Contract Practice (L2) Flashcards
(56 cards)
1
Q
What are the minimum requirements for executing a legally binding contract?
A
- Offer and Acceptance
- Offer from the builder, acceptance from the employer - Consideration
- Something of value, I.e services - Intention to Enter a Legally Binding Contract
- Legality: The contract must comply with existing laws
- Capacity: Legal capacity, I.e must be of age
- Certainty: Unambiguous terms must be agreed
2
Q
What insurances do contractors usually have?
A
- Professional Indemnity Insurance
- Public Liability Insurance
- Employers Liability Insurance
- Plant Insurance, Motor Insurance, Contractors All Risk Insurance
3
Q
What’s retention? How does this work?
A
- Moneys held by the employer during contract works and after completion until the end of defects in relation to the contracted works
- As per the contract
- To provide assurances for progress, quality and defects
4
Q
How did you go about determining an LADs value?
A
- This is to be done by the employer
- Must be a genuine pre estimate of the potential losses they would incur, should the works not be completed within the contracted completion date
5
Q
How do you deal with variations?
A
- Understand the requirement for the change and check the contract and specification to confirm if it is a change
- Review details and submit a change order request to the contractor to advise on cost and programme implications of the change
- Review contractors submission of cost and programme should the variation be instructed
- Review the amended works in relation to the critical path of the programme and review costs against historical data and tools such as BCIS and SPONNE
- Verify value for money and advise the client accordingly
- Act promptly and within the contractors stated date to avoid any delays
- Raise contract instruction as necessary stating details of the change
- Clearly document and keep records of approvals and decisions
6
Q
What would you typically include in a contract induction?
A
- Description of the change and reference to any correspondence and agreements
- Date of the variation
- Reference to the project and contract
- Contract sum
- Sum of the variation
- Sum of variations to date
- Adjusted contract sum
- Signature
7
Q
JCT Digital Service - What is this? How does it work?
A
- Online platform used for creating JCT contracts
- Used all standard terms of the contract
- User is able to insert the contract particulars relating to their project and make amendments as necessary
- Formulates the JCT contract which can be purchased and exported
- JCT standard terms and conditions are in line with the UK law and any changes to these must be undertaken by a suitably qualified legal representative
8
Q
NBS Chorus - What is it? How does it work?
A
- National Building Specifications
- Online platform for creating building and contract specifications
- Standardised approach across the industry for consistence and clarity
- Allows multiple users to promote collaboration
9
Q
What are the typical timeframes for an interim payment in JCT?
A
- Valuation date is within the contract
- Due date is 7 days after the valuation date in the contract
- CA’s payment certificate is due within 5 days of the due date
- Date for final payment is 14 days after the due date
- Any pay less notices must be issued at least 5 days prior to the final payment date
10
Q
When is completion deemed to have been achieved?
A
- When works are substantially complete as per the contract and specifications
- When all handover information including health and safety file, O&Ms, testing and commissioning certificates, guarantees have been provided
- When site has been cleaned, tidied and made safe for possession to be taken back by employer
11
Q
Talk me through the End of Defects period on one of your projects?
A
Hall Green Case Study
- End of defects period as stated on the completion certificate
- Inspection to be undertaken towards the end of this period to identify any defects with the works
- Contractor to close out any last defects in time for the End of Defects date
- Once satisfied all defects have been rectified, issue the certificate of making good which triggers the final payment process for releasing the remaining retention
- Final payment is due 28 days after the End of Defects date or 28 days after the certificate of making good is issued, whichever is sooner
12
Q
Are interim payments required after PC?
A
- Usually interim payments are during the construction phase
- Final payment at the end of defects remains after PC
13
Q
Winshill - What type of tender did you run? What types of tender can you run?
A
Winshill - Selective Tendering
Open Tendering
- Open for all to submit tender
Selective Tendering
- Pre selected group of tenderers
Negotiated tendering
- Negotiate with one contractor usually
Two Stage Tendering
- Stage 1: Provisional Price
- Stage 2: Detailed Price
14
Q
Winshill - How did you select tenderers?
A
- Pre selected group of tenderers on the Staffordshire county council framework of contractors
- Historical project performance of previous contractors used
- Check company financial accounts on companies house to review business financial health
- Check contractor previous track record, case studies etc
- Health and safety record and qualifications and workforce
- Check insurance cover of contractors to ensure appropriate cover in place
15
Q
Winshill - What contract did you choose and why?
A
- JCT Minor Works Contract
- Works were simple in nature, window replacements with no specialist input or subcontractor required
- Relatively low contract sum of £80k with a programme of 4 weeks
- All works to be completed within the 5 weeks and one payment to be made at the end of the works
- All works undertaken by one main contractor
16
Q
What is the risk of using a LOI?
