Contract Practise Flashcards
1
Q
What are the forms of JCT contracts
A
JCT Standard building contract 2016 JCT Intermediate building contract 2016 JCT Minor works building contract 2016 JCT Design and build contract 2016 JCT Management building contract JCT Construction management contract JCT Major Project construction contract
2
Q
What are the forms of subcontract
A
Short form of sub contract
Contractors design
Sub-sub contract
3
Q
What is a JCT minor works contract
A
is designed for smaller, basic construction where the works are simple in nature. For traditionally procured projects
4
Q
What is a JCT intermediate works contract
A
is designed for construction projects involving all of the trades and skills of the industry but without specialist or complex building services installations.
5
Q
What is a JCT construction management contract
A
is designed for construction projects where the employer appoints separate trades to carry out the works, and a construction manager to oversee the works for a fee.
6
Q
What is a JCT management building contract
A
is for use on construction projects where the client appoints a management contractor to complete the works. construction is completed under a series of separate works contract
7
Q
When were JCT building contracts established
A
1931
8
Q
What are the forms of NEC contract
A
NEC4 Engineering & Construction
NEC4 Design Build & Operate Contract
NEC4 Engineering & Construction Subcontract
NEC4 Framework Contract
NEC4 Professional Servies Contract
NEC4 Supply Contract
9
Q
What are the options for NEC contracts
A
Option A: Priced contract with activity schedule
Option B: Priced contract with bill of quantities
Option C: Target contract with activity schedule
Option D: Target contract with bill of quantities
Option E: Cost reimbursale contract
Option F: Management contract
10
Q
What are some differences between JCT and NEC
A
JCT offers prov sums, Nec does not,
JCT is a fixed price contract. Option B is, Options C&D are target cost,
JCT has relevant matters and relevant events, time and money are dealt seperatly. NEC contract has compensation event, time and cost are dealt with together
11
Q
What is a letter of intent
A
a document expressing the intention to enter into a contract at a future date but creates no contractual relationship until that future contract has been entered into.
12
Q
What is a comfort letter of intent
A
Expressing interest to act in a particular way at some point in the future or at the time of issuing the letter. Does not form a contract but may impose either or both parties to obligations in relation to payment.
13
Q
What is a Instruction to proceed with consent to spend letter of intent
A
A letter with instruction to proceed and content to spend as if in a contract. Allow contractor to proceed before the contract has been finalized. Legally binding but superseded after main contract begins.
14
Q
What are letters recognizing the existence of a building contract
A
also known as a letter of acceptance and is used by some forms of contract (FIDIC) to formally execute the contract.
15
Q
What is included within a letter of intent
A
The parties, The works, The price (if agreed), Statement of intention, Insurances that are to be provided, Termination procedure, Dispute resolution procedure.
16
Q
What if time, quality or cost if missing from a letter of intent
A
Cost - the contractor will be entitled to a reasonable sum that reflects the value of the works “quantum meruit basis”
Time - reasonable time for the completion will be implied
Quality - the contractor must carry out the works with reasonable skill and care not with standing statutory obligations.
17
Q
What is a retention
A
a percentage of the amount certified as due to the contractor on an interim certificate that is deducted from the amount due and retained by the client
18
Q
what percentage is a retention
A
typically between 3-5% unless stated otherwise in the JCT contract particulars
19
Q
What are the advantages of a retention
A
funds rectifying defects,
incentive for contractors to complete the project on time without defects,
incentive for contractors to return for DLP,
offers the client protection against contractor insolvency.
20
Q
What are the disadvantages of a retention
A
Contractor is not paid in full for satisfactory work,
5% can represent a large portion or all of contractor profits,
A subcontractor who completes their works may not receive payment for months/ years until the project is complete
21
Q
What alternatives to a retention were recommended in the pye tait review
A
Project bank accounts, Retention bonds, Performance bonds, Escrow stakeholder accounts, Parent company guarantees, Retentions held in trust funds
22
Q
What actions have been taken to improve retentions
A
2017 - pye tait review,
2018 - bill passed so retentions are held in third party scheme
2019 - persimmon homes let buys hold back a retention until snagging issues are dealt with
2019, build uk published a set of minimum standards for retentions
23
Q
What is a bond
A
bonds are means of protection against the non-performance of the contractor.
