Contract Practice Flashcards
(50 cards)
1
Q
Q. Can you tell me what the HGCRA and LDEDCA introduced?
A
HGCRA – Housing Grants Construction Regeneration Act – 1996
- Introduced the right for a contractor to be informed of how much is going to be paid to them
- The right to adjudication
- The right for a contractor to suspend works for non-payment
LDEDCA – Local Democracy Economic Development Construction Act – 2009
- Stated that verbal contracts and instructions are binding
- Abolished pay when paid clauses
- The referring party is not always liable for adjudication costs
2
Q
Q. Can you talk me through the Payment Timelines on one of your Projects?
A
- IVD = Date stated in the contract
- DD = 7 days from this point
- Payment Notice = 5 days from DD
- Final date for payment = 28 days (amended) from DD
- Final date for pay less notice = No less than 5 days before the final date for payment
3
Q
Q. Can you talk me through some of the key contractual differences between the JCT D&B and JCT SBC?
A
- EA will administer a D&B
- CA will administer a SBC
- SBC pricing document is Schedule of works, Schedule of rates or BoQ
- Pricing document for D&B will be a contract sum analysis
- PI insurance for the contractor under a D&B contract.
4
Q
Q. On 3B, were there any risks you identified with using a LOI for the Enabling Works?
A
- Not necessarily a legally binding contract
- Not a means tested contract, meaning my client was more exposed to potential claims from the contractor
- No defined confirmation that the main works contract would be entered into.
5
Q
Q. How else might you have Contracted with the Contractor for those works?
A
- Using a JCT minor works contract to enable demolition and enabling works
- Although this was not used given the advice from my clients legal team and further costs involved.
6
Q
Q. Can you talk me through how you valued materials off-site for 3B?
A
- Ensure the materials are listed in the contract
- Complete my off-site visit
- Check all materials are stored correctly, insured, labelled and the qty / information provided is correct
- Ensure I receive a Vesting certificate from the contract (with no retention of title)
7
Q
Q. Can see you reference Liquidated Damages on your Dorking Halls project, did you advise the Client on the Rate to include within the Contract? Would you ever?
A
- No, I would never advise on this.
- Instead, I can outline some typical things to be included in a calculation for LD’s. For example, staffing costs, loss of earnings, overheads, etc.
8
Q
Q. Do you know the difference between stating £0 / Nil, and leaving the entry blank against Liquidated Damages? What do they become if left blank?
A
- If £Nil then no LD’s can be levied.
- If blank, then unliquidated damages can be calculated and levied.
9
Q
Q. Can you talk me through the advice you gave to your Client on GE3B as to whether to go for Performance Bonds and Parent Company Guarantees?
A
- PCG = Less expensive (typically provided for free by the contractor), although it relies on the financial standing of the parent company of the subsidiary.
- Performance Bond = More expensive, typically 1% of the contract sum. Does provide more security, especially if it is an on demand bond.
10
Q
Q. What other Bonds are you aware of? What are the different types of Bond?
A
Other bonds:
- Retention bond
- Advanced payment bond
- Tender bond
- Performance bond
Types of bonds:
- On demand bond = can be called upon without substantiation
- Conditional bond = requires substantiation that the contractor has defaulted, no as quick.
11
Q
Q. What are the different insurance options for All Risk in a D&B contract?
A
The JCT contracts offer three main options for all risk insurance:
- Option A: The contractor is responsible for taking out the insurance for the works 1.
- Option B: The employer takes out the insurance for the works 1.
- Option C: Insurance for works within or including existing structures, covering both the new works and the existing structure 1 2.
12
Q
Q. Why could you not define the below ground risk prov sum?
A
- This was originally as the contractor could not completely limit their risk for an EoT to the programme when dealing with the obstructions in the ground and services.
13
Q
Q. Is defined and undefined prov sums stated in the JCT contract?
A
- In design and build it is not mentioned
- Although it was stated in the CP’s provided by the contractor.
- The JCT SBC does provide guidance on tis and refers to the Rules of Measurement NRM for the definitions.