A
- Not legally binding and subject to execution of formal contract
- Full detailed and contract terms not agreed
- Informal document with risks of miscommunication and misinterpretation
- Full scope of works not detailed
- Financial risk for the contractor due to no clear payment terms
- Risk of further delays of having full contract completed
- Risk of liabilities such as insurance claims are not clear within the letter, therefore a financial risk for the client
- No guarantee for payment of work performed
- Needs to be reviewed and agreed with legal representatives and used as a last resort
- Potential breach of contract, made on assumptions and trust
17
Q
Winshill - What details did your Letter of Intent include?
A
- Details of the employer and contractor
- Project description, details, address
- Form of contract intended to be used for the works
- Intended contract sum, start date, completion date, duration, LADs, retention amount
- Terms of the agreement, obligations of both parties
- Signature or both parties
18
Q
Winshill - Did you advise the client to get a 3rd party to review the Letter of Intent? I.e lawyers
A
- Yes, I advised the client to have the Letter of Intent reviewed and completed by their legal representative
- I provided the project related details as taken from the tender submission
- Legal terms and agreements to be made by clients representative
19
Q
Letter of Intent - Is there any case law that highlights these risks?
A
- Arcadis v Amex
- Appeal case on liability cap for design works undertaken by Arcadis
- Appeal court found that Arcadis were not liable for potential millions as terms were not agreed during for design liability in the interim agreement
20
Q
What information did you include in your contract document?
A
- Cover page, details of the parties and project description, and contents page
- JCT Contract
- Drawings and specifications
- Priced schedule of works
- Contract sum analysis / form of tender
- Post tender clarifications and adjusted contract sum if necessary
- Drawing register sheet
- Precontrstion health and safety information
- Reference to the Letter of Intent
- Signatures of both parties
21
Q
Tell me about the RICS guidance on Appropriate Contract Selection?
A
- RICS Practice Information on Appropriate Contract Selection (2024)
- Outlines the types of contract and possible routes for the choice of contract to proceed with
- Size, complexity, value of the works
- Employers level of construction knowledge
- Balance of risk/ risk allocation
- Design responsibility
- Control over sub contractors
- Describes how the procurement route can impact the chosen contract
- How to formulate the contract and incorporate any amendments etc
22
Q
What is your understanding of JCT Intermediate?
A
- Used for medium scale projects
- More provisions for interim payments, detailed contract clauses in comparison with MW
- Provisions for naming specialists and sub contractors
- Provisions for splitting the works into sections with different sectional completion dates
- Used for more complex projects than MW but less complex than SBC
- Can be used for projects where the contractor is responsible for design of certain elements of the work
- Has provisions for mediation, ajudication and arbitration
23
Q
What is your understanding of JCT Minor Works?
A
- Used for smaller simple in nature projects
- Usually works are undertaken by one contractor
- Relatively low value projects, however not always the case, depends on complexity of the works
- Limited payment provisions and usually one lump payment at the end of a shorter programme than Intermediate
- Doesn’t usually include design for the contractor
- More simple provisions for insurance of the works
- Less structured approach for dispute resolution
24
Q
What other standard form of contract are you aware of?
A
NEC Contracts
- Used for engineering and construction
FIDIC
- Used internationally for large scale infrastructure projects
- Red Book, Blue Book, Silver Book, Green Book
25
What do you understand about NEC4?
- New Engineering Contract
- PM takes responsibility for CA duties
- More collaborative approach to projects where risks are shared between parties, encouraging mutual cooperation and open communication
- Encourages early warning and risk management
- Less legal jargon and unambiguous terms in comparison to JCT making it easier to understand
- More project focused as opposed to party focused
26
Why is checking insurance cover for contractors important?
- To ensure they have sufficient cover in place for carrying out the works
- To make sure they are protected in the case of any claims for negligence
- To ensure they are covered for public damages which could occur during the project
- Financial protection in place
- Assurances of diligence and quality for the client and project team
27
Why is assessing retention important prior to contract?
- Needs to be agreed and stated within the formal contract
- Offers financial protection to the employer for any damages during and after the works
- Provides incentive for contractor to ensure the quality of works are in line with the contract specifications
- Must be proportionate to the project and risks associated with the works
- Must be agreed during pre contract phase
28
Why is assessing liquidated damages important prior to contract?
- Needs to be agreed and inserted into contract and signed
- Must be a genuine pre estimate for potential losses in the case works are not completed within the completion date
- Provides assurances and incentive for contractor to ensure works are completed on time providing there is no basis for extension of time claim
- Protect clients for financial losses if works are not completed on time
29
What do you understand about the RICS Black Books?