24
Q
what are the types of bond
A
Performance bond, Advance payment bond, Bid bond, Retention bond, Adjudication bond,
25
What is a performance bond
A performance bond is a form of insuring the client against the risk of the contractor not fulfilling their contractual duties. Typically set at 10% of the contract value.
26
What is a advance payment bond
If the client decides to make an advance payment to the contractor a bond will be required to protect the client in the event of default by the contractor. This as an on demand bond.
27
What are bid bonds
Rare in the UK, typically used on international projects submitted with a tender to secure commitment to the project. This as an on demand bond.
28
What are adjudication bonds
Emerged from PFI/PPP projects, a payable amount due upon the adjudicators decision.
29
What are retention bonds
the client agrees to pay amounts that would otherwise be held as a retention. The value of the bond decreases after PC.
30
What is a bondsman
a professional agent, agency or corporation who takes responsibility for another persons obligations by signing a bond to that effect.
31
What is a surety
takes responsibility for another persons obligations and may have to undertake payment to the client in the event of non-performance
32
What is an on demand and conditional bond
on demand bond - the bondsman pays an amount of money set out in the bond immediately.
Conditional bond - requires the client to provide evidence that the contractor has not performed before the amount stated in the bond is payed
33
What is a relevant event
Where a delay which impacts on the completion date is not caused by the contractor. This is addressed ins section 2.20 of a JCT contract. The contractor may be entitled to an EOT or claim a loss of expense due to direct result of the delay.
34
What are some examples of a relevant event
```
Variations or instructions,
Exceptionally adverse weather,
Civil commotion or terrorism,
Failure to provide information,
Force majeure e.g. war or epidemic,
National strikes,
Changes in statutory requirements,
```
35
What are some specified perils under JCT
Fire, Explosion, earthquakes, flooring, aircraft crash
36
What is the test for exceptionally adverse weather
The contractor has to prove that the weather had been worse than of a specified number of years previous, typically 10.
37
What are relevant matters
Where the client is responsible for an item that materially affects the progress of the works. This is addressed in section 4.17 of a JCT contract. A relevant matter does not always result in a delay or an EOT
38
What are some relevant matters
Failure to give the contractor possession of the site,
Failure to give the contractor access to the site,
Delays in receiving instruction,
Issues relating to CDM,
Discrepancies in the contract documents,
Failure of the client to supply goods or materials,
39
What did the case Balfour beatty v chestermount properties demonstrate
Actual delay is required for a relevant event. Hypothetical delays are not accepted in court.
40
What are the JCT insurance options
There are three insurance options. Options A and B are for new buildings and Option C is for works involving existing structures.
41
What is JCT Option A insurance
For new builds option A requires the contractor to take out and maintain joint names all risks insurance of the works.
42
What is JCT Option B insurance
For new builds option B requires the employer to take out and maintain joint names all risks for the insurance of the works.
43
What is JCT Option C insurance
Options C requires the employer to take out and maintain joint names specified perils insurance in respect of the existing structures and contents and all risks insurance of the works.
44
What is meant by acceptance?
- where a party agrees to the terms of the offer presented by another party, creating a binding contract
- Acceptance must be unconditional (e.g. a signature on a contract of employment)
- Negotiations are counter-offers, not acceptance
- Silence is not acceptance, unless it is clear acceptance was intended (as substantiated by that party's conduct)
45
What is meant by consideration?
- Parties must exchange something of value for a contract to be binding
- For example, selling their house for £1 is valid consideration. Selling your house for nothing is not.
46
What is meant by capacity?
