Contract administration Level 1

Question 1

What forms a contract?

Answer 1

offer, acceptance, consideration and intent to create legal relations.

Question 2

What is offer and acceptance?

Answer 2

An offer:

An offer is actually a promise for another partys specific performance requirements.

An offer must have definite terms.

The offer needs to be communicated with the other party, of whom must have a chance to either accpt or reject. A person cannot accept an offer about which they are unaware.

Acceptance:

Acceptance is an agreement to the terms of an offer by the other party

Acceptance can be communicated through various means, including orally, in writing, or by conduct, depending on the circumstances.

Question 3

What are key project characteristics which influence which JCT contract is used?

Answer 3

• Size, value and type of project
• Need for contract design
• Final cost certainty
• Appetite for risk ownership and risk transfer
• Employer experience
• Programme requirements

Question 4

What are the different certificates you are aware of under JCT forms of contract?

Answer 4

• Interim certificate
• Practical completion / sectional -
• Completion certificates
• Non completion certificates
• Certificate of making good
• Final certificate

Question 5

What is Tort?

Answer 5

Tort is a branch of civil law that deals with civil wrongs or wrongful acts, whether intentional or accidental, that result in harm or injury to another person.

The purpose of tort law is to provide relief to the injured party for the harms caused by others, to impose liability on those responsible for the harm, and to deter others from committing similar acts.

Negligence is the most common type of tort. It occurs when an individual fails to exercise reasonable care, resulting in harm to another person. To establish negligence, the plaintiff must prove that the defendant owed a duty of care, breached that duty, and caused damages as a result.

Question 6

What are the categories of Tort?

Answer 6

Negligence (Most common)
Nuisance
Trespass

Question 7

What is a Collateral Warranty

Answer 7

A ‘Collateral Warranty’ is a formal contractual agreement which runs alongside another primary contractual agreement

its purpose is to create a contractual relationship between two parties where one would not otherwise exist due to Privity of Contract

Privity of Contract provides that you cannot enforce either the benefits or liabilities of a contract to which you are not a party

Therefore a Collateral Warranty provides for a duty of care to be extended by one of the contracting parties to a third party who is not party to the original contract

Question 8

What is the Duration of Collateral Warranties?

Answer 8

Usually duration of limitation period of contract (6 or 12 years)

Question 9

What are the main parts of the JCT contracts?

Answer 9

There are 7 Main section to JCT contract.

1. The agreements; includes details of company number and adresss and teh date.
2. Recitals; Includes the nature and location of the works, contract proposal, contract sum and rfers to contract documents
3. Artcles of agreement; provide obligations of both parties, contract sum, details of EA , deatails of PD and Princiap contractor, adjudication and arbitration information.
4. Contract Particulars; provides various recital options and options; named subconrtactors; supplementary provisions; date of completion and posession; Liability insurance; LADS; Rectification priod; Fluctations; Insurance; retention ; PI;
5. Attestation - Execution of works (under hand or deed) (signing)
6. Conditions (divided into 9 sections, 7 for minor works)
   6.1 Definitition & interpretation
   6.2 Crrying out the works; Contractor obligations; Materials, goods and workmanship, posession;Documents; discrepencies and divergences; compltion dates ADdjustments; relecent events; PC; LADS;Defects
   6.3 Control of th works; Instructions; testing; cdm;
   6.4 payment; notics; loss and expense; relevant matter
   6.5 changes; valuation rules
   6.6 injury damage insurance
   6.7 Assignment, performance bonds, guarante, third party rights, collatral warranty
   6.8 Termination
   6.9 Settlement of disputes
   7.Schedules (cover procedures and options that add to the operation of the conditions - the supplement condition in contract particulars chosen

Question 10

Name the 9 sections of the conditions in a JCT Contract

Answer 10

(9 sections of the conditions in a JCT contract)  
1. Definition and Interpretation
2. Carrying out the works
3. Control of the works
4. Payment
5. Variations
6. Injury, damage and insurance
7. Assignment, Third Part Rights and Collateral Warranties
8. Termination
9. Settlement of disputes

Question 11

How is a contract under hand different from a deed?

Answer 11

A deed is signed by a witness & traditionally authenticated by a seal.
The limitation period of under hand is 6 years whereas a deed is 12 years.
Execution: A contract under hand is typically signed by the parties involved and may require witnesses, while a deed must be signed, witnessed, and delivered with the intention of it being immediately binding.
Consideration: A contract under hand requires consideration (something of value exchanged), but a deed does not require consideration to be enforceable.

Formality: Deeds generally require more formalities, such as being written on parchment, and must clearly state that they are intended to be a deed.