- RICS Guidance Documents for Contract Administration Practices in the construction industry for PM/QS/BS
Includes
- Extension of time
- Commercial management of construction
- Assessing loss and expense
- Conflict avoidance, management and dispute resolution in construction
- Interim valuation and payment
- Final account procedures
- Change control and management
- Defects and rectification
30
What is JCT Digital service?
- Online platform used to create JCT contracts
- Allows you to used standard contracts which are pre populated
- Insert contract particulars in relation to my project
- Make amendments if necessary (by employers legal representatives)
- Purchase and export the JCT contract
31
What are contract preliminaries?
- Items necessary for the contractor to complete the works
- Can include access, insurances, site management, fees etc
- Requirements regarding the preliminary and general conditions of the works specifications
- Items required for contractors general costs
32
What is NBS Chorus?
- National Building Specifications
- Used to create building and contract specifications
- Standardised approach across the industry for consistency and clarity
33
What are the timeframes for Interim Payment?
- Valuation dates will be stated as per the contract
- Due date is 7 days after the interim valuation date
- CA must issue payment certificate within 5 days after the due date
- Final date for payment is 14 days after the due date
- Pay less notice if applicable must be submitted at least 5 days prior to the final date for payment
34
What is the implication of issuing the certificate of making good cert?
- Confirmation that the works are complete and free of defects
- End of defects liability period
- Triggers final payment within 28 days of issuing the certificate of making good
35
What are the risks associated with letters of intent?
- Informal agreement with no detailed clear terms and conditions
- Not legally binding as is subject to execution of contract
- Full scope of works and specifications not detailed
- Financial risk for the contractor with no clear payment provisions
- Risk of non payment for works completed
- Risk of delays due to contract terms not being agreed
- Risk of miscommunication and misinterpretation
- Issues with insurances with no detailed provisions for insurance, therefore financial risk for the client
- Risk of breach of terms, not legally binding
- Done on an assumptions and trust basis
36
What key contracted elements are included on a Letter of Intent?
- Details of the employer and contractor
- Description of the works
- Form of contract intended to be executed
- Contract Sum
- Commencement date
- Duration
- Completion date
- Rate of retention
- Rate of LADs
- Terms of the agreement, not legally binding
- Signatures
37
How have you produced contract documentation?
- Cover page and headed letter and contents page
- JCT contract with terms and particulars agreed by both parties
- Drawings, specifications
- Drawing register
- Contractors priced schedule of works, contract sum analysis and Form of Tender
- Post tender clarifications
- Post tender agreed sum
- Reference to the letter of intent
- Health and safety pre construction information
- Signature pages for both parties
38
How have you carried out contractual mechanisms and procedures relevant to the financial management aspects of your project, such as change control procedures, valuations, loss and expense and final accounts?
Guidance: RICS Black Books Practice Information for Contract Administration services covering these elements for BS/PM/QS use
- Have clear documentation in place, regularly update as project progresses
- Master valuation document which has the contracted sums listed and progress against the works and net value to date
- Variations tab for all contract instructions and resulting adjusted contract sum
- Provide full breakdown during valuation for transparency
- Separate cost plan provided for client team use detailing all inductions and forecast variations to give an accurate representation of the final account account at any given point
- Allows client to track finances and cash flow for the project
38
How have you advised on general contractual provisions such as letters of intent, insurances, retention, bonds, liquidated damages, early possession, practical completion and other common contractual provisions?
Winshill - Letter of Intent to commence works for summer holiday delivery
- Advised my client of the risks associated with letter of intent and importance of executing the formal contract as a matter of urgency
Insurances
- All projects - client notification to building insurers for Option C in particular works where refurbishment works are taking place
- LADs - Genuine pre estimate of potential losses should the works not be completed in the contract completion date
- Retention - Generally 5% during construction and 2.5% after completing, must be proportionate to the project risks and scale
- Practical completion and payment triggers for interim payments, and final payments
39
How have you carried out contractual mechanisms and procedures relevant to the financial management aspects of your project, such as change control procedures, valuations, loss and expense and final accounts?
Guidance: RICS Black Books Practice Information for Contract Administration services covering these elements for BS/PM/QS use
- Have clear documentation in place, regularly update as project progresses
- Master valuation document which has the contracted sums listed and progress against the works and net value to date
- Variations tab for all contract instructions and resulting adjusted contract sum
- Provide full breakdown during valuation for transparency
- Separate cost plan provided for client team use detailing all inductions and forecast variations to give an accurate representation of the final account account at any given point
- Allows client to track finances and cash flow for the project
40
Explain how you have selected a suitable contract based on the procurement route?