- All parties must have the ability to understand the terms of and any obligations under the contract.
- Consent to the contract must be freely given (force, fraud, misrepresentation, inebriation renders the contract void)
- People under 18, under the influence of drugs or those suffering from mental health conditions generally lack the capacity to enter into contracts.
- THE CLIENT/COMPANY MUST HAVE THE CAPACITY TO BE ABLE TO DELIVER THE WORK/PAY FOR THE WORK e.g. I do not have the capacity to enter into a Contract to deliver a £100m scheme because I am one person with £0 capital, no labour etc
47
What is meant by intent?
- Not all agreements between parties are contracts. It must be clear the parties intended to enter into a legally binding contract
- The person who wants the agreement to be a contract must prove the parties actually intended to enter into a legally binding contract
48
What is a collateral warranty?
A way of forming a direct contractual link between two parties with otherwise wouldn't have a link, such as between a sub-contractor and a client.
49
Why might you get a performance bond for a smaller Contractor?
They are more at risk of going insolvent. Less well established, probably are more dependent on credit and good cash flow.
50
How much is a typical performance bond worth?
10% of Contract Sum
51
Who issues performance bonds?
Banks/Insurance Companies
52
What are the two variations of performance bonds?
- Conditional: Client has to prove that Contractor has not performed
- On Demand: No pre-conditions needed to be met. Not often used, seen as too harsh.
53
How long would you recommend a performance bond should stay in place?
Until the end of the Defects Liability Period.
54
Name 7 insurances that you may come across in a construction Contract.
- Contract Works Insurance
- Employer's Liability Insurance
- Public Liability Insurance
- Professional Indemnity Insurance
- Terrorism Insurance
- Flood Insurance
- Legal Indemnity Insurance
55
What is Contract Works Insurance?
- non-standard insurance policy
- coverage for property damage and third-party injury or damage claims, the two primary types of risks on construction projects
56
What is Employer's Liability Insurance?
Covers compensation if employees are injured or become ill because of the work they do.
All firms that employ staff are legally required to hold Employers Liability Insurance.
57
What is public liability insurance?
Provides cover against personal injury or death, loss or damage to property of third parties e.g. the general public or sub-contractors
58
What is professional indemnity insurance?
Provides cover for negligence on part of service provider. Will ensure service provider will not be bankrupted by successful claim, and recompense to client to re-mediate consequences of negligence.
Essential for providers of professional services
59
What is legal indemnity insurance?
Provides recompense in the event that the policy holder incurs capital loss or expense dealing with a range of possible legal issues.
Examples can be unforeseen rights of way issues over land that has been purchased, incurring costs to rectify.
60
What is an advance payment?
When a Contract Sum is paid in advance of the exchange (prior to work being done/goods supplied)
61
Why may a contractor request advance payment?
If there are significant start up/procurement costs, e.g. expensive items with long lead times
62
How might the client protect themselves when paying a Contractor in advance?
Secure a payment bond from the Contractor
63
What are the implications for paying for goods that the sub-contractor has ordered but have not yet been delivered to site?
Puts the client at risk in the case that the supplier/sub-contractor goes insolvent, as they may never receive the materials.
64
Materials for the project have been sourced and delivered to site. Does the client pay for those materials?
Yes unless stated otherwise in the Contract. Payment is made regardless of whether Contractor has paid supplier.
65
What is "retention of ownership" in regards to materials?
- This is a clause that allows the supplier to hold ownership of materials until payment.
- Good for supplier as it encourages payment, improves cashflow
- Bad for the client as if items are not affixed, as client may pay Main Contractor but Main Contractor may not pay supplier. Supplier could reclaim those items.
66
What is meant by "fluctuations"?
- A mechanism to deal with inflation, particularly useful in long lasting projects.
- Accounts for the inflation of labour costs, transport, materials (escalation), overheads.
67
How are fluctuations calculated?
