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RICS APC LG > Contract Practice > Flashcards

Contract Practice Flashcards

1
Q

What is an LoI?

A

Letter of Intent

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2
Q

What are the types of LoI?

A

1) Comfort Letter
2) Instruction to proceed
3) Recognition of contract

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3
Q

What are the advantages of a LoI?

A

Promotes trust & enables earlier start on site.

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4
Q

What are the disadvantages of a LoI?

A

1) Not legally binding
2) Can provide a false sense of security
3) If left too long, the contractor may no longer wish to sign the contract

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5
Q

What is a Parent Company Guarantee?

A

A guarantee provided by the contractor’s ultimate parent or holding company to answer for the debt, default or miscarriage of the contractor.

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6
Q

Who issues a LoI?

A

The Client or any party authorised to enter into contract on behalf of the Client.

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7
Q

What is a performance bond?

A

A bond obtained by the contractor which will provide the client with a sum or % of the contract sum if/when the Contractor fails to comply with their obligations under the contract.

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8
Q

What are the ways to protect the client from contractor default?

A

1)Performance bond (Conditional or On-Demand)
2) Parent Company Guarantee

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9
Q

What is a collateral warranty?

A

Creates a contractual link between parties where one does not already exist, such as a Client and Subcontractor, or Client and Novated designers.

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10
Q

What is the difference between “Novation” and “Assignment”?

A

Novation is a transfer of both Rights and Responsibilities (Obligations), whereas Assignment is just a transfer of Rights.

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11
Q

What are the 5 types of bond?

A

1) (T)ender Bond
2) (R)etention Bond
3) (A)dvanced Payment Bond
4) (M)aterials off-site Bond
5) (P)erformance Bond (Conditional or On-Demand)

(TRAMP)

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12
Q

What is meant by “Deferment of Possession of the site”

A

Cl. 2.5 in JCT SBC - Entitles the client to defer giving the contractor possession of the site for a period of up to six weeks unless a shorter period was stipulated in the contract particulars.

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13
Q

What Clause does “Deferment of Possession” refer to in the Contract?

A

JCT SBC Cl. 2.5.

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14
Q

What makes a Contract legally binding?

A

1) Offer
2) Consideration
3) Intent to create legal relations
4) Certainty of terms
5) Legality
6) Acceptance
7) Capacity to make agreement

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15
Q

What are the advantages of using standard forms of Contract like JCT?

A

1) The contracts have been tried and tested and parties have experience in using them.
2) Bespoke contracts are time consuming to put together and expensive, the Contractor is also likely to inexperienced with the Contract which could lead to disputes / less people wanting to tender for the project.

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16
Q

What are the key payment timelines under JCT?

A

1) Due Date
2) Payment Certificate - 5 days after the Due Date
3) Final date for a pay less notice is 5 days before the final date for payment.
4) Final Date for Payment is 14 days from the Due Date (unless amended)

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17
Q

What must a Contract Administrator state in their Certificate?

A

1) The sum he considers to be due to the Contractor at the Due Date.
2) The basis of which the sum has been calculated.

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18
Q

What is the purpose of a Vesting certificate?

A

Vesting is a tool used to help the Contractor’s cashflow. A vesting agreement transfers the ownership of the materials over to the Client.

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19
Q

What documents may be required to pay for materials off site?

A

1) Signed vesting agreement.
2) If there is a materials off-site bond, make sure this has been purchased by the Contractor.
3) Check to make sure materials you’re paying for align with the rates in the Contract.

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20
Q

If the Client delays the Contractor’s start on site date by more than 6 weeks, what is the Contractor entitled too?

A

Terminate the Contract.

21
Q

What is a retention bond?

A

A bond that will pay the client a percentage of the contract price if the contractor were to default or fail to correct defective work.

22
Q

Why would you extend the liability period?

A

For example, a student accommodation can only do inspections out of term time.

23
Q

What are the advantages of novation?

A

1) Reduced learning curve
2) Transfer of design risk to the Contractor.

24
Q

What are the disadvantages of novation?

A

Requires a good relationship between the Contractor and Architect.

25
Q

What types of insurance are there?

A

1) Professional indemnity
2) Public liability
3) Contractors all risk
4) Run off cover

26
Q

What are the levels of PI as required by the RICS?