EIA Landscaping
- Traditonal procurement where the client is responsible for the production of the design through a consultant
- JCT Minor works or Intermediate suitable as the design is provided by the client for contractor to procure the works
41
What are bonds and when are they required?
- Bonds are agreements put in place of monetary value of the works to protect the employer if the contractual obligations are not met
- Safety net, ensuring the employer can recover any losses if the contractor defaults or fails to deliver the project as agreed
- Advanced payment bonds: These guarantee the repayment of any advanced payments made to the contractor, particularly high value materials or equipment
- Performance bonds: These guarantee the contractors performance and provide monetary guarantee to the employer if the contractor fails to meet their obligations
42
Explain how you dealt with post contract cost control?
- Regularly reviewing and updating of the cost plan shared with the client for transparency
- Clear records and documentation of agreements and approvals
- Variation tracker and change control tracker feeding into the adjusted contract sum and financial position at any given time
43
How have you managed change on a project?
- Clear and concise contract documents
- Verification of changes to the specification
- Clear details of the change and cost and programme implications stated in the contract instruction
- Adjustment to the contract sum
- Fed into overall cost plan for the project
44
How have you produced a cashflow for a project?
- Produced a cashflow for the client linked to the cost plan
- Professional fees, abnormal costs and contractor cashflow fed into this
- Shared with the client for transparency and regularly reviewed and updated
45
How have you implemented risk management?
- Initiate project risk register early on in the project
- Regularly update during reporting period to the client
- Outline risks, risk owner, likelihood and severity, cost and programme implications
46
How have you reported change to the risk register in cost reports?
- Revision number on the risk register
- Updated for each report, showing increase or decrease in likelihood and severity of the risks, colour coded
- Risks categorised by number and key indications
47
Explain your use of bespoke form of contract?
- I haven’t produced any bespoke contracts
- Involved in projects where bespoke contracts have been used to outline key contract terms on sustainability targets, planning condition responsibilities
- Outlined in a schedule of amendments agreed by both parties and legal representatives
48
Bespoke contract - why was this used?
Attic Storage
- Used to insert clauses on BREEAM sustainability targets and responsibilities as well as discharge of pre commencement and construction planning conditions
- Outlined on schedule of amendments and agreed by both parties and their legal representatives
49
What is the purpose of NBS chorus?
- National Building Specifications
- Online platform used for creating building and contract specifications
- Standardised approach across the industry for consistent and ease of understanding
50
What are the key items you would include in your certificate of payment?
- Reference to the form of contract
- Employer and contractor details and address
- Project description
- Contract start date
- Valuation date
- Contract sum
- Gross valuation
- Sum of previous valuations
- Net valuation
- Valuation in word format
- Signature by chartered surveyor
51
What is the purpose of a letter of intent?
- To sign an agreement of the intention to enter a legally binding contract
- To facilitate the works commencement and project delivery
- When contractual terms are yet to be agreed
- Risks of letter of intent include the risk of breach as it is not legally binding, lack of contract detailed clauses and terms, no payment provisions outlined, risk of miscommunication and misinterpretation, financial risk for the contractor, risk of further delays to executing the contract, risk of insurances and claims, informal assumption and trust based agreement
52
What are the pitfalls of Letter of Intent?
- Risk of breach due to unclear and unambiguous terms
- No clear scope detailed
- Not legally binding and subject to execution of the contract
- Financial risk of non payment for works completed
- Risk of miscommunication and misinterpretation
- Assumption based agreement on trust
- Risk of delays to executing the formal contract
- Risk of insurance claims and financial risk to employer
53
Winshill Letter of Intent - Why did you follow this route rather than Traditonal contract?
- Clients preference was to issue a letter of intent and contractor was in agreement to facilitate the order placement of the materials to secure summer holiday deliveries whilst full contact was being collated
- I outlined the risks to both parties, and the need for the employer to have reviewed and approved by their legal representative
- I compiled the full contract as a matter of urgency for execution as soon as possible
54
Winshill - How did you assess the contractors design portion for the works?
- Revieed the site access and compound plan submitted with tender
- Reviewed the contractors proposals for the window fabrication drawings, revised against tender drawings and specification to ensure they align and meet the speciation requirements
- Reviewed the design for teleflex gearing for high level main hall windows
55
Winshill - Was the works achieved on programme?
- Yes, works were completed within the 5 week contract period and before the start of the academic year
- The Letter of Intent in this scenario worked to both parties benefit to have the works completed promptly, although the risks were present until the formal contract was executed