- Using nationally published price indices
- Payment is based on cashflow projections of material, then quarterly percentage assessments of inflation are added to projection
68
Are all projects subject to fluctuations?
No, only projects whereby it is stated within the Contract that fluctuations will be accounted for.
69
What are the 3 types of fluctuations considered under JCT?
1. Changes to statutory contributions, levies and taxes
2. Changes to labour, materials, transport (sometimes referred to as escalation)
3. Increase in head office/administrative costs
70
When does retention get released?
Half released at practical completion, half released upon certification of making good defects
71
Who keeps the interest on the retention money?
The client
72
What happens with the retention money the client keeps?
The Contract may state that the retention money is kept in a separate bank account.
73
What issues do sub-contractors have with regard to retention?
- Causes cashflow problems
- Release of retention can be delayed for reasons out of their control, e.g. defects liability period not ending due to other parties not remedying defects
- construction supply chain payment charter proposed abolishing retention by 2025
74
What are change procedures?
A process that ensures potential changes to the deliverables of a project or the sequence of work in a project, are recorded, evaluated, authorised and managed
75
When should change procedures be introduced?
Change procedures may be tendered:
- After design freeze
- After tender documentation is released
- After project is tendered
- After the Contractor is appointed
76
What should change procedures ensure are defined?
- Reason for the change
- Who is requesting the change
- Consequences of change (time/cost/H&S/quality/who bears the cost)
- Risks associated with change
- Proposals to mitigate consequences
- Alternatives to the proposed change
- Time by which change must be instructed
77
What is a variation?
An alteration to the original scope of works in a construction contract.
This may be an omission, substitution or addition of works.
78
Why do variations occur?
- Client changes mind (design development or Contract Documents not stipulating what the client originally wanted in sufficient detail)
- Geological anomolies
- Statutory changes
- Technological advances (changing client requirements)
79
What are express terms in a Contract?
Express terms are those that have been explicitly agreed by both parties and can be oral or in writing.
80
Does a Contractor have to carry out variations?
If there are no express terms, Contractor does not legally have to carry out variation.
Contractor can continue to carry out works as per agreed at tender.
81
How are variations valued?
- Contract rates
- If Contract rates are not available (for example in a D&B Contract that was tendered with limited design info), the PQS and Contractor's QS will negotiate to what is deemed reasonable and fair. Market tesing, BCIS data and in-house data can be used by the PQS to review Contractor submissions.
82
Why do variations cause conflict?
- Conflict over the value of the change
- Over whether the change is a client cost or Contractor risk
- Often conflict occurs where there are gaps in the specification. Contractor may argue it is therefore a change, but Client is not bound to pay for things that a reasonable contractor must have understood to be done
Example: specification may not state every screw used to fix a radiator to the wall, but within the spec for a radiator, pattressing etc, a Contractor would reasonably be expected to assume the inclusion of the screws.
83
What is an extension of time?
Where the Client allows the Construction Period to be extended due to delays that are not the fault of the Contractor.
84
How does the Contractor acquire an extension of time (EoT)?
- Gives CA/EA written notice identifying the relevant event that caused the delay
- Proposes adjusted completion date
85
What counts as a relevant event that can result in an EOT?
- Variations
- Weather
- Terrorism
- Force Majeure
- Strikes
- Nominated sub-contractor delays
86
If the Contractor can foresee a delay caused by a relevant event, what should they do?
They are required to prevent or mitigate the delay even if it is not their fault.
If they cannot avoid the delay, they can request an EoT.
87
How should a Contractor prepare for a claim of EoT?
- Provide good quality information
- Demonstrate link between breach and delay
- Demonstrate delay against progress of the works, not programme
88
What are liquidated damages?
Pre-determined damages set at the time the Contract is entered in to, based on the actual loss the client is likely to incur if the Contractor fails to meet the completion date.
89
What are claims of loss and expense?
The Contractor can claim for direct loss and/or expense as a result of relevant matter the client is responsible for.
90
Give some examples of when a Contractor may be entitled to Loss and Expense?
