Contract Practice Flashcards
What is a contract?
A contract is a legally binding promise by one party to fulfill an obligation to another party in return for consideration
What are the components of a legally binding contract?
Offer
Acceptance
Consideration - the promise made by both sides to do something e.g. providing a building in return for money
Intent - the intent to create legal relation, could be in the form of a letter of intent
What are ‘express’ terms?
Terms which are expressly stated and agreed within a contract
What are ‘implied’ terms?
A contractual term which is not expressly stated or agreed within the contract but has been implied into the contract by common law or statute
What is the difference between statutory provisions and contract provisions?
Statutory provisions are set out by the law and must be complied with regardless
Contract provisions relate to the specific contract and only apply to the project at hand
What are the different types of subcontractors?
- Domestic - selected by the main contractor to carry out a package of works designed by someone else
- Named - the employer provides a list of pre-approved and named subcontractors, the main contractor then selects one form this list through the tendering process
- Nominated - selected by the employer to carry out an element of works, employed by the main contactor. Usually imposed upon the main contractor
Why do main contractors sublet works?
Complexity and specialisation
Avoids need to maintain directly employed operatives
Reduces supervision and admin costs
Flexibility as large volumes of work can be carried out
What is novation?
A process by which contractual rights and obligations are transferred from one party to another
What are the two main procurement routes?
Traditional
Design and Build
What is a letter of intent?
A document expressing an intension to enter into a contract at a future date but creates no contractual relationship until that future contract has been entered into.
What is typically included within a Letter of Intent?
- The agreed contract sum
- Reference to tender documents
- Site possession date
- Proposed form of contract, including warranties and performance bonds
Why are LOIs used?
They can be used to mobilise construction prior to a formal contract being executed.
What are collateral warranties?
A formal contractual agreement which runs alongside another contractual agreement, creating a contractual relationship between two parties which otherwise would not exist
What are JCT contracts?
JCT is a standard form of contract; Joint Contracts Tribunal
Name some examples of contracts within the JCT family.
Minor Works Building Contract
Intermediate Building Contract
Standard Building Contract
Design & Build Contract
What are the key project characteristics which influence which JCT contract is used?
- Size, value and type of project
- Need for contractor design
- Certainty on final cost
- Client experience
- Programme requirements
When would you use a JCT Minor Works Contract?
- Smaller, basic construction projects where works are of a simple nature
- Where the procurement route is traditional
- Where the Client is responsible for design
Describe the Works insurance provisions within a JCT Minor Works Contract.
5.4 Option A - The Contractor shall effect and maintain with insurers approved by the Employer a Joint Names Policy for All Risk Insurance for the full reinstatement value of the Works
5.4 Option B - The Employer shall effect and maintain: a Joint Names Policy in respect of Existing Structures Insurance, and a Joint Names Policy for All Risks Insurance.
5.4 Option C - Allow parties to use whatever alternative insurance arrangements they wish.
When would you use a JCT Intermediate Contract?
- Construction project involving all recognised industry trades and skills
- Detailed contractual provisions are required but without complex building services or specialist work
- Suitable for projects following the traditional procurement route
- The need to complete the work in sections (Sectional Completion)
What is a Joint Names Insurance Policy?
An insurance policy typically held jointly by the employer and the contractor. The key feature of this policy is that the insured parties are unable to claim against one another in respect of an insured loss.
What are the benefits of a Joint Names Insurance Policy?
- Neither party needs to take out its own insurance policy which unnecessarily increases the project’s total insurance cost.
- It can avoid costly litigation between the jointly-insured parties who may otherwise try to claim against each other.
Describe the Works insurance provisions within a JCT Intermediate Contract.
Option A - Applicable where the Contractor is required to take out a Joint Names Policy for All Risks Insurance of the Works for NEW WORKS
Option B - Applicable where the Employer has elected to take out a Joint Names Policy for NEW WORKS
Option C - Employer to insure where the works are being carried out within, or as an extension to an existing building
When would you use JCT Design & Build Contracts?
- For projects where the contractor carries out the design and construction works
- Where the contractor’s design requirement go beyond that of a traditional contract with a ‘Contractors Design Portion’
What is the difference between a relevant event and a relevant matter?
Relevant event - An event on or off site that causes delay to the completion of works, entitles the contractor to claim additional time
Relevant matter - a matter for which the client is responsible that materially effects the progress of the works entitles the contractor to claim for additional costs (loss and expense)
