Contract Practice

Question 1

Could you explain what the roles of the client, contractor and consultants involve under traditional JCT contracts?

Answer 1

Under the JCT contracts:
- the client is responsible for expressing the project requirements, making payment to the contractor, employing consultants

• the contractor is responsible for developing the design, managing and executing construction, application for payment
• consultants (like architects, quantity surveyors, principal designer etc.) provide professional services and advice.

Question 2

Which consultants are specified in the D&B 2024 contract?

Answer 2

EA
PD and PC for CDM
PD and PC for Building Regs

Question 3

Which consultants are specified in the Intermediate contract?

Answer 3

Architect/CA
QS
PD and PC for CDM
PD and PC for Building Regs

Question 4

What is the role of the Quantity Surveyor in the Intermediate Contract?

Answer 4

Valuation assessments
Issuing pay less notices
L&E assessments
Final account
Variation assessments

Question 5

What are the changes from JCT 2016 to JCT 2024

Answer 5

Gender neutral language.
Notices can now be served by email.
New Article 7 requires identification of the Principal Designer and Principal Contractor
Epidemic is added as a Relevant Event and an optional Relevant Matter
Changes in law now seen as a Relevant Event and optional Relevant matter
Asbestos, contaminated materials and uxo’s can now be claimed as RE and RM.
Delays - Employer has 14 days to notify contractor of further information required to reach a decision and now have 8 weeks to provide a decision, not 12.
LD’s can’t be claimed if contract terminated
Fluctuations text moved online.
Notification and negotiation provisions are now integrated, not supplemental.
Sustainability provisions are now integrated, not supplemental.
PD and PC now required for Building Regulations as well as CDM regs (previously included)

Question 6

Could you explain how JCT 2024 contracts has or will affect the industry, if at all?

Answer 6

Digital Integration – Incorporates provisions for electronic communications, allowing critical notices to be served via email to specified addresses.

Enhanced Building Safety – Article 7 addresses the appointment of duty holders under the Building Safety Act 2022, ensuring compliance with new safety regulations.

Any future epidemics delays will be easier to deal with in terms of time and money due to a new Relevant Event and optional Relevant Matter.

Question 7

What do you believe are the key benefits of using JCT contracts in the construction industry?

Answer 7

clarity of responsibilities,

certainty of obligations and rights, and risk allocation between parties.

provide a regulatory framework that is thorough and understood across the industry.

Question 8

What are the basic requirements to make a contract binding in the construction industry?

Answer 8

Offer
Acceptance
Consideration

Intent to create legal relations
Capacity
Legality

Question 9

Could you provide an example of how your understanding of these contracts has been put to practical use in a project?

Answer 9

When reviewing a claim for Loss & Expense:
Review the reason for the delay and whether that is a relevant matter
Review the contractor’s loss and expense claim to, checking it was submitted in accordance with contractual timescales
Request additional cost back up where required
Agree the final cost, to avoid disputes

Question 10

Can you provide an outline of the JCT Design and Build contract?

Answer 10

a contract where the contractor is responsible not only for the construction but also the design of the project.

It has a single point of responsibility, simplifying the client’s management of the contract.

Question 11

Can you provide an outline of the JCT Intermediate contract with contractors design?

Answer 11

the client takes on design change risks except for items specifically listed in the contractor’s design portion.

Simple works involving all the recognised trades and skills of the industry, where fairly detailed contract provisions are needed, but without complex building service installations or other specialist work

Potentially for projects between £250k and £1.5million

Question 12

When would a JCT Design & Build be suitable?

Answer 12

D&B is suitable when a project is simple in nature and the client wants to remove risk.

can vary in scale, but the Design and Build Contract is generally suitable where detailed provisions are needed.

Question 13

When might a JCT Intermediate contract be suitable?

Answer 13

Projects involving all the recognised trades and skills of the industry, where fairly detailed contract provisions are needed, but without complex building service installations or other specialist work

Typically suitable for projects that range in value from approximately £250,000 to £1.5 million. Please note that these prescribed values are only indicative and can change depending upon various factors like complexities involved, project duration and expertise required.

Question 14

Explain contractor’s design within the intermediate contract?

Answer 14

The contractor is responsible for developing the design for ‘discrete parts’ listed in the Contractors Design Portion.

