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Alex Martin APC > Contract Practice/Admin > Flashcards

Contract Practice/Admin Flashcards

1
Q

What are the benefits of a PCSA?

A

1.Influencing The Design (ECI)
2.Defining the Contract and Milestones
3.Developing a Partnership with the Contractor
4.Leverage the Contractor’s Experience
5.Recognize Potential Issues
6.Analyze Cost

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2
Q

What is a ‘change’

A

A change/variation can be defined as a change to the contracted scope of works.

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3
Q

Why might changes occur?

A
  • expediate programme
  • Design led change – improved aesthetic or performance
  • Value engineering
  • Surveys
  • Exogenous factors – supply issues etc
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4
Q

What is a deemed change/variation?

A

Deemed changes or variations are also known as necessary changes. In the JCT Standard Form of Building Contract, for example, if there are changes to the statutory requirements after the base date, the contractor is obliged to alter its work to comply with the change. Such a deemed change would require a formal variation notice.

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5
Q

What is the process if the contractor does not implement the deemed change/variation?

A

Should the Contractor not implement the instruction, the Employer has the right to issue a notice to the Contractor which after 7 days allows the Employer to employ others to complete the instruction and the additional costs can be deducted from the Contractor.

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6
Q

What is your company’s process for change control?

A

We use Smartsheets for change control. The change will be logged on the system, and include a reason for the change, designer/contractor comments required and any supplementary information (1 day). It is then reviewed by the contractor, designer (2 days) and the QS (2 days) before being presented to the client for approval (1 day). Once approved, a CAI or EAI is issued. We aim to approve all changes within 1 week of them being raised, but will expediate this depending on the nature of the change.

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7
Q

What contracts are in the JCT suite?

A

13:
- Homeowners Contract
- Minor Works Building Contract
- Intermediate Building Contract
- Standard Building Contract
- Design and Build Contract
- Major Project Construction Contract
- Management Building Contract
- Construction Management Contract
- Measured Term Contract
- Prime Cost Building Contract
- Repair and Maintenance Contract
- Constructing Excellence Contract
- Framework Agreement

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8
Q

What is a parent company guarantee?

A

the parent company takes on the obligations of the subsidiary company under the contract. Whilst this provides an element security for the client, they have no power to choose the members of the team for the project. There is no cost to the client.

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9
Q

What is a performance bond?

A

alternative to PCG, typically 10% of the contract sum. This is a issued by an independent financial surety paid for by the contractor, and likely recovered in the contract sum. Although there is a cost to the client, they have greater control over the selection of the project team. However, this may cause additional delay to the project through receiving the funds, tendering for a new contractor and mobilising on site

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10
Q

What is a contract ‘underhand’

A

does not have to be in writing, but requires consideration (the price paid by each party to be defined. They have a statutory length of 6 years.

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11
Q

What is a deed?

A

must be written, must state that there is an intention to be a deed, but does not require consideration to be valid. A deed requires a witness to observation the formation (signature). A deed has a statutory length of 12 years.

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12
Q

What are the insurance options under JCT?

A
  • Option A – in reference to new developments, the contractor takes out and maintains a joint names all risk insurance for the works
  • Option B – in reference to new developments, the employer takes out and maintains all risk insurance of the works
  • Option C – in reference to renovations involving existing buildings, the employer takes out and maintains a joint names all risk insurance for the works, and the policy also insures the existing structure and contents against ‘specified perils’
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13
Q

What is all risk insurance?

A

An insurance policy that covers all risk such as loss or damage, fire, theft, terrorism etc

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14
Q

What is a schedule of derogations?

A

A schedule of exemptions or relaxation of items specified in the Contract.

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15
Q

What are specified perils?

A

“Specified Perils” are events that are likely to cause significant damage, such as fire, explosions, earthquakes and flooding. The standard position under JCT contracts is that a “Relevant Event” (which includes “Specified Perils”) is an employer’s risk and that a contractor will be entitled to an extension of time where completion is delayed by a “Relevant Event”.

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16
Q

What is a relevant matter?

A

Outlined in clause 4.21 of the JCT contract, a relevant matter is a matter for which the client is responsible for affecting the progress of the works. This may enable the contractor to claim direct loss and/or expense that has been incurred. Relevant matters might include:

Failure to give the contractor possession of the site.

