Contract Practice

Question 1

What is a Contract?

Answer 1

A legally binding agreement between 2 or more parties outlining specific terms and obligations

Question 2

What are the different types of JCT Contract?

Answer 2

Standard Form
Design and Build
Intermediate
Minor Works

Question 3

What are the Differet Types of Procurement Methods

Answer 3

Management Contracting
Construction Manager
Traditional
Design and Build

Question 4

What is Management Contracting?

Answer 4

Client appoints 1 Contractor

Contractor appoints Subcontractors

(Client only has one contract with the main contractor)

Question 5

What is a Construction Manager?

Answer 5

Acts as an Agent

Manages the multiple contracts between the Client and Contractors

(Client has a contract with each contractor - overseen by Construction manager)

Question 6

What is a Tradidtional Procurement Method?

Answer 6

Client appoints a designer to design the building to RIBA stage 4

Contractors tender for the work (no design input).

2 Separate stages

Question 7

What is a Design and Build Procurement Method?

Answer 7

Client appoints 1 contractor for the design and build of the project

Less risk for the client - passed all over to the contractor

Less cost information available for Capital Allowances Purposes

Question 8

What is a Lump Sum Procurement Method

Answer 8

Lump Sum is a type of traditional procurement

Sum of works is agreed before the contract commences

Contractor takes on the risk to complete the works within the budget

Question 9

What are Liquidated Damages

Answer 9

Liquidated Damages

A genuine pre-estimate of a loss - agreed pre contract

Contractor pays LADs to the client if the project overruns and the contractor is at fault

Question 10

What is Loss and Expense?

Answer 10

Contractor can claim for Loss and Expense if the works take longer than expected but the client is at fault (e.g. changes in design etc)

There must be written notice, and it is restricted to the direct cost incurred by the client

Question 11

What is an Extension of Time?

Answer 11

Contractor can be granted an Extension of Time if the works take longer than expected.

The contractor must apply for “Reasonable Time”

Contract Administrator needs to approve the “Relevant Event” / “Relevant Matter” (e.g terrorist attacks, natural disasters etc)

Question 12

What do you include in an Engagement Letter?

Answer 12

Assumptions / Background
Entitlement to claim
Proposed Services
Information Requirements
Proposed Fees
Standard Terms of Business

Question 13

What do you include in your Standard Terms of Business?

Answer 13

Payment Terms / Dates
Quality Assurance
Termination of Contract
PII
Money Laundering Information
Data Handling
Complaints Handling Procedure

Question 14

Why are Engagement Letters important?

Answer 14

They bind both parties to the contract

Ensure a duty of care

Question 15

What are Heads of Terms?

Answer 15

Non-binding document outlining the main issues relevant to the agreement

Question 16

What is an Indemnity Clause?

Answer 16

Protective Contractual Provision

Requires one party to compensate another for a specific loss.

Question 17

Why are Contract Dates Important?

Answer 17

First Year Allowances

SBA Statements
- Practical Completion
- Date brought into use
- Earliest written construction contract

Question 18

What is a Practical Completion Certificate?

Answer 18

When construction works are finished and handed over to the client (there may still be snagging)
- Type of Contract
- Contract Date
- PC Date

Question 19

What is the RIBA Plan of Work?

Answer 19

Royal Institute of British Architects

Outlines the stages of design from Inception to Completion

8 Stages

2020 Document updated to reflect an update in Sustainability

Question 20

What are the RIBA Stages?

Answer 20

0. Strategic Definition
1. Preparation and Brief
2. Concept Design
3. Spatial Coordination
4. Technical Design
5. Manufacturing and Construction
6. Handover
7. Use

Question 21

What is a CPSE?

Answer 21

Commercial Property Standard Enquiries

Information on the commercial contract pre-sale

Specific Capital Allowances Section

Question 22

What is a Letter of Intent?

Answer 22

A document expressing intent to enter a contract in the future

No contractual relationship

Usually sent when recipient is incurring costs and overheads

Question 23

What is a PCSA?

Answer 23

Pre-Construction Services Agreement

Allow clients to employ contractors before the main contract has been signed

Outline scope of works required of the contractor during the pre-construction phase

Question 24

What are the Standard forms of Building Contract?

Answer 24

JCT - Joint Contracts Tribunal - For construction

NEC - New Engineering Contract - For engineering contracts

FIDIC - International engineering contracts

Question 25

What are the differences between JCT and NEC?

Answer 25

NEC is written in layman's terms - easy to understand NEC - program is a contract document

Question 26

What is Retention?

Answer 26

A sum of money held following each valuation to incentivise contractors to fix defects Usually 3% (half released at PC and half 12 months later)

Question 27

How is Retention usually treated in JCT Contracts

Answer 27

JCT states retention should be 6 months Retention periods are often changed to 12 months to allow for all seasons

Question 28

How do you treat retention for Capital Allowances purposes?

Answer 28

Treat Retention as an accrual for the following year

Question 29

What is an Agreement for Lease?

Answer 29

An agreement between two parties to enter into a lease at some point in the future

Question 30

What is Insolvency?

Answer 30

When someone is unable to pay their debts Individuals are made 'Bankrupt' Companies are put into 'Liquidation' or 'Administration' - Liquidation wind up a company and sell assets to creditors - Administration - Aim to rescue the company - restructuring or sale

Question 31

When would you use a Design and Build Contract?

Answer 31

Larger more complex projects Works can begin on site before all formalities of the main contract are agreed More liability to contractor / less control for the client

Question 32

When would you use a Standard Form Contract?

Answer 32

Generally used on large projects Go into lots of detail for each element Most commonly used contract other than Design and Build Would use Traditional Procurement Method

Question 33

When would you use an Intermediate Contract?

Answer 33

Similar to Standard Contract but generally for smaller projects (between Standard and Minor) Traditional procurement route (generally less than 1 year)

Question 34

When would you use a Minor Works Contract?

Answer 34

Non complex projects Generally lower value projects (under £200,000) but cost cannot be the determining factor Fewer terms in the contract Traditional procurement route

Question 35

What is a Bond?

Answer 35

A promise (usually a deed) to pay another person a sum of money

Question 36

What are the different types of Bond?

Answer 36

Demand Bond Default Bond Performance Bond - Commonly used - insuring a client against a failing contractor (on demand / conditional if they breach contract) Retention Bond - Standard retention on valuations