Limitation Period: The time limit for bringing a claim under a contract under hand is usually 6 years, whereas for a deed, it is 12 years.

In essence, deeds are more formal and have a longer limitation period for enforcement than contracts under hand. They are often used for significant transactions where no consideration is passed or where a longer enforcement period is desired.

Question 12

What is Execution as a deed?

Answer 12

Execution as a Deed – is when the contract must be in writing and clear that the contract is a deed. Liability period is 12 years and signatory is:
* signature of director and company secretary or two directors.
* Affixing the company’s common seal in the presence of a director and company secretary or 2 directors.

Question 12

What is Execution Under Hand

Answer 12

Can come into effect orally and no requirements to sign (however it is good practice to execute and signify acceptance to prevent future disagreement).
Liability period is 6 years
Signatory is: Single Director in the presence of a witness who attests (confirms) the signature.

Question 13

What is a contract?

Answer 13

A legally binding document (between two parties) to provide goods and services with a

Question 14

What is a Parent Company Guarantee?

Answer 14

Parent Company Guarantee is an arrangement where the contractual performance of one company in a corporate group is underwritten by the other members of the corporate group. This means that is must complete the works itself if it can or pay the financial equivalent.

Question 15

What is the most common type (most common parent company guarantee) in the construction

Answer 15

A performance bond.

Question 16

What are common contract documents?

Answer 16

The contract (with any amendments)
Preliminaries
Contract Sum Analysis/ Pricing schedule
Drawings
Specification

Question 17

What are the main contract suites?

Answer 17

JCT -joint Contract Tribunal
NEC – New Engineering Contract
FIDIC - International federation of Consulting Engineers

Question 18

What are Liquidated Damages?

Answer 18

Liquidated Damages are a genuine pre-estimate of the likely loss incurred by the employer should the completion date not be met.

A non-completion certificate and a withholding notice must be in place before LDs can be deducted. 

Question 19

What must be in place before LDs can be deducted?

Answer 19

A non-completion certificate and a withholding notice must be in place before LDs can be deducted.

Question 20

What is novation?

Answer 20

Novation is a mechanism whereby one party can transfer all its obligations under a contract and all benefits arising

Question 21

What are third party rights?

Answer 21

Third Party Rights – The Contracts (Rights of Third Parties) Act 1999 in the UK allows third parties to enforce terms of contracts that they are not a party to, but which benefit them in some way. This act provides an alternative to collateral warranties.

Question 22

What is Performance specified works?

Answer 22

A performance specification is a document that provides details about functionality and other important technical information. This is produced before

Question 23

What are the provisions under the Construction Act? (HGCRA 96)

Answer 23

o The right to be paid in interim, periodic or stage payments.
o The right to be informed of the amount due, or any amounts to be withheld.
o The right to suspend performance for non-payment.
o The right to adjudication.
o Disallowing pay when paid clauses.

Question 24

What are the different valuation types?

Answer 24

Activity schedule in terms of percentage achieved or completion of the activity. Milestones reached on a pre-agreed programme. Measurement against a bill of quantities. Stage payments against calendar dates.

Question 25

What are the NEC options?

Answer 25

Option A: Priced contract with activity schedule Option B: Priced contract with bill of quantities Option C: Target contract with activity schedule Option D: Target contract with bill of quantities Option E: Cost-reimbursable contract Option F: Management contract

Question 26

What is a bond?

Answer 26

Bonds are undertakings given by one party - a bondsman - to another to pay money if a third party defaults

Question 27

What are construction security methods?

Answer 27

Parent company guarantee Bonds Collateral warranties Third party rights Direct agreements Payment security methods

Question 28

When are on demand bonds used?

Answer 28

Advance payments - used when the employer makes an advance payment to cover the contractor’s costs for for a particular part of the project Tender bond - would entitle the employer to payment if they have incurred substantial costs in a tender process and the contractor withdraws their tender

Question 29

What are collateral warranties?

Answer 29

Collateral warranties are agreements which are associated with another ‘primary’ contract. They provide for a duty of care to be extended by one of the contracting parties to a third party who is not party to the original contract.

Question 30

What were the benefits of a PCG over performance bond?

Answer 30

Under a PCG it is certain that the parent company will take over if the contractor defaults. This means that there is no delay to find a new contractor as there would under a performance bond.

Question 31

What are the JCT payment provisions?

Answer 31

IVD - when the contractor is due to send their application Due date - 7 days after contractor submits their application Payment notice date - 5 days after due date Pay less date - at least 5 days before payment date Payment date- 14 days after due date

Question 32

What must a contractor do if a relevant event occurs?

Answer 32

The contractor must give notice if and whenever it becomes reasonably apparent that the progress of the works is being or is likely to be delayed. The notice must set out the material circumstances including cause or causes of the delay and must identify any event that is considered a relevant event.

