Piccadilly, Manchester.
+ Judge cited example of exceptionally inclement weather occurred concurrently with a contractor’s inability to source labour during the same week.
+ Judge stated that Architect would not be allow to deny the contractor an extension of time on the grounds that the works would have been delayed by the labour shortage - contractor entitled to an EoT by 1 week.
56
Q
What would you do whereby you had concurrent delays where one is deemed a ‘relevant event’ and the other is not?
A
- The contractor would be granted an extension of time for the full length of delay caused by the relevant event.
- Henry Boot Construction (UK) Ltd V Malmaison Hotel (Manchester) Ltd [1999].
57
Q
What are the responsibilities of a contractor with regards to delay?
A
- Contractor must ‘constantly use his best endeavours to prevent delay and must take steps to minimise the effect of the delay on the completion date.
58
Q
What are liquidated damages?
A
- Liquidated damages are a predetermined sum agreed between both parties of a building contract which are to be paid by the contractor to the employer whereby the contractor has failed to complete the works by the contractual completion date.
- The rate for liquidated damages is stated in the contract particulars and is usually expressed as per week or part there of.
- If the works are to be carried out in sections, the rate for liquidated damages can differ for different sections.
59
Q
How is the rate for liquidated damages determined?
A
- Usually comprise of cost for anticipated rental income - usually informed by the client’s surveyor, professional fees (CA etc), any other costs incurred as a result of the delay e.g finding alternative accommodation for storage of a an incoming tenant’s property etc.
- It is no longer essential for the rate to be calculated on the basis of a genuine pre-estimate of the loss likely to be suffered by the employer - reference ParkingEye Limited V Beavis.
- Provided the amount is not ‘out of all proportion’ to the likely loss, damages will be recoverable and the employer will not have to prove their loss, even if it is much less than the amount of damages being claimed (BFI Group of Companies v DCB Integration Systems).
60
Q
Why should the CA be careful with regards to liquidated damaged when populating contracts?
A
- If ‘nill’ is inserted as the rate of liquidated damages into the contract, this will likely prevent the contractor claiming liquidated damages or general damages (Temloc V Errill).
- If nothing is inserted as the rate of liquidated damages then the employer may be able to claim general damages.
61
Q
Why should the CA be careful with regards to liquidated damaged when populating contracts?
A
- If ‘nill’ is inserted as the rate of liquidated damages into the contract, this will likely prevent the contractor claiming liquidated damages or general damages (Temloc V Errill).
- If nothing is inserted as the rate of liquidated damages then the employer may be able to claim general damages.
62
Q
What are the preconditions that must be met for an employer to claim liquidated damages? JCT Intermediate Contract
A
- Contractor must have failed to complete the works by the contractual completion date.
- Employer / CA must have fulfilled any duties with respect to the award for an EoT (if EoT should have been granted then liquidated damages will not be claimable).
- Employer / CA must have issued a certificate of non-completion (JCT Intermediate) / non-completion notice (Design and Build) to the contractor.
- Employer must have notified the the contractor before the due date of the final payment (D&B) / before the date of the final certificate that it intends to withhold payment or requires payment for liquidated damages.
- A second notice is then required to state how the liquidated damages will be claimed.
127
Q
What is the procedure for interim valuations for the JCT D&B contract?
A
- Valuation date occurs at monthly intervals as stated in the contract particulars (or closest working business day).
- If the contractor issues their application for payment prior to or on the interim valuation date then then due date is 7 days after the interim valuation date.
- If the contractor submits their interim payment application later than the valuation date the due date is 7 days from the date of receipt.
- The employer / EA must issue a payment notice five days after the due date.
- The final date for payment is 14 days from the due date.
- If employer wishes to pay contractor less than sum stated in interim certificate then they must issue a pay less notice no later than 5 days before the final date for payment.
Note: the overall effect of the payment mechanism is that the contractor’s interim payment application is a condition precedent to its right to be paid!
128
Q
What is the procedure for interim valuations for the JCT Intermediate Contract, 2016?
A