Question 15

What strategies did you use to handle complications that arose due to the wards in the mental health centre being live during its reconfiguration?

Answer 15

Contract sections were used to split up the wards

contract sections were phased to allow for ward relocation while minimizing disruption.

Question 16

Highgate West - Can you describe your method for splitting the contract into different sections, and how this benefited the progress of Highgate West?

Answer 16

The contract sections were split by each ward/area following discussions with the EA and Employer.

I then sought information required for each sections such as possession date, completion date, liquidated damages rate, rectification period.

Sections allowed the wards not in contractor’s possession to stay live until they were handed over to the contractor.

Question 17

In relation to the Leopold Buildings project, can you detail how you carried out and managed monthly interim valuations?

Answer 17

Leopold was under an Intermediate contract, so I would carry out the valuation in line with the due date, with or without contractor application.

I visited site to for a physical verification of work completion as well as reviewing clerk of work reports to determine the accurate value of works completed.

I then discussed my assessment with the contractor to maintain a good working relationship before issuing to the CA for them to issue their Interim Certificate.

Question 18

Could you elaborate on the process you followed when assessing variation on Leopold, particularly concerning gas pipework rerouting?

Answer 18

I studied the contract drawings, identifying the scope of the variation

I communicated with the contractor to get an estimated cost and time impact if applicable before making my assessment.

In the case of the gas pipework rerouting, I analysed the technical necessities and reviewed the contractors costs against benchmark figures that we had on similar projects.

Question 19

What did you mean by the Contractor’s requirements under the contract?

Answer 19

I meant the works they are required to do under the contract.

Question 20

How did the contractor’s contract work requirements affect your decision when determining the relevance of the claimed variation costs?

Answer 20

I would review the claimed variation and compare the works with the contract works to check if they were a valid variation.

Question 21

Can you share your experience in handling Extensions of Time issued by the Contract Administrator and how did this impact Loss and Expense claims?

Answer 21

Extensions of Time changes the way the preliminaries are assessed in interim valuations. Preliminaries should be paused during an EoT period.

I would review the EoT Relevant Event to see if there was an equivalent Relevant Matter to allow the contractor to claim L&E.

Question 22

How did your understanding of JCT contractual provisions contribute to the final account discussions with the contractor in the Leopold Buildings project?

Answer 22

My understanding of the contract final account timelines

I reviewed the EoT’s awarded and which of these enabled the contractor to claim L&E for those periods

I reviewed the instructions issued to determine their value

All of the above enabled me to negotiate and reach a satisfactory final account conclusion for all parties.

Question 23

What process and considerations did you have when dealing with matters such as liquidated damages, retention and practical completion?

Answer 23

I considered the contract dates, as well as if the EA/CA had issued an extension of time.

I ensured to consider and have a good understanding of the contractual matters including timescales and responsibilities.

I would ensure good communication with all parties involved.

Question 24

On Leopold, how did you determine if liquidated damages were due and how did you value them?

Answer 24

I reviewed the time period between the revised completion date and practical completion and then applied the contract liquidated damages rate to this period. I informed the client of the amount of LD’s that were due to them.

Question 25

What two things need to happen if the employer is to claim Liquidated Damages?

Answer 25

Notice that employer may take liquidated damages Certificate of non completion of the section or works.

Question 26

How did you report the completion of the project works and the final valuation back to the client?

Answer 26

Following receipt of the contractor's final account information, I undertook my own assessment of the final account. Once final account assessment was completed, I prepared a comprehensive final cost report detailing the work done, total costs and my assessment of final account.

Question 27

On Gallery Court, how did you determine if liquidated damages were due and how did you value them?

Answer 27

I reviewed the time period between the revised completion date and practical completion applied the contract liquidated damages rate to this period. Determined that the total was higher than the liquidated damages maximum cap of £150k.

Question 28

You referred to using Pay Less Notices as a form of taking liquidated damages, why can this not be deducted from the valuations?

Answer 28

The JCT D&B contract indicates that LD's can be either paid to the Employer by the client or deducted from sums due to the contractor. (2.29.2) However the interim and final payment clauses do not allow for deduction of the liquidated damages so the deduction would be taken following a notice from the employer that they would be deducting the liquidated damages.

Question 29

You referred to liquidated damages being taken as part of an interim valuation. How can these be taken before the end of the project?

