Contract Practice (Level 3) Flashcards
How do variation requests work?
They are used when there is a need to make changes or variations to the original scope outlined in the contract. You are to:
o Identification of the Variation
o Submission of Variation Request to Contract Administrator which includes details of the event, reasons for change, proposed modifications and associated cost and time implications.
o Evaluation and Approval
o Implementation
o Adjustment of Contract
Sum and Completion Date
What are the JCT suite of contract options?
o Design and Build
o Minor Works
o Short Form
o SBC/Q
NEC alternatives? How do the two suites differ?
iChemE
o Origin and scope – iChemE are typically used for process based projects assigned to address the unique technical and commercial requirements. NEC was developed by the ICE and is used across various sectors. They are easily adaptable to different project types and procurement strategies.
o Risk allocation – iChemE allocates risk in a manner than reflects the nature of the process. Risk allocation provisions address technical risks and performance guarantees. NEC has a collaborative risk management approach where the risk allocation is shared between the parties. They also have EWN’s, risk registers and CE’s to manage fairly and transparently.
How does a standardised form benefit a project?
o Keeps contractual bias to a minimum.
o Proven caselaw
o Saves time and cost for developing a unique contract for each project.
What typical amendments have you encountered? & do you agree with them?
o Payment terms
o Change management i.e. CE’s and periods of reply.
Payment terms are agreed on the basis of cashflow availability.
Change management is agreed based on type of work to be carried out and our liability with the client, ensuring no gaps.
What if you were asked to provide advice on amendments to the NEC Contract?
o Secondary clauses (X Clauses within NEC) – I can advise on
o Amendments to core clauses – seek legal advice
What are the parties’ responsibilities and duties under a contract?
o Performance of work or services in accordance with the specifications and quality standards
o Payment obligations
o Compliance with Law and Regulations
o Communication and cooperation
What is the significance of the Local Democracy, Economic Development and Construction Act 2009?
- Adjudication can apply to written and oral contracts
- Mandatory payment notices and other notices following
- Strengthened the right to suspend work for non payment
How is adjudication recognised in standard forms of construction contracts?
NEC contracts have been revised to incorporate provisions related to payment, adjudication, and dispute resolution in compliance with the LDEDC Act 2009. For example, NEC contracts include mechanisms for prompt payment, issuing payment notices, and referring disputes to adjudication, as required by the Act.
By way of examples can you tell me how the formation of a legal contract find their way into an JCT construction contract?
Offer and Acceptance – JCT contract documents include the contract form, tender documents, contractors’ proposals and terms and conditions of the offer.
Consideration – Agreed Contract Sum
Legal Capacity – Presumed to have the legal capacity to enter a binding agreement.
Mutual Consent – Execution of the contract documents by both parties
What are the essential components of a valid contract?
Offer, Acceptance, Consideration, Legal Capacity, Legal Purpose (Non Illegal)
What is the principal difference between a parent company guarantee and a performance bond?
o PCG – If a company goes insolvent or is unable to provide the works, the parent company is obliged to complete the works.
o PB – Financial instrument provided by a third party (insurance), the guarantee the performance of a contractor under a construction contract. E.g if a product/ system is not achieving the performance requirements set out in the contract.
Can you name 2 types of performance bond?
o Bid bonds.
o Payment and performance bond.
Have you dealt with collateral warranties, performance bonds or PCGs on your projects? If so, can you provide details of how you did so?
PCG only, a contract with an MCC supplier, whom we have a framework agreement with, have a parent company. This contract was set to be over £1m therefore our company stipulates that a PCG is required.
Have you experience of using letters of intent?
No experience with letters of intent, however I am aware of the risks associated:
o Non-binding meaning there are no legally enforceable obligations
o Ambiguity and lack of clarity
How have you dealt with completion of your projects with your sub-contractors and/client?
Yes, I have both awarded subcontractors and been awarded by the client. Once the criteria set out in the contract is met by my company or a subcontractor, we either receive or issue a completion certificate which fully acknowledges that the work is complete and the defects liability period has begun.
Upon completion and issuance of the completion certificate, the parties may proceed to finalize the account for the works, including any adjustments for compensation events
What is your process for formally agreeing final accounts?
- Prepare the final account – all additional costs to the tendered prices scheduled out.
- Linking the last formal cost report – all costs to this point should be agreed, anything new is all that requires discussion.
- Final account meetings – agreement on the last few items.
- Structuring the final account (terms)
- Execution and release of retention
Have you had cause to deal with loss and expense claims on your projects?
No, however I have had experience dealing with compensation events under the NEC Contract.
How do you ensure CEs under the main contract and those under sub-contracts are linked, where they need to be, ensuring MWHT isn’t left exposed?
I ensure that any amendments to clause’s 60 to 65 are back to back with the subcontractor’s subcontract. It is important to pass on this risk such that MWH aren’t exposed to all risks set out by the employer.
Can you provide an example of a CE not being agreed or accepted?
W&B Wigan (Restricted working access over MH01)
- Unable to progress with works due to tracking over existing chmaber
- Temporary works solution required to enable tracking
- Use of grab wagon over standard equipment
Rejection for
- Chamber always been shown in contract drawings
- Subby required to produce temporary works
- Health and safety risk in accordance with mentioned specs in contract
How do you ensure compliance with the contract and legislation for payments?
The contract
The contract sets out the requirements that of the relevant legislation for payments:
o Payment notices in accordance with the statutory requirements of Section 110 of the Construction Act.
o Issuance of a payment certificate in accordance with section 111 of the Construction Act. This also refers to issuing payless notices if you intend to pay less than the notified sum.
o Dispute resolution process - Section 108 of the Construction Act provides for statutory adjudication to resolve payment disputes quickly and cost-effectively.
Have you issued a Payless Notice? Explain how and why you would use it.
Yes, on the Forton project a civil subcontractor had applied for various accepted CE’s, of which the quotations were not yet agreed. However, as a gesture of good will, and that the work was complete, I certified their applied amounts in full (on account) until we had agreed a price.
Subsequently, we had agreed a value for each of the CE’s. I revised the payment certificate and issued them a payless notice within the time frames set out in the subcontract.
How was your advice received by MWHT and the sub-contractor for the welfare building package amendments?
I held a meeting with the subcontractor to discuss the proposed amendments, which concluded in agreement on most.
Then, I set up another meeting with senior management advising them on the position of the project, the contract and potential implications of said changes.
How did you persuade senior management to depart from the standard risk position for the welfare building package?
I explained the nature of the works required by the contract and advised that, despite the amendments differing from the standard risk position, our exposure is minimal subject to the contract being drafted correctly.