Question 33

What are the conditions of a JCT DB contract?

Answer 33

1) Interpretations and definitions 2) Carrying out the works 3) Control of the works 4) Payment 5) Variations/Changes 6) Injury, damage and insurance 7) Assignment, 3rd party rights and warranties 8) Termination 9) Settlement of disputes

Question 34

What is a Payless Notice?

Answer 34

A notice which must be issued (under the Construction act 1996) by the client if they are intending to pay less than what the contractor invoiced, or if they are deducting liquidated damages.

Question 35

Within the JCT form of contract what insurances are there within the contract?

Answer 35

Construction all risk insurance Option A – New building taken out by contractor Option B – New building taken out by employer Option C – Existing building taken out by employer Contractor will need to take out public liability and employers liability.

Question 36

What are the consequences of a Practical Completion Statement

Answer 36

Releasing half of the retention Ending the contractor’s liability for liquidated damages Signifying the beginning of the defects liability period. Insurances liabilities move from contractor to client Client takes possessions for occupation

Question 37

What is an extension of time?

Answer 37

A mechanism in the contract that allows an employer to extend the time in the contract by which the contractor is required to complete works.

Question 37

Can you name the Relevant events?

Answer 37

Variations Exeptionally adverse weather Force Majure Delays in possession of the site Civil commotion or terrosism Strikes or Lockouts Statutory undertakers works Failure to provide infromation Changes in statutory requirements

Question 38

What is the JCT insurance option A

Answer 38

For new works The contractor takes out the insurance policy It is in joint names It should be maintained under PC The contractor will only receive the value paid out by the insurers for reinstatement, if the cost is greater than that they bear the loss

Question 39

What is the JCT insurance option B

Answer 39

For new works The employer takes out the policy in joint names It may be used by frequent developers who may have a lower premium than the contractor Any reinstatement works are treated as a variation, and the employer has to pay the actual value, if that is more than the insurance policy they bear the loss

Question 40

What is the JCT insurance option C

Answer 40

For works to existing structures Taken out by the employer in joint names The new works have to be insured for all risks and specified perils The existing structure only has to be insured for specified perils

Question 41

What is the joint fire code?

Answer 41

Sets out a series of standards and procedures to be followed to minimise the occurrence of accidental or malicious fires To reduce the incidence of fires in construction realted work. By designing out, taking simple precautions and adopting safe working practices it argues that the majority of fires can be prevented

Question 42

Who often requires the joint fire codes inclusion in a contract?

Answer 42

The Insurer

Question 43

What must the contractor provide if the joint fire code applies?

Answer 43

Handbells, whistles, portable fire extinguishers, fire doors, fire stopping to voids and lift shafts, fire marshalls ETC

Question 44

What is a bespoke contract?

Answer 44

Contract conditions that are drafted specifically for a particular project

Question 45

What the advantages of standard forms over bespoke contracts?

Answer 45

a) Written by legal experts b) Rights and obligations of each party are clearly set out to the required level of detail c) Risks should have been allocated equitably between the parties d) Parties should be familiar with the provisions in the form – greater consistently in application and fewer unforeseen anomalies e) The time and expense of preparing a fresh document for each occasion is avoided f) Case law is built up over time – provides good source of knowledge and clarity of terms

Question 46

Name the main types of JCT contract

Answer 46

a) Minor works b) Intermediate c) Standard building contract d) Major Projects e) Design and Build f) Prime cost contract g) Measured Term contract h) Construction Management Agreement i) Management Contract j) Framework Agreement

Question 47

When would you use JCT Minor Works?

Answer 47

Projects that are short in duration, small and simple Guidance is for a value up to £150,000 It is a short, easy to follow contract It is a lump sum form; design should be completed prior to execution Not as comprehensive as others – limited claims provisions, no fluctuations

Question 48

When would you use JCT Intermediate Contract?

Answer 48

Recommended for project that do not exceed one year’s duration For projects that are simple in content, require only basic skills and trades and where services are not complex and where the works are already designed

Question 49

When would you use JCT Standard with quantities?

Answer 49

Work has already been designed Where there is a bill of quantities It is a lump sum form The contractor’s risk is limited to price only The employer takes the risk of errors in the bill

Question 50

When would you use JCT Standard without quantities?

Answer 50

Work has been designed prior to contract but there is no bill Contract documents will include drawings, specification and schedule of rates It is a lump sum form of contract The contractor’s risk includes both price and quantity

Question 51

When would you use JCT Standard with approximate quantities?