Failure to give the contractor access to and from the site.

Delays in receiving instructions.

Opening up works or testing works that then prove to have been carried out in accordance with the contract.

Discrepancies in the contract documents.

Disruption caused by works being carried out by the client.

Failure by the client to supply goods or materials.

Instructions relating to variations and expenditure of provisional sums.

Inaccurate forecasting of works described by approximate quantities.

Issues relating to CDM.

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17
Q

What is a relevant event?

A

Events that cause a delay to the completion date, which is caused by the client, or a neutral event not caused by either party. The contract should set out what constitutes a relevant event in clause 2.26. Relevant events entitle the contractor to claim an extension of time. An extension of time is a request for the completion date to be moved. Relevant events might include:

Variations.

Exceptionally adverse weather.

Civil commotion or terrorism.

Failure to provide information.

Delay on the part of a nominated sub-contractor.

Statutory undertaker’s work.

Delay in giving the contractor possession of the site.

Force majeure (such as a war or an epidemic).

Loss from a specified peril such as a flood

The supply of materials and goods by the client.

National strikes.

Changes in statutory requirements.

Delays in receiving permissions that the contractor has taken reasonable steps to avoid.

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18
Q

What is a waiver of subrogation?

A

A waiver of subrogation is a contractual provision whereby an insured party waives the right of their insurance carrier seek compensation for losses from a negligent third party. Typically, insurers charge an additional fee for a waiver of subrogation endorsement. This allows the insured party to manage risk in the form of protecting their insurance premium/costs.

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19
Q

What is the purpose of construction contracts?

A

A contract legally defines the parties’ obligations to each other and determines how risks will be shared or divided on the project.

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20
Q

What are the typical elements of a ‘project’ that need to be considered when selecting a form of contract?

A
  • The uncertainty of scope (level of pre-construction contractor involvement required)
  • the client’s appetite for risk - who carries risk and unexpected cost increases
  • the programme
  • the need for cost certainty
  • the level of client experience
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21
Q

What does NEC stand for?

A

New Engineering Contract. (NEC4 is most recent). Established in 1991.

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22
Q

When would you use NEC?

A

Generally aimed at engineering projects, but are easily adapted to building projects. Unlike JCT, NEC was drafted for use internationally as well as in the UK.

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23
Q

What does JCT stand for?

A

Joint Contracts Tribunal. (JCT 2016 most recent). Established in 1931.

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24
Q

When would you use JCT?

A

Generally aimed at building projects, but can be easily adapted for engineering projects. JCT is considered the market standard, and thus people are more familiar with its use.