14
Q
Q. How were you planning to manage this?
A
- Understanding the contractors key reasons for the risk proposal they were presenting
- Incorporating pain gain mechanisms and ensuring that the risk could be reduced
- Providing the contractor with an extension to the programme upfront.
15
Q
Q. How else could you have reduced the risks of prov sums? (pay the risk)?
A
- Yes, the risk could have been paid for upfront but again this may have come at an increased premium and not reflected value for money for my client.
16
Q
Q. Contractual mechanisms for protecting the client against the administration of a contractor?
A
- Performance bonds and parent company guarantees
17
Q
Q. What is 4th condition in a JCT D&B Contract? (Payment) tell me the payment timelines on one of your projects?
A
- IVD = Date stated in the contract
- DD = 7 days from this point
- Payment cert / notice = 5 days from the DD
- Final date for payment = 28 days from the DD
- Final date for pay less = No less than 5 days before the final date for payment
18
Q
Q. What dictates this?
A
- The construction act and update to the construction act.
19
Q
Q. What are the 2 different forms of attestation, which would you typically advise a client uses.
A
- Underhand = 6 year liability period
- Deed = 12 year liability period
20
Q
Q. GE3B LOI value? advise client on risks of LOI, any alternative?
A
- C.£4m for the facilitating and demolition works
- Minor works contract for the demo and enabling works
- Ultimately we were acting on advice made by the clients legal team.
21
Q
Q. What does the JCT contract say about valuing materials on site?
A
- Providing they are protected and secure then they can be valued on site
- Also not brought to site prematurely.
22
Q
Q. Talk me through what issue of PC on Dorking Halls meant?
A
- Building control sign off achieved
- O&M manuals produced by the contractor
- Outstanding defect and making god register
Triggered:
- End of LD’s period
- Start of rectification and making good
- Start of liability period
- Half retention released
- Insurance and possession of site handed back to the client
23
Q
Q. Tell me the pros and cons of Performance bonds and PCG’s, what is the typical cost and pay out of a performance bond?
A
Performance bond
Pro’s:
- Provides the client with monetary benefit in the case that a contractor default
- More secure than a PCG as does not rely on the parent company performance
Con’s
- More expensive than a PCG.
Parent Company Guarantee
Pro’s:
- Typically free if obtained by the parent company
Con’s
- Relies on the fact that the parent company of the subsidiary is also not experiencing financial difficulty and can still perform the obligations of the contract.
24
Q
Q. Why did you suggest SBC without qaunts as oposed to with quants? What pricing doc did this lend itself to? How did the insurances required here differ to D&B?
A
- Straightforward works to be completed
- Lended itself to a Schedule of works for the pricing document
- Limited the risk exposure involved with qty’s where the client may take on the risk
- Insurances in place under a D&B would typically include PI insurance as the contractor is responsible for design works.
25
Q. Do you know what contra proferentem is?
o It means that if a term in a contract is ambiguous, it should be interpreted against the interests of the party who drafted or provided the wording
26
Q. When can the client / contractor terminate a contract, JCT suite? (SECTION 8)
Termination by the Contractor
Default by the employer
Insolvency of the employer
Termination by the Employer
Default by the contractor
Insolvency of the contractor
Corruption and bribery
27
Q. On Ge3b was the LOI used legally binding?
o Yes, as there was all forms required for a contract to be legally binding.
28
Q. What makes a contract legally binding?
o Offer
o Acceptance
o Consideration
o Capacity
o Legality
29
Q. What did it include? Risks to the client of using?
o Agreement between the parties
o Signed by the parties
o Scope of the works
o Cap for limit to be spent under the LOI.
o Expiry of the letter of intent
o Relevant insurances.
30
Q. What needs to have happened before you can issue final payment notice?
o Certificate of making good defects.
31
Q. Explain a performance bond? Why issues procuring recently?
o A performance bond is a form of insurance that protects the client against default of a contractor under a contract.
o In the current market, due to the amount of insolvency’s that have occurred, they are harder to procure.
32
Other forms of protection under the contract?
o Liquidated damages
o Termination clauses
o Parent company guarantees
o Retention
33
Q. Have any of the designer been novated on your schemes?
o Yes, on Quad Three, the whole design team apart from the MEP consultant was novated to the contractor.
34
Q. JCT 24 some of the key updates?
o Inclusion of the building safety act
o More inclusive language
o Collaborative focus
o EoT = Time frame for decision = Reduced from 12 weeks to 8 weeks.
35
Q. What are some insurances included in a JCT contract, and what do they cover?
o Employer Liability Insurance – Cover the employer’s liability or injuries or illnesses of employees
o Public Liability Insurance – Protect against claims for injury or damage to third parties
o Construction All Risk Insurance – Protects against physical loss or damage to the works, materials or equipment (theft, vandalism and natural disasters)
Option A – Joint names policy taken out by the contractor for new works
Option B – Joint names policy taken out by the employer for new works
Option C – Joint names policy for new works and insurance of existing structures.
o Non-negligence insurance – Protects against non-negligence (i.e. unfortunate circumstance where damage is caused but by no fault of the contractor)
o PI insurance – Covers professional negligence claims
36
Q. What is the definition of construction works, or a construction contract as outlined in the HGCRA?
1. Carrying out construction operations, building, civil engineering and installation work (including surveying)
2. Arranging for the carrying out of construction operations
3. Providing labour for construction operations
37
Q. What are construction operations as per the HGCRA?
o Construction, alteration, repair, maintenance, extension, demolition, or dismantling of buildings or structures forming part of the land, whether permanent or temporary.
38
Q. What is concurrent delay?
o Refers to when two or more delays occur at the same time.
o One is the responsibility of the employer, and the other is the responsibility of the contractor
o If the contractor can prove that the delay caused by the employer occurred concurrently then they may be entitled to an Extension of time.
39
Q. What is a contract?
o A legally binding agreement between two parties to enter a contractual relationship
40
Q. What things are required for a contract?
o Offer
o Acceptance
o Intention
o Consideration
o Legality
o Capacity
41
Q. What would you typically expect to see in a professional services appointment?
o Agreement between the parties
o Attestation, signing of the document
o Professional insurance, Employer liability insurance, Public liability insurance
o Scope of works
o Change mechanisms
o Payment mechanisms
o Fee agreement
o Dispute resolution, termination and CHP.
42
Q. What is your understanding of pay when paid clauses?
o Pay when paid clauses have now been removed from all contracts, following the LDEDCA update to the construction act.
o It referred to main contractors not paying sub-contractors until they had been paid by clients
43
Q. What might be an appropriate contract for a client looking to build a new office block, the client is risk adverse?
o The best would be a design and build contract
o This would allow the client to transfer both design responsibility and input to the contractor, reducing their overall risk
o It would still also enable them to get a fixed price lump sum for the works being completed
44
Q. How long do you assess a loss and expense claim from a contractor?
o Ultimately I would assess this using the build up from the contractor that has been provided as soon as reasonably possible.
o The EA should provide their determination within 28 days or receipt and then 14 days of the latest update or submission from the contractor.
45
Q. What is the purpose of a collateral warranty?
o A collateral warranty provides a contractual relationship between two parties that otherwise would not exist.
o For example, a design consultant is novated from the client to the contractor, therefore removing a contractual link
o By having a collateral warranty, the client is then covered to make claims should they need to against the consultant.
46
Q. What is the difference between assignment and novation?
o Assignment is the transfer of the rights or benefits to a contract, typically would be the assignment to a funder or tenant
o Novation is the transfer of the rights and the obligations to a contract from one party to another, for example the novation of a design team consultant. (the original contract is removed and replaced with a new one)
47
Q. What are third party rights?
o Third party rights enable those not privy to the contract to still enforce the terms of that contract. For example, a purchaser, tenant or funder.
48
Q. How are third party rights dealt with in a professional services appointment?
o Typically, they would be excluded
o This would be done to prevent third parties gaining enforceable rights under the contract.
49
Q. What does a collateral warranty include?
o Identification of the parties
o Obligations
o Step in rights
o Insurances
o Dispute resolution
o Net contribution clauses
50
Q. What if a collateral warranty is not provided – what can be written into a contract?
o If the collateral warranty is not provided, then the client may include third party right clauses to ensure these can be enforced instead.