- Failure to give Contractor site possession/access
- Delays in instruction
- Discrepancies in Contract Documents
- Failure to supply goods/materials
91
What costs can be claimed under Loss and Expense?
Varies between contracts, for example overheads may be excluded.
92
What are the various methods of dispute resolution?
- Mediation
- Adjudication
- Arbitration
- Litigation
93
What are the alternative dispute resolution (ADR) methods generally found in Contracts?
- Mediation
- Adjudication
- Arbitration
94
What is adjudication?
- Contractual or statutory procedure for swift interim dispute resolution
- Provided by a third party adjudicator selected by parties in dispute
- Purely based on documentary submissions
- Decisions are binding unless and until revised by arbitration or litigation post-completion
- No power to award costs
95
What are the timelines for adjudication?
- Notice of intention to adjudicate must be submitted by one party to the other
- Adjudicator appointed within 7 days of notice
- Decision made within 28 days of appointment (can be extended to 42)
- Adjudication is confidential and a statutory right
96
What is arbitration?
- A procedure in which both sides agree to let an impartial third party decide the case
- May be a lawyer or expert in the field of dispute, or in some cases an arbitration panel
- Arbitrators "award" is legally binding and can be enforced through the courts. (Can award costs)
- No appeal except under special circumstances
- Arbitrators have powers to ascertain facts as opposed to just review submissions
97
What is mediation?
- Where a third party mediator is appointed to assist in the negotiation of a resolution to a dispute
- Different types of mediation, e.g. evaluative, facilitative, settlement
98
What is litigation?
The process of engaging in or contesting legal action in court as means of resolving a dispute.
Pros
- Highest quality
- Judges can compel parties to comply
- Defined rights of appeal in cases where errors of fact or law are made
Cons
- Expensive
- Longer time period to obtain judgement
- Public
99
What are the three main types of sub-contractor?
- Domestic sub-contractor
- Nominated sub-contractor
- Named sub-contractor
100
What is a domestic sub-contractor?
A sub-contractor selected and appointed by the Main Contractor
101
What is a nominated sub-contractor?
A sub-contractor selected by the client to carry out an element of works
102
How is a nominated sub-contractor appointed?
- The client negotiates a price with the nominated sub-contractor, then instructs the main contractor to appoint them for those works
- The Contractor will include the sub-contractors price as a PC Sum (prime cost sum) in the Contract Sum for the main contract, to which they add OH&P & attendance
103
Why would the client nominate a sub-contractor?
- If the works involves long delivery times
- If specialist design input is required for the package
- Where the client orders a preferred item (perhaps that they wish to have complete design control over) such as specialist plant/equipment
104
What is a named sub-contractor?
A named sub-contractor is a sub-contractor that has been short-listed by the client as an acceptable sub-contractor in the tender documents for the main construction contract.
In the Contract Sum, a provisional allowance is made for the subcontract package in question. After the Contract is awarded, the package is tendered to the list of named sub-contractors and the PSUM is replaced by the actual cost + on costs.
105
What are the advantages of naming sub-contractors?
- allows the client to influence the sub-contractor selection whilst leaving responsibility for their performance to the main Contractor
- Alternative to nominated sub-contractors, which are not included as a provision in JCT contracts
106
What is sectional completion?
When a project has different completion dates for different sections of the works.
This is common in large projects.
107
What considerations should you make when incorporating sectional completion into a contract?
- Liquidated damages must be specific to each section
- Retention/retention release must be specific to each section
- EoT clarifications required, i.e. if EoT is required on section 2 will it impact section 3?
- Sectional completion must be specified in EXPRESSED TERMS in the Contract
108
What happens with regards to commissioning and O&M manuals at the end of a sectional completion?
These items may be left outstanding until practical completion of the whole site.
109
What are the key considerations for sectional completion?
- Logistics
- Protection of completion sections
- Insurance for all sections at all times
- H&S measures dealing with the risk of construction adjacent to occupied areas
110
What is partial possession?