Answer 29

The JCT D&B contract refers to the LD notice being issued between the completion date and the date of practical completion, therefore interim valuations after the completion date could have liquidated damages taken against them, following a notice from the employer that they would be deducting them.

Question 30

What are the timelines for agreeing the final account under JCT Intermediate Contracts?

Answer 30

After PC, contractor has 6 months to provide the necessary documents for adjustment of final account. If not provided in 6 months, CA can give a 1 month notice of requiring contractor documents. If not provided after that 1 month period, the CA or QS can make their assessment using the information available to them. Within 3 months of receipt of contractor's information, the CA or QS must provide their assessment of the L&E and final adjustment.

Question 31

What is the timeline for the final payment under JCT Intermediate Contracts?

Answer 31

CA issues Final Certificate within 28 days of whichever of the following happens last: end of rectification period issue of cert of making good issue of statement of adjustments to contractor Final date for payment is last day of that 28 day period.

Question 32

What are the timelines for agreeing the final account under JCT D&B Contracts?

Answer 32

After PC, contractor has 3 months to provide their Final Statement. If not provided in 3 months, Employer can give a 2 month notice of requiring contractor Final Statement. If not provided after that 2 month period, the Employer can issue their own final statement to the contractor. Employer has till the final due date to dispute anything in the contractor's final statement, or vice versa if the employer issues the final statement.

Question 33

What is the timeline for the final payment under JCT D&B Contracts?

Answer 33

Due date for final payment is one months from whichever of the following happens last: end of rectification period issue of cert of making good issue of final statement to contractor

Question 34

In both the D&B and Intermediate contracts, how long does the Employer/CA have to issue their defects list following the rectification period ending?

Answer 34

14 days

Question 35

What happens if the Employer does not pay the contractor on time.

Answer 35

The contractor may give a 7 day suspension notice as well as an employer default notice. If the reason for default continues for 14 days then the contractor can terminate the contract. (Same for both D&B24 and IC24)

Question 36

For what reasons could an employer terminate the contract?

Answer 36

Contractor suspends works without reasonable cause Contractor fails to proceed regularly or diligently with their contract obligations Contractor refuses to remove non-compliant work Contractor assigns the contract to another party or sub contracts the works or design of the works. Contractor does not comply with CDM regulations

Question 37

For what reasons could a contractor terminate the contract?

Answer 37

(8.9.1) Employer does not pay by final date for payment Employer assigns the contract to another party (7.1) Employer does not comply with CDM regulations Employer interferes with issuing of any certificate due under the contract (intermediate only)

Question 38

What does D&B call amendments to the ER's?

Answer 38

Changes

Question 39

What does Intermediate contract call amendments to the ER's?

Answer 39

Variations

Question 40

What are red flags for contractor insolvency?

Answer 40

slowing down of works supply of materials drying up increasing defective work changes in management additional or inflated payment requests complaints from subcontractors

Question 41

What would you do if a contractor became insolvent?

Answer 41

- Informa all parties involved - Secure the site - Consider stopping pending payments - Take ownership of materials offsite - Schedule all materials - Value completed works and value any defects - Monitor loss & expense incurred by the employer - Terminate the contract - Start the process of appointing a new contractor.

Question 42

What makes a contract binding?

Answer 42

Offer Acceptance Consideration Intent to create legal relations Capacity Legality

Question 43

For interim valuations, what is gross valuation Alternative A?

Answer 43

Stage payments

Question 44

For interim valuations, what is gross valuation Alternative B?

Answer 44

Periodic payments

Question 45

How can loss and expense be ascertained for Contractor's Head Office Overheads?

Answer 45

The value of lost profit/overheads can be determined using the Emden or Hudson formulas. Hudson is based on OH&P percentage included in the tender. Emden uses the actual head office overheads and profit percentage.

Question 46

What are the differences between NEC and JCT

Answer 46

Programme is a contractual document in NEC but not JCT. Project Manager in NEC, Contract Administrator in JCT NEC is in plain English, JCT in complex legal language NEC incorporates time and cost into compensation events, JCT separates them. NEC uses Activity Schedule, JCT uses CSA or BoQ

Question 47

Do all instructions need to be in writing?

Answer 47

In D&B there is an 'Instructions Other than in Writing' Clause (3.7) If Employer gives verbal instruction it is of no immediate affect Contractor has 7 days to confirm the instruction in writing to the employer The employer has 7 days to respond to the confirmation, if they do not then the instruction stands. (Not available in Intermediate contract)

Question 48

How would you deal with damages for late completion when preparing a valuation?

Answer 48

I would not include LD's in the valuation. If a Certificate of non completion and a notice to take damages have both been issued, then no later than 5 before final payment of the valuation, the Employer may issue a notice to request payment or that they will deduct LD's from sums due to the contractor.

Question 49

Are damages subject to VAT?

Answer 49

No they are not. https://www.squirepattonboggs.com/~/media/files/insights/publications/2016/02/liquidated-damages-in-construction-contracts/liquidateddamagesinconstructioncontracts.pdf

Question 50

On a £1m 3-month refurbishment contract, the proven costs to the client were £45K for every extra day the premises were closed to business. How would you advise the Client with regard to damages for late completion?

Answer 50

I would advise the client that they are entitled to include £45k/day in the contract for LDs if it is a genuine pre-estimate of loss, but this is likely to put contractors off from tendering for the project or increase tender sums significantly so a lower sum may be more beneficial to ensure the client receives tender returns that aren't too high.

Question 51

Do the agreed damages amount have to be applied?

Answer 51

No they can be applied at or below the contract LD rate. They cannot be claimed higher.

Question 52

What are some of the differences in approach between NEC and JCT contracts?

Answer 52

JCT (Joint Contracts Tribunal) and NEC (New Engineering Contract) contracts differ in their approach to risk allocation, payment, and dispute resolution.  JCT contracts are more prescriptive, allocating risk to specific parties and often using traditional dispute resolution methods like litigation or arbitration.  In contrast, NEC contracts prioritize collaboration, distribute risk more evenly, and favour early warnings and dispute resolution boards.

Question 53

What are the differences between collateral warranties and third party rights?

Answer 53

Third party rights are due to third parties (funders, purchasers) through the Contracts (Rights of Third Parties) Act 1999. However it is not easy to go through this act so a Collateral Warranty can be used to make things simpler. Creates a contractual link between two parties that wouldn't have had a link otherwise. Examples include: main contractor and funder a sub-contractor and the employer S/C and tenant/purchaser consultant and funder consultant and tenant/purchaser

Question 54

What are collateral warranties and when might you use them?

Answer 54

Creates a contractual link between two parties where there wouldn't have been one otherwise. Ideal for offering cover for defects

Question 55

What was the gallery court project?

Answer 55

It was a cladding project.

Question 56

How are Liquidated Damages calculated on Gallery Court?

Answer 56

They were a genuine pre-estimate of direct loss suffered by the employer in the event of a delay caused by the contractor. Information must be provided by employer, LD's were £2,500. I believe the majority of the pre-estimate of loss suffered by employer was for professional fees.

Question 57

What was adjusted in the final account statement as a result of the information not being provided on Leopold?

Answer 57

After 6 months, they had not provided the information so I gave them 1 months notice to provide their supporting information and they met this deadline.

Question 58

Highgate West - So what challenge did having live wards bring you when you split in the sections up?

Answer 58

Due to being live wards, it was not possible for contractor to do any kind of opening up works in sections before they had possession of each ward/section. There was also additional security in the hospital in general, which required additional training and awareness from the contractor.

Question 59

What was the Liquidated Damages rate at Leopold?

Answer 59

£2,500 per week or part thereof.

Question 60

Arkwright Garages - You produce a modular cost plan and make sure to factor in all the works packages of the building that would not be included in the modular works package. How did you do that?

Answer 60

A quote was acquired from a modular manufacturer. Their quote was reviewed to determine what was not included in it and those works were then added to the cost plan as separate items.

Question 61

Why was £150,000 the maximum cap for this type of project at Gallery Court?

Answer 61

It was a compromise between the client and the contractor, in order to reduce the risk on the contractor and allow them to keep their risk allowance down in the contract sum.

Question 62

What is the traditional contract alternative to ERs?

Answer 62

Drawings and specifications/BoQ/Work Schedule

Question 63

What would you do if a project became delayed.

Answer 63

Request a revised programme. Review cashflow forecast Spread the time related prelims in valuations.