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25
What are the key differences between JCT and NEC?
- JCT is more widely adopted - NEC is seen as more collaborative. For example, NEC requires the PM to generate an 'early warnings register', but does not allocate them to a particular party. JCT, on the other hand, seeks to allocate and define risks at the point of entering into contract. - NEC is generally more flexible.
26
What does FIDIC stand for?
International Federation of Consulting Engineers. In French - Fédération Internationale Des Ingénieurs-Conseils.
27
When would you use FIDIC contracts?
Aimed at the international construction industry. International projects.
28
What is the Housing Grants, Construction and Regeneration Act (HGRA) 1996?
Also known as the Construction Act, it is intended to ensure that payments are made promptly throughout the supply chain and that disputes are resolved quickly. It applies to all contracts for construction operations including consultant appointments.
29
What are the key provisions of the Housing Grants, Construction and Regeneration Act 1996?
- the right to interim payments - the right to be informed about payment due - the right to be informed of any amounts being withheld - the right to suspend performance for non-payment the right adjudication - disallowing pay when paid clauses.
30
What happens if a contract fails to comply with the Housing Grants, Construction and Regeneration Act 1996?
The Scheme for Construction Contracts applies.
31
What is the Scheme for Construction Contracts?
Supplements the provisions of a contract where it has deficiencies relative to the requirements of the Housing Grants, Construction and Regeneration Act 1996.
32
What updates were made to the Housing Grants, Construction and Regeneration Act in 2011?
Updated to include construction contracts that are not in writing, although adjudication clauses must still be in writing. It is no longer allowable to define within a contract who must bear the cost of adjudication, and adjudicators have the right to correct errors within contracts within 5 days of delivering a decision. There were also changes made with regard to making payments.
33
What is a vesting clause or a vesting certificate?
A vesting clause is a contractual term which deals with the transfer of ownership of goods and materials and a vesting certificate is a document evidencing that transfer of ownership of those goods or materials.
34
What is a purchase order?
A purchase order is a commercial source document that is issued by a business’ purchasing department when placing an order with its vendors or suppliers. The document indicates the details on the items that are to be purchased, such as the types of goods, quantity, and price.
35
What is an advance payment?
Advance payments are made before receiving a good or service. In many cases, advance payments protect the seller against nonpayment in case the buyer doesn't come and pay at the time of delivery. Companies record advance payments as assets on their balance sheets. This could be made to allow early procurement of materials for example.
36
What are the Employer's Requirements?
They provide a description of the client's requirements, including; the specification for the building, the scope of services required from the contractor and an allocation of risk for unknown items.
37
What are the Contractors Proposals?
The contractor responds to the Employer's Requirements with the contractors proposals, setting out the manner in which it proposes to design and construct the works
38
What are the contract documents in JCT D&B?
- The printed form of contract - The employer's requirements - The contractor's proposals - The contract sum analysis The BIM protocol (where applicable).
39
What are the contract documents under JCT SBC?
- The printed contract - Stage 4 information - CSA (Contract Sum Analysis) - BIM Protocol (If Applicable)
40
Discuss the design obligations under JCT
- Design obligation 1) Due skill and care – undertake the design work to an appropriate standard of a professional consultant. This applies if the consultant is not undertaking the works. (contractor under D&B requires both) - Design obligation 2) fitness for purpose. Design must meet the purpose for which it is intended. Applies for construction (contractor under sbc).
41
What takes precedence between ERs and CPs?
BOTH CPs and ERs have equal priority, but it is a common amendment to make ERs take precedence. The contract anticipates that the CPs comply with the ERs.
42
Why is clause 2.11 often deleted as an amendment to the JCT SBC?
43
What happens if inadequacies are found within the Employer's requirements?
The contractor must notify the employer and submit a proposal. The employer must then instruct the proposal under the change control procedure. It is a common amendment that this does not constitute a change.
44
What happens if the ERs become the CPs and an inadequacy is found?
The contractor cannot seek a change.
45
What happens if the ERs do not state statutory requirements?
It is the contractor's responsibility to carry out works within statutory requirements. This does not matter if it is stated in the ERs or not. This is therefore not deemed a change.
46
What is the base date on a contract?
The date in which the contractor has priced the works (usually end of tender period). This accounts for any statutory changes. If after this, contractor can submit a change request. The contract may be amended to state that changes post the base date do not constitute a change.
47
What is the inclusive price principle?
Unless otherwise stated – the contractor has priced for works that are possible for that price, and the contractor is therefore liable to undertake works for no additional cost. This is the common law position, unless the contract states otherwise.
48
What is the Unfair Contract Terms Act?
49
Can the contractor suspend the defects notification period commencing?