Handing over part of the site before official completion.
111
Why would partial possession of the site be given?
- If the client wishes to occupy part of the site
- When there is no sectional completion in the Contract
- When part of the site is deemed to have achieved practical completion
112
What are the implications for retention, LDs and DLP when partial possession of the site is given?
- Half retention for that section of works is released
- The Defects Liability Period (DLP) begins for that part of the site
- Liquidated Damages are reduced proportionally.
113
What's the difference between partial possession and sectional completion?
This differs from sectional completion as it is not planned, and therefore no provisions for sectional completion are in the Contract.
114
Why might the Contractor not wish to allow partial possession?
- If it disrupts the works
- If it disrupts access routes
- If it incurs additional costs
The contractor is not obliged to allow partial possession.
115
What is meant by Contractor's Design Portion?
- Associated with JCT Contracts
- It is an agreement for the Contractor to design specific parts of the works
- The Contractor may in-turn sub-contract this portion out
116
What is the difference between Design & Build and a Standard Building Contract with CDP?
In D&B the Contractor is appointed to design the whole works, whereas CDP relates to a specific part of the works.
117
How is CDP incorporated into the Contract?
- There is a provision for CDP in the JCT SBC.
- A separate sub-contractor design agreement is available for when the main contractor wishes to allocate part of all of the CDP to a sub-contractor.
- In JCT Intermediate Building Contract has separate Contractor's Design Agreement as well as Sub-Contractor Design Agreement.
118
If the Main Contractor sub-contracts out the CDP, what responsibilities remain with the MC?
- Coordinating design and construction between the specialist sub-contractor and the main works
- Ensuring sub-contractor design complies with building regulations
119
How are the requirements for the CDP communicated to the Contractor?
- Requirements will be set out in the ERs (Employers Requirements) in the Tender Documents
- Contractor will respond in the CPs (Contractor Proposals)
- Design consultants will judge how far design is taken before handing it over to the Contractor (level of detail in ERs for CDP)
120
What is determination?
Determination relates to ending a Contractor's employment under the Contract. The Contract remains in place, as do the rights of both parties.
121
Why do Contracts provide for determination of the Contractor's obligations?
For the eventuality that there is a breach of Contract by the Contractor or Client. For example:
- The Contractor may no longer be performing diligently and regularly with the works
122
What is termination of a Contract?
Ending of a Contract.
This occurs when there is a repudiatory breach (fundamental breach of Contract) such as the Contractor indicating they no longer intend to accept their obligations under the Contract.
The Contract is terminated and the innocent party can sue for damages.
123
What is a Final Account?
The final account is the conclusion of the contract sum
(including all necessary adjustments) and signifies the
agreed amount that the employer will pay the contractor.
124
When is the final payment made?
Generally after DLP, subject to all defects being made good.
125
What certificate is issued at the end of the DLP, if all defects are made good in the JCT 2016 Contract suite?
Certificate of Making Good Defects
126
What certificate is issued at practical completion in the JCT 2016 Contract suite?
Certificate of Practical Completion
127
What happens after the Certificate of Making Good is issued?
Final Certificate issued. The client pays the remainder of the retention money minus any kept back for defects that were not rectified.
In some cases, the Contractor may owe the Client money.
128
In the JCT D&B 2016 Contract, which clause refers to Final Account procedures?
Clause 4.24 Final Statement and Final Payment
Clause 4.8 Relevant statement and Final Payment Notice
Clause 4.9 Interim and final payments - final date and amount
129
Why may the Final Account be different to that agreed in the Contract Sum?
- Variations
- Fluctuations
- PSUMs
- Prime cost sums
- LADs
- Loss and Expense claims
- Contra claims
130
The Final Account is often an adversarial procedure. What can be done to mitigate this?
- Agree adjustments as project progresses
131
What happens after the PQS and Contractor agree the Final Account?
Final Account is paid minus the necessary retention amount.
| After DLP, final certificate/statement is issued by EA/CA, and remaining retention is released
132
What happens if after completion of contract, latent defects emerge?
Client may claim for damages for breach of contract or negligence
133
What happens on practical completion?
- CA/EA certifies PC when all works have been completed
- Half retention is released
- End of Contractor's liability for LDs
- DLP begins
- Various documents may be released to client such as O&M manual, H&S file.
- Client takes possession
134
When is practical completion?
No absolute definition of practical completion in JCT but generally a project is deemed PC when works are complete and there are no outstanding defects (aside from snagging or minor items) so the building can be used.
135
When does the Contractor's obligation to insure the works come to an end?
At PC
136
What is a rolling Final Account?
Rolling final accounts will ensure that all instructions and cost effects to a project are agreed and up-to-date at the point of the latest financial report
137
In the JCT 2016 intermediate building Contract, what are the provisions set for interim payments?
Clause 4.7
1 - Interim Payments made by Employer to Contractor as per section 4 and [payment method]
2 - Due date will be 7 days after relevant Interim Valuation Date
3 - If the Interim Payment Application is received after the Interim Valuation date, the Due Date shall be 7 days from whenever the Application is received
4 - Interim Payment Application shall be accompanied by further info as may be specified in ERs
5 - No later than 5 Days after the Due Date the Employer shall give Payment Notice to Contractor
Clause 4.12
1 - Final Date for Payment 14 days from due date
2 - Employer must pay sum on Payment Notice on or before Final Date for Payment
3 - If Payment Notice is not given, Employer must pay what Contractor has stated in interim application
4 - In case of final payment, the Employer shall pay the sum stated as due in Final Payment Notice. If FPN not given, balance stated in relevant statement on of before final date of payment is paid.
5 - No later than 5 days before Final Date for Payment shall Pay Less Notice be given to Contractor
138
What are LADs?
Liquidated and Ascertained Damages are pre-determined damages set at the time that a contract is entered into, based on a calculation of the actual loss the client is likely to incur if the contractor fails to meet the completion date.
They are generally calculated weekly or daily, and are NOT A PENALTY. They must be based on actual loss from things such as rent, income.
139
What are unliquidated damages?
Unliquidated damages are damages, the exact amount of which has not been pre-agreed, and are typically determined by the courts.
A client can claim for unliquidated damages even if LADs are specified in the Contract, if the actual loss incurred is much more than originally expected.
140
How long does the Defects Liability Period?
Generally lasts 6 - 12 months from PC.
141
Who manages the DLP?
The CA acts as the bridge between the Client and Contractor.
Client reports to the CA who decides whether the issue is a defect or maintenance issue.
If it is seen to be a defect, the CA will instruct the Contractor
142
Who's responsibility is it to identify and rectify defects?
The Contractor
143
What happens at the end of the DLP with regards to the outstanding defects?
The CA prepares a schedule of defects not rectified, and agreed a date with the Contractor by which they will be rectified. If the Contractor does not rectify them, the cost to rectify them shall be taken out of the retention.
144
What clauses relate to Defects in JCT IB 2016?
Clause 2.30 Rectification
Clause 2.31 Certificate of Making Good
145
What are Alternative A and Alternative B in JCT 2016?
Different methods of calculating sums due
Alternative A - staged payments: Stages + Changes - Listed Items * any fluctuations
Alternative B - periodic payments: work executed to date + site materials (if they are protected) - Listed Items
146
What are different methods of calculating sums due at payment?
- Staged payments
- Milestone payments
- Payments following an activity schedule
- Periodic payments (Work done to date)
147
What are recitals in a Contract?
- Introductory statements at the beginning of a contract
- First Recital - name of project + address
- Scene setting, explanatory in nature
148
What are articles in a Contract?
