Contract Practice Flashcards
- What is a contract?
A legally binding agreement (between two parties) to provide goods and services within a specified timeframe.
- What is necessary to form a contract?
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)
- How is a contract executed?
- Under hand, signed by both parties, 6 year limitation period. Means that a party must bring about any claim for breach of contract 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. Valuable consideration not required,
- What are common contract documents?
- The Contract (with any amendments)
- Preliminaries
- Contract sum analysis/Pricing Schedule
- Drawings
- Specification
- Planning conditions/agreements
- Contractors Proposals
- What are the main contract suites?
- JCT (Joint Contract Tribunal)
- NEC (New engineering contract)
- FIDIC (International federation of Consulting engineers)
- ICE (Institution of Civil Engineers)
- How did you try to mitigate a delay on one of your projects?
Coventry demolition - Liasing with Main contractor to overlap the works, early survey work can begin on site whilst last section of demolition taking place.
N 1. Why use standard forms of contract?
- 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.
N 2. Why wouldnt you use a bespoke contract?
- They are costly to produce and time consuming
- Contractors do not like them, as they regularly put alot of the risk onto the contractor
- They are not tried and tested like a standard form
N 2. Why wouldnt you use a bespoke contract?
- They are costly to produce and time consuming
- Contractors do not like them, as they regularly put alot of the risk onto the contractor
- They are not tried and tested like a standard form
N 3. What is required to form a contract?
Offer Acceptance Consideration Capacity Intention Legality?
N 4. What should you consider when selecting the contract?
- The criteria of the client
- The procurement method you are going to use
- Nature of the works
- Timings, are the works required to start quickly or do you have time to produce robust set of docs
N 7. What standard forms of contract do you know that are offered by JCT?
- SBC 2011/2016
- Intermediate building contract 2011/2016
- Minor works Building contract 2011/2016
- Major Projects building contract 2011/2016
- Design and build contract 2011/2016
- Management Building contract 2011/2016
- Construction management contract 2011/2016
- Prime cost building contract 2011/2016
N 8. Can you name some NEC standard contract forms?
NEC - Engineering and Construction Contract (ECC)
- Option A, Priced contract w/ Activity Schedule
- Option B, Priced contract w/ BoQ
- Option C, Target contract w/ Activity Schedule
- Option D, Target contract w/ BoQ
- Option E, Cost reimbursable
- Option F, Management contract
N 12. When is a JCT Minor Works contract NOT suitable?
- Complex projects
- Detailed control procedures
- Where there are named Sub-Contractors
N 13. Can you provide more information on the JCT Major project construction contract?
- Used on large , complex project by experienced clients
- They place most of the risk on the contractor
- Has sub-contract derivatives
- All derivatives/versions have a yellow and purple cover
N 14. Can you provide more information on the JCT Design and Build Contract 2011?
- They are used by all types of clients, create a single point of responsibility for the design and construction with the contractor
- Can be used on projects of all sizes
- Client must produce the Employers Requirements
- Has a sub-contract derivative broken into two parts: JCT DB11 Sub-contract Agreement, JCT DB11 Sub-contract Conditions
- All derivatives have a Yellow and pink cover
N 15. Can you provide more information on the JCT Management Building Contract?
- Used then a management contracting route is chosen
- Used by experienced clients who understand the construction costs
- No real cost certainty until all packages are let
- Works are completed by a number of ‘Works Contractors’ who are placed under a management works contract.
- Works Contractors are contracted to the Management Contractor
- Management Contractor is a fee earning professional onto the the final construction costs.
- All derivatives have a yellow and brown cover
N 16. Can you provide more information on the JCT Construction management contract?
- Used where a CM procurement route is chosen
- Used by experienced clients who understand the construction costs
- No real cost certainty until all packages are let
- Works are completed by a number of ‘Trade Contractors’, who are placed under a ‘Construction Management Trade Contract’.
- Trade contractors are contracted directly with the client
- The Construction Manager is only responsible for looking after the programme and construction.
- All derivatives have a Yellow and Brown cover.
N 17. Can you provide more information on the JCT Prime Cost Building Contract?
- Used on projects which require an early/quick start
- Usually on a cost plus basis, as the extent of the works are not known until the project is underway
- Has sub-contract forms
- All derivatives have a yellow and pink cover
N 18. Can you provide more information on the NEC Option A contract?
Priced Contract with an Activity Schedule
- For all types of clients, the balance of risk is mainly with the contractor
- It comes with/requires an activity schedule, containing a list of activities the contract expects is required to complete construction.
- Lump sum
N 19. Can you provide further information on the NEC Option B contract?
Priced Contract with a Bill of Quantities
- For all types of clients, the risk is mainly with the contractor
- Comes with a detailed BoQ, which can either be produced by the client or Contractor, which is a detailed statement of all the works that will be undertaken.
- Lump sum
N 20. Can you provide further information on NEC Option C contract?
See revision sheet
N 21. Can you provide further information on NEC Option D contract?
See revision sheet
N 22. Can you provide further information on NEC Option E contract?
See revision sheet
What are contra claims?
Imposed as a result of the contractor's operations (such as a third-party claim resulting from contractor negligence or contractual breach, for example, flooding a neighbour's property)
What is a Contract Sum?
The amount agreed and set out in the contract to be paid to the contractor for completion of the works
Why may a Contract Sum need to be adjusted when it comes to Final Account?
• Variations
• Fluctuations
• Prime Cost sums
• Provisional sums
• Payment to nominated sub-contractors
• Statutory fees
• Loss & Expense
• LD’s
How is Retention Held?
• The employer deducts retention. The contract states the following: ‘…the Employer’s interest in the retention is fiduciary as trustee for the Contractor (but without obligation to invest)’.
• Unless the employer is a local authority, the contractor may request that the employer place the retention monies in a separate bank account to comply with the above statement. The employer will certify that this has occurred to the contractor and then the architect/contract administrator. The employer benefits from interest earned on this account.
What is Retention?
• A percentage (usually 3-5%) of the amount certified as due to the contractor on an interim certificate that is deducted and retained by the client.
• Purpose is to ensure that the contractor properly completes the activities required of them under the contract
What’s the difference between a Relevant Event and a Relevant Matter?
• A ‘Relevant Event’ is an event that causes a delay to the completion date which is caused by the client, or a natural event not caused by a party. A contractor is entitled to claim an Extension of Time
• A ‘Relevant Matter’ is a matter for which the client is responsible that materially effects the progress of the works. This enables the contractor to claim direct/loss and or expense that has been incurred.
• A Relevant Event does not necessarily entitle the contractor to claim loss and expense, and a Relevant Matter need not necessarily result in a delay to completion
What is Tort?
A tort is a civil wrong by the “tortfeasor” that unfairly results in loss or harm to another. This makes the tortfeasor liable to other party. Law of Tort is separate to criminal and contract law and is dealt with by the civil courts.
What are the categories of Tort?
• Negligence (Most common)
• Nuisance
• Trespass
What happens if the client will not pay the retention?
• If retention is due to the contractor, then the client would be in breach of contract
• Contractor could bring dispute to adjudication / arbitration or the dispute resolution technique listed in the contract
What is the default retention in the JCT form of contract?
• Standard Building Contract 2016 with & without CDP = 3%
• Intermediate contract 2016 = 5%
• Intermediate contract 2016 with CDP = 5%
• Minor works contract 2016 – 5%
• Minor Works contract with Design = 5%
• Design and build 2016 = 3%
• Major Projects 2016 = NONE
When is retention released?
A portion (50%) is released on completion of the works with the other 50% released at the end of the rectification period (Final Certificate)
What is included and excluded with Retention?
Included:
• Preliminaries
• Measured works
• Variations
• Materials on site
• Materials off site
Excluded:
• Insurance
• Statutory fees and charges
• Costs relating to patent defects
• Cost of opening up the works and testing the works
• Loss and expense
• Insurance for restoration works
• Fluctuations in the cost of labour and material (Option A & B)
What is a Collateral Warranty
• 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
What is the Duration of Collateral Warranties?
Usually duration of limitation period of contract (6 or 12 years)
What are the disadvantages of collateral warranties?
• Administration of completing them - On large projects there can be a great number consultants and sub-contractors meaning resulting in a lot of warranties
• ‘The contracts (rights of third party)’ can offer a way around this difficulty by allowing the primary contracts to confer benefits upon third parties even though they are not party to the contract
Examples of when Collateral Warranties are used?
• Client with subcontractor’s
• Main Contractor and
• Client with any Contractor’s Design Portion (E.g. MEP, cladding specialist, joinery specialist etc.)
• Funder with developer providing ‘step-in’ rights if client goes insolvent