Yes, for non-payment for example, but a 7 day notice of intention to suspend must be issued.
50
What happens if the Landlord doesn't allow the contractor onto the insurance policy under option C?
Essentially, Option A applies, and the contractor will charge a premium for taking out a new policy.
51
In what instance would you amend a standard form of contract?
The JCT is drafted to not require amendments. If amendments are made, these are usually in favour of the client, in terms of payment, insurance and bonds for example.
52
State the 'certificates' issued under the Standard Building Contract.
Payment Certificate, Certificate of Practical Completion, Certificate of Sectional Completion etc.
53
State the 'Notices' and 'Statements' under a design and build contract.
Payment Notice, Statement of Sectional/Practical Completion, End of Defects Statement.
54
When must the CA/EA notify the contractor of defects?
Within 14 days of the rectification period expiry.
55
What is the correct term for the defects liability period?
Rectification period.
56
What happens at the end of the Rectification Period?
Usually 12 months (to allow the building to experience all four seasons heat/cold etc), the CA/EA must notify the contractor of any defects within 14 days of the rectification period expiry. Once satisfied, a Certificate/Statement of making good can be issued, and the final payment certifcate prepared (and retention released).
57
What are the parts of a payment notice/certificate?
Covering letter, Notice/Certificate, Valuation, Application. The notice/certificate contains: Contract sum, prelims, measured works, OH&P, gross valuation, retention, net valuation, minus previously certified, amount in numbers and words.
58
What happens if a contractor refuses to implement an instruction?
Should the Contractor not implement the instruction, the Employer has the right to issue a notice to the Contractor which after 7 days allows the Employer to employ others to complete the instruction and the additional costs can be deducted from the Contractor.
59
What are prelims?
Prelims are the section in the bill of quantities which are necessary to complete the works, but do not form part of the finished works. Examples include plant and machinery, security, and management/staff etc.
60
What is OH&P?
A phrase used to demonstrate a contractor's mark-up on a project. Overheads refer to the costs of operation, and profit is the ability for the contractor to earn money.
61
When may a client or contractor terminate a contract?
Failure to deliver obligations under contract or insolvency.
62
What is corporate recovery?
‘Corporate recovery’ is a term used to describe the process and actions taken to bring an ailing company back to full health; this can involve the provision of financial, restructuring, accounts and legal advice by those qualified to give such advice and the possible appointment of an insolvency practitioner.
63
What is insolvency?
A company or party is deemed to be insolvent when it does not have sufficient assets to cover its debts or is unable to pay its debts when they are due. A common indication that a company may be insolvent is that it consistently makes late payment to creditors (including HMRC).
64
What are the types of contract termination?
Voluntary (release agreement for example) and Involuntary termination (one party wishes to terminate contract).
65
What is the process for involuntary termination as a result of a breach of contract?
- Discuss the situation with the party - make note of all the relevant contract clauses and terms - Seek additional assistance from an expert if required - Service notice to the party in accordance with the contract informing them of the breach. - Dispatch further notice after the relevant time period. - If continues, prepare documents for termination.
66
What is administration?
Administration involves the adoption of a procedure that allows a company unable to pay its debts to continue to trade for a further period, during which its assets are protected. The intention is to achieve a good market price for all or partial assets and/or to keep the company fully operational, as a ‘rescue’ function. The advantage of this over involuntary liquidation is that the assets may realise a better position to that of an involuntary arrangement.
67
What is liquidation?
Winding up of the party/company or compulsory liquidation occurs when the company is unable to pay its debts. At this juncture, on the issue of a winding-up order the company ceases to trade and the official receiver acts in its capacity as liquidator to sell off the company assets. This can be voluntary or involuntary.
68
What is receivership?
Administrative receivership (or receivership) is where a party breaches the terms of its borrowing from a creditor (for example, a bank with a floating charge). The creditor may then appoint an administrative receiver, who must be a licensed insolvency practitioner, to recover the money owed.
69
What are the dangers associated with incorrect termination?
Incorrect procedure for termination would be a breach of contract by the party wishing to terminate.
70
What is repudiation?
Rejection of contract clauses - may be voluntary. This may form the basis termination.
71
What takes precedence, the Employer's Requirements or the Contractor's Proposals?
Neither. The JCT is drafted so that neither take precedence. The CP's should meet the requirements of the ER's as well as any statutory obligations. This highlights the importance of robust contract documentation to ensure that the ER's accurately detail the requirements of the project. However, if this level is detail is very granular, then maybe a traditional procurement route is more appropriate where the client has control over the design.
72
What are the contract documents under JCT SBC?
- The printed form - CSA - Stage 4 design - BIM protocol (if applicable)
73
What is the difference between damages and liquidated damages?