- Set out what is agreed between the parties
- Contractor's obligations (1) and Contract Sum (2)
- Identifies CA/EA
- Identifies QS
- Identifies principal designer
- Identifies Contractor
- Reference to adjudication/arbitration in event of dispute
149
What are Contract Particulars in a Contract?
- Sets out aspects of Contract that are particular to the project, fills in the blanks
e. g. where the Employers rights/Contractors Person, key dates, sections, payment method, insurance option. adjudication.arbitration
- It is a schedule of variables for the agreement and conditions
150
What is Attestation in a Contract?
The attestation is the process of confirming that something is correct or genuine or that a particular requirement has been met. It may be completed:
- Under seal (signed by both parties, witnessed & made clear it is executed as a deed)
- Under hand (just signed by both parties)
151
What purpose do the schedule of amendments serve?
They amend the conditions set out in the standard form of Contract.
For example, in a JCT IB 2016 Contract you may wish to amend the date the Contractor submits his/her interim application.
152
What situation would result in LADs
Liquidated and ascertained damages would be due if there was a delay to the completion date caused by the contractor
153
What is a relevant event?
- A delay that was not the contractors fault
- The fault may be from the client or neither party (e.g. extreme weather)
- Definitions of relevant events will be found in the contract e.g. delay in site possession, variations, weather, terrorism, civil unrest, changes to statutory requirements
Contractor may be entitled to EoT or claim to loss and expense
154
What is legality?
Conditions in the contract that has been offered/accepted cannot be illegal/unlawful
155
What insurance option would you choose for a new build project under a JCT contract?
Option A - requires contractor to take out and maintain joint names all risk insurance of the works
Or
Option B - requires employer to take out and maintain joint names all risk insurance of the works
156
What insurance option would you chose for on an existing building project under a JCT contract?
Option C – Requires the employer to take out and maintain joint names specified perils insurance in respect of the existing structures and contents and all risks insurance of the works.
157
What are the main types of contract for traditional procurement?
- lump sum contracts (with or without quantities)
- remeasurement contracts
- cost reimbursement contracts
158
What are the three main types of contract for design and build?
- package deal or turnkey
- design and build contracts
- contractors design for specific elements only (strictly these are traditional contracts with limited design provisions for specific portions of work)
159
What is a package deal or turnkey project?
Where the client settles on a complete package, usually to some standard specification from a commercial firm.
Such arrangements sometimes result in a specially drafted contract, but they will usually be based on the provider’s standard terms.
160
What factors may influence choice of contract?
- nature of project is new build, refurb, reinstatement, extension
- scope of works I.e. complexity, location, size of works, requirements for sophisticated design
- clients desire for control over design
- accountability; single point of responsibility?
- appointment of contractor; works only, design, management role?
- certainty of final cost
- start/completion times
- restrictions; noise, working hours, phasing
- likelihood of post contract change
- client view on risk
- is building a relationship with supply chain important?
161
How is the contractor usually appointed in a traditional form of procurement?
Competitive tender, not often negotiated.
162
What is the cost certainty like in traditional procurement?
Reasonable cost certainty as contract sum is known at the outset of construction, though may vary dependent on the number of post-contract changes
163
When are design decisons made in traditional procurement?
During the design stage.
Post contract design changes can be accommodated usually at a price in terms of direct and related costs and extra time.
164
Where does risk sit in traditional procurement ?
In lump sum traditional - low risk in clients favour. Cost known at outset and quality in control of client as client appoints design team. Time is generally longer due to sequential phasing.
In remeasurement - still balanced, though cost not known until end of the project.
165
How is design and build often tendered?
Two stage tender
166
What types of contract fall under the traditional procurement route?
- lump sum contracts
- measurement contracts
- cost reimbursable
167
What types of contract fall under the management procurement routes?
- Management contracts
- Construction management
- Design - Manage - Construct
168
What is a Design - Manage - Construct contract?
This and other variants of management procurement exist but such contracts are invariably on the basis of
specially drafted forms to suit the particular situations
169
What may influence a client's choