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JH APC > CONTRACT PRACTICE Rev2 > Flashcards

CONTRACT PRACTICE Rev2 Flashcards

1
Q

What is a contract?

A

A Legally binding agreement between two parties whereby one party is to fulfill an obligation for another in return for consideration.

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2
Q

What needs to be in place for a contract to be valid?

A

Offer
Acceptance
Consideration
Intent
Legality
Capacity

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3
Q

Why do we use contracts in construction?

A

Construction projects are often bespoke and require risk management and allocation which contracts support.

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4
Q

What are the NEC options?

A

NEC – Option A Priced contract with activity schedule
NEC – Option B Priced contract with Bill of quantities
NEC – Option C Target cost with activity schedule
NEC – Option D Target cost with BOQ
NEC – Option E Cost reimbursable
NEC – Option F Management contract

NEC – ECC Short Contract

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5
Q

What other suites of contract are available?

A

JCT & FIDIC

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6
Q

What Does JCT Stand for?

A

Joint Contracts Tribunal

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7
Q

What is the payment mechanism under the NEC Option A?

A

Paid for full completed activity schedule activities.

Price for the works done plus any additional amounts due to the contract i.e CEs minus retention.

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8
Q

You mention the construction act 1996, what is the purpose of it and what did it introduce

A

To ensure that contractors and sub-contractors could enforce payment of amounts due without having to take expensive court proceedings

Interim payments

Suspension

Adjudication

Pay when paid

Applies to verbal contracts

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9
Q

What are the standard timescales for payment in the NEC?

A

The first assessment date is decided by the PM

Contractor must submit application on or before the assessment date

PM certifies payment 7days later

Final date for payless to be issued 14day after assessment date

Final date for payment 21 days after assessment date

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10
Q

What is the risk to a client if the doesn’t pay by the final date for payment?

A

If the failure continues for 7days after notice to the employer of intention to suspend has been issued they can suspend performance

It also entitled the contractor to Relevant Event

And will be reimbursed for reasonable costs for suspension

If the default continues for 14 days following notice the contractor can on or within 21 days from expiry of the 14 days terminate the contract

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11
Q

What impact can the non submittal of the first programme have on the payment to the contractor?

A

25% can be withheld from the contractor until the first programme is submitted

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12
Q

What are the steps you take through the valuation process?

A

Planning - Understand the contract and the requirements of dates and co-ordinate with all parties

Pre-Valuation - Desk top review of the valuation submitted

Valuation - Review the works on site discuss and agree wit the contractor the position of the valuation (DOSENT HAVE TO HAVE AGREEMENT)

Validation docs - Carry out final review of val and correct all items within the val that are erroneous

Issue Val - Complete payment certificates and issue to all parties

Post Val - Record the val and payments and manage discrepancies

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13
Q

What is a compensation event?

A

An event that doesn’t arise from the fault of the contractor but they are due the additional cost and or time in which the event has caused.

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14
Q

How many CEs are there?

A

19

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15
Q

What are the two ways a CE can be notified?

A

By the contractor by CE or PM via PMI

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16
Q

What is the CE process?

A

Notification
Quote
Assessment
Implementation

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17
Q

Under what circumstances can the PM make an assessment on a compensation event

A

Contractor has not submitted a quotation

Pm decides the contractor has not assessed it correctly

When the Contractor submitted the CE he didn’t include a Programme

when the Contractor submits the CE but the Programme hasn’t been accepted

18
Q

CE Timeline

A

Contractor notifies within 8 weeks of knowing about the issue and submits a CE.

1 Week period for PM to submit a PMI or the contractor to submit a quote.

PM accepts or in 2 weeks the CE is automatically accepted.

19
Q

NEC3 VS NEC4

A

-new contracts - Design, build and operate contracts & Alliance contracts
-Simpler language

20
Q

NEC VS JCT

A

-PM vs EA
-Proactive Collaborative vs liabilities and risk
-Clear and non legal jargon vs can be confusing

21
Q

What is a collateral warranty and why is it beneficial?

A

A collateral warranty is a side agreement between the employer and a third party usually a subcontractor in order to make a contractual link.

22
Q

What is a performance bond and why is it beneficial?

A

An insurance back surety usually 10% of the contract price. It allow the employer to recover cost when the contractor fails to construct as per the works information.

23
Q

What is Third Party rights?

A

-It is an alternative use of a collateral warranty
-Remove privy from a contract
-Allows third parties like investor to enforce terms
-Only beneficial terms

24
Q

What are the dispute resolution clauses under NEC?

A
  • W1 - Adjudication & W2 - Arbitration

Provides a timeline for dispute resolution so it is completed quickly.

25
Q

What is included within contract documents?

A

-Form of agreement
-Contract conditions
-Contract Data
-Pricing Document
-Works info
-Site info

26
Q

What changes were made in the 2009 construction act?

A

-Defines construction contracts
-Ensures quicker payments through the supply chain
-Quicker dispute resolutions

27
Q

What is contact data part 1 ?

A

Data provided by the employer

-Scope
-Parties responsibilities
-Time
- Quality
-Payment

28
Q

What is contact data part 2 ?

A

Data provided by the consultant\Contractor

-Name
-address
-key personal
- Value of works

29
Q

Name the contracts under JCT

A

Minor Works
Standard
Design & Build
Major
Management

30
Q

What is on demand bond?

A

An on-demand bond is an unconditional obligation to pay when a demand has been made

31
Q

Name 3 Letters of intent

A

-letter of comfort
-authority to spend
-recognition of a contract

32
Q

What is a letter of comfort

A

A letter which extends the tender period

33
Q

What is authority to spend ?

A

Allows works to progress on site prior to being in contract

34
Q

What is recognition of a contract?

A

Allows works to start on site while contract terms are fully agreed.

35
Q

Why cant QS’ write a letter on intent for a client?

A

QS cant provide legal guidance and this is a legal ordeal and as such should be dealt with by a lawyer.

36
Q

What is Y(UK) 2 & 3?

A

Y (UK) 2 - ensures that the contract’s payment provisions comply with the Housing Grants, Construction and Regeneration Act 1996.

Y (UK) 3 - allows a third party to a contract to enforce terms of the contract in certain circumstances under the Contracts (Rights of Third Parties) Act 1999.

37
Q

What is conditional bond?

A

When an obligation must be met prior to payment of the bond.

38
Q

What is Professional indemnity insurance?

A

Liability insurance which protects business due to negligence, error, omission or breach of duty.

39
Q

Types of PI insurance

A
  • Each and every claim means that each individual claim has its own limit of indemnity, though multiple claims arising from the same cause will be treated as a single claim

-Aggregate means that the limit of indemnity applies to the total of all claims made against you during the period of insurance

40
Q

What contracts would you use for each value of works?

A

-Minor Works up to £250k
-Standard up to £1mil
-Major above £1mil

41
Q

What is the payment mechanism under the NEC Option B?

A

Paid for percentage of works done +CE - Retention

JH APC (7 decks)

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