A

1) A turnover of <= £100k requires £250k min cover.
2) A turnover of £100,001 - £200k requires £500k min cover.
3) Turnover of >£200k requires £1million min cover.

27
Q

What are LD’s?

A

Liquidated Damages, they are a genuine pre-estimate of likely cost to the Client.

28
Q

What would happen if LD’s were construed as a penalty?

A

They would be unenforceable.

29
Q

What are typical examples of a relevant event?

A

1) Client changes to scope
2) Delayed access to site
3) Force majeur (circumstances can be foreseen)

30
Q

What is the purpose of loss and expense?

A

To get the contractor back to a financial position if the delay hadn’t occurred.

31
Q

What was included within the 2011 update to the construction act?

A

1) The act now applies to Construction Contracts not in writing.
2) Doesn’t allow who bears cost of adjudication, this is agreed within the case
3) Dates for payment must be set out in the Contract.

32
Q

Can you deduct liquidated damages from a Final Account?

A

No, only the Employer can deduct the monies.

33
Q

What is the process of levying LD’s?

A

1) A notice of non-completion must be issued by EA / CA.
2) The employer must write to the Contractor notifying them of their intention to deduct damages
3) The Employer would then issue a second notice, informing the contractor that they intend to deduct the money from monies due or that the contractor needs to pay it.

34
Q

How do interim payments change after practical completion?

A

Payment notices / certificates are issued at monthly intervals as previously, only half the retention is deducted from these.

35
Q

On PWI & Chelsea Barracks, how were your interim valuations conducted?

A

1) PWI was JCT SBC, so interim payments
2) Chelsea B8 was JCT D&B, so Alternative B (Periodic Payment) applied rather than Alternative A (Stage Payments).

36
Q

What is the ‘date for completion’?

A

The initial date as stated in the Contract for the Contractor to complete the Works.

37
Q

Where is the ‘date for completion’ stated?

A

Contract Particulars.

38
Q

How would you recommend your proposed form of Contract?

A

1) Quality of design information
2) Complexity of the build
3) Procurement route
4) Client appetite to risk
5) Client experience

39
Q

What types of JCT Contract are there?

A

Traditional:
1) Lump sum (with or without quants)
2) Measurement (approx. quants)
3) Cost Reimbursement (Prime Cost)

D&B
1) Packages / Turnkey
2) Traditional D&B
3) CDP

Management Contracts
Construction Contracts

40
Q

What are the different sections in JCT?

A

1) Definitions and Interpretations
2) Carry Out Works
3) Control of Works
4) Payment
5) Variations
6) Injury, Damage and Insurance
7) Assignment, Third Party Rights and Collateral Warranties
8) Termination
9) Disputes

41
Q

Who is protected under a Contract?

A

Both parties to the contract, as it sets out terms and obligations for each party.

42
Q

What is the Housing Grants, Construction and Regeneration Act 1996?

A

Ensures that payments are made promptly throughout the supply chain and that disputes are resolved swiftly
“Provisions of the act include;
1) The right to be paid in interim, periodic or stage payments
2) The right to be informed of the amount due, or any amounts to be withheld
3) The right to suspend performance for non-payment
4) The right to adjudication
5) Disallowing pay when paid clauses”

43
Q

What is the difference between a Collateral Warranty and Third Party Rights?

A

Collateral Warranties are agreements which are associated with another primary contract.

44
Q

What are the types of Performance Bond?

A

1) Conditional
2) On-Demand

45
Q

What is a conditional bond?

A

A Condition Bond requires certain conditions to be met before payment is to be made.

46
Q

What is an On-Demand bond?

A

An on-demand bond is an unconditional obligation to pay once a proper demand has been made (a Contractor defaults).

47
Q

What do you not apply retention too?

A

1) Loss and Expense
2) Insurances
3) PCSA agreement

48
Q

Under a JCT Form of contract, tell me how you manage change, what mechanisms?

A

1) Variations
2 )Loss & Expense
3) EOT
4) Delays

49
Q

What is the difference between latent defect and patent defect?

A

Patent - discovered by reasonable inspection (Pre-PC)
Latent - not discovered by reasonable inspection (Post PC)

RICS APC LG (5 decks)

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