Damages are the financial value of the actual loss suffered by a party, whereas liquidated damages are a genuine pre-determined estimate. You cannot choose both within the contract.
74
What are the levels of liquidated damages on your projects?
CS - £20k per week Aviva - £190k per week then after 12 weeks £360k.
75
What must the contract administrator do under JCT to claim LADs?
- Issue non-completion certificate - Notify contractor of intention to claim LADs - Serve a pay less notice no less than 5 days before payment is due.
76
When must the contract administrator issue a pay less notice under JCT?
No less than 5 days before payment is due.
77
What is the process for reviewing a claim (EOT or loss/expense)
- Review all evidence - Determine if it is valid, and if it is a relevant event/relevant matter. - If matter (loss/expense), if event (EOT). - Recommendation to client.
78
What is the difference between the LAD option being left blank or marked as zero within the JCT?
- If left blank, the client can claim the actual loss incurred (damages) - if zero, the client cannot claim LADs.
79
When would you use a JCT Minor Works Contract?
For small, non-complex works up to a value of £500,000.
80
When would you use a JCT Intermediate Contract?
Higher level of complexity for works up to £1million (involving all the recognised trades in the industry) - the works can be carried out in sections.
81
How does a management contract differ from traditional?
Unlike a traditional or design and build procurement, the Management Contractor is not required to carry out any construction works but instead is paid a fee to manage construction works carried out by others. The Management Contractor in effect provides services and not works.
82
Benefits of lump sum vs measurement?
Lump sum provides cost certainty for client, but the contractor price risk into the sum. Measurement will be the actual price for the works, but could be above or below the budget (higher risk). Also cost plus and target cost.
83
Which contract would you use for repair and maintenance?
JCT Repair and Maintenance Contract
84
When would you use JCT SBT instead of intermediate?
For works over £1m and where more detailed contract provisions are required. For example Third Party Rights, retention bonds etc.
85
What are the dispute resolution procedures available under JCT?
Negotiation, Mediation, Adjudication, Arbitration, Litigation
86
When would the various types of dispute resolution procedure be used?
- Negotiation and Mediation are optional and more collaborative. Resolving disputes this way may help to maintain relationships (which is key is the construction industry). - Adjudication - statutory right under the Construction Act (HGCRA 1996) - if one party requests the other must concur. Quick binding decision. - If the first three do not resolve the dispute, then arbitration/litigation. The JCT states that one must be chosen. Arbitration involves a neutral third party, whilst litigation is dealt with in court (typically TCC - Technology and Construction Court).
87
Where would you find a mediator?
Key professional bodies such as the RIBA, RICS etc have lists of mediators.
88
What are alternative dispute resolution procedures?
Methods of dispute resolution without the use of a court.
89
Why might a contract be terminated and what is the process?
- Specified defaults by either party - Not adhering to CDM Regulations - Insolvency - Notify the contractor of the specified default. - If the contractor does not respond to stop the default within 14 days of the notice, then the employer must give notice of termination within 21 days of the end of the 14 day period. It is important to note, if the termination process is not followed correctly, this in itself is a breach of contract.
90
What are the payment options under JCT?
Under SBC - interim payments. Under D&B, its alternative A/B. Alternative A is stage payments and Alternative B in period (interim valuations).
91
Name some ley changes from JCT 2011 to JCT 2016?
- Introduction of the common valuation date - which seeks to align cashflow through a project. - The frequency of applications post-PC - now monthly until the final certificate.
92
What is the difference between an Employer's Agent and a Contract Administrator?
An Employer's Agent administers the contract under D&B, whilst the Contract Administrator administers the contract under traditional contracts. The CA should be impartial, whilst the EA acts of behalf of the client.
93
What is a deed of variation?
A deed of variation is appropriate when you want to vary the terms of a contract, and the contract requires any changes to be in writing and signed by both parties. A deed is recommended for high-value contracts or if the changes are significant or substantial.
94
How is fluctuation dealt with under JCT?
Fluctuation clauses are optional under JCT, although if not used, the contractor will price this risk into their fixed sum. Options A, B and C are available: - Option A - allows for adjustments to the contract sum in respect of changes to tax, levies and contributions which the contractor is required to pay. - Option B - allows for adjustments to the contract sum in respect of changes to the price of labour and material cost. - Option C - Option C – is a formula led adjustment to the contract sum. On my CS project, no fluctuation clause was used, due to a volatile market and price certainty for my client.
95
What are listed items under JCT?
Option C – is a formula led adjustment to the contract sum.
96
How is retention dealt with on your projects?
The unamended version of the JCT allows 3% retention for SBC and D&B. Retention is normally 3%-5% on construction projects. I advise my clients to amend the contract to state 5% retention, to ensure that the contractor is suitably motivated to complete the works on time and to protect the client against contractor failure.
97
What is a contract limitation period?
The period of time in which parties to a contract must bring a claim.

Alex Martin APC (25 decks)

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