Answer 51

This is a remeasurement form of contract There is no contract sum Used where the design is not completed at time of execution An approximate bill of quantities has been prepared Construction is wished to commence prior to the design being completed

Question 52

When would you use JCT Major Works?

Answer 52

Projects that are significant in both size and quantity Generally for clients that have their own in house contractual procedures

Question 53

When would you use JCT DB?

Answer 53

When the contractor is responsible for design and construction Similar in complexity to the standard building contracts The contactor’s proposals form the basis of the contract There is no mention of an architect or QS

Question 54

When would you use the prime cost contract?

Answer 54

Broadly based on the provisions of standard building contract The contractor is paid the cost of carrying out the work plus a fee to cover OH&P Might be used if another contractor is hired to complete the works after an insolvency The employer bears the majority of the financial risk The total cost is not known until completion

Question 55

When would you use a JCT Measured Term Contract?

Answer 55

Where the employer requires maintenance / minor works to be undertaken on a regular basis over a defined period of time on a defined list of properties Contract agreed on a schedule of rates for carrying out certain types of work Can be let on a fixed or fluctuating price basis Contains a break provision for terminating the contract early

Question 56

When would you use JCT Construction Management Agreement

Answer 56

When the construction management procurement route is picked When the employer wants an early start on site etc Construction Management Trade Contract also used as the standard form for the agreements between employer and trade contractors

Question 57

What key things happen when the PCC is issued?

Answer 57

Possession of site will transfer back to client Responsibility to insure/protect site goes on to the client Casement of liability for delay damages or LD’s Passes risk of damage to site on to the client Commencement of defects liability period Trigger milestone payments Release of (some) retention monies Can effect third party agreements such as performance securities

Question 58

What is ‘partial possession’?

Answer 58

It’s a mechanism whereby the contractor can give possession of completed parts of the works before practical completion of the whole works. - Consent cannot be unreasonably withheld, but PP requires contractor consent.

Question 59

What is the effect of granting partial possession?

Answer 59

The rate of liquidated damages is reduced in proportion to the value of the relevant parts; Half the retention is released for the relevant parts; and The contractor’s obligation to insure the relevant parts ceases.

Question 60

What is ‘sectional completion’?

Answer 60

It’s a mechanism whereby the works are divided into distinct sections which may have different dates of completion.

Question 61

What is the Contracts (Rights of Third Parties) Act 1999?

Answer 61

Legislation that reforms the principle of privity of contract.

Question 62

Why was the Contracts (Rights of Third Parties) Act 1999 introduced?

Answer 62

The doctrine of privity of contract led to the proliferation of collateral warranties which included significant expense and legal paperwork. This legislation aims to avoid that.

Question 63

What is the JCT position on the Contracts (Rights of Third Parties) Act 1999?

Answer 63

The JCT default position is that the legislation will not apply. This act can be opted out of if the contract states so

Question 64

If the employer wanted to make use of the Contracts (Rights of Third Parties) Act 1999, what information would he need to provide?

Answer 64

The employer would need to enter the name, class and description of the beneficiary, i.e. purchaser, tenant or funder within the contract particulars.

Question 65

What’s a ‘collateral warranty’?

Answer 65

It’s a mechanism which creates a legal relationship between parties where otherwise one would not exist. They opporate allongside another agreement.

Question 66

Under JCT, what ways can benefits be transfered?

Answer 66

a) Collateral warranties b) Third party rights c) Assignment

Question 67

Why are collateral warrenties used?

Answer 67

Due to the principle of privity of contract, the rights and obligations under a contract can only be enforced by a party to that contract Collateral warranties give remedies to parties that due to privity of contract would not otherwise have them

Question 68

What is a bond?

Answer 68

A type of security that provides a beneficiary a pre-detemined/calculated financial compenstation A glorified “i owe you” - a contract that can be similar to insurance

Question 69

What is a guarantee?

Answer 69

A contract involving a third party who guarantees the obligations of one party to the beneficiary A contract with a guarantor

Question 70

In a construction contract, what is a parent company guarantee?

Answer 70

A guarentee that guarantees the obligations of a contractor by the parent company Particually usefull if a contractor is part of a group with many assets

Question 71

What is a performance bond?

Answer 71

A type of bond that can be called if a contractor defualts on their obligations monetery remuniation - the bond is a payout only

Question 72

What is assignment?

Answer 72

When a party of a contract assigns their rights under a contract to a third party

Question 73

What is novation?

Answer 73

Novation is where both contractual rights and obligations are transfered to a third party? Original contract breaks and a new one is formed

Question 74

Does novation require agreement of all party’s?

Answer 74

Yes - it is a three way agreement

Question 75

What is the difference between novation and assignment?

Answer 75

Assignment: transfer of rights Novation: transfer of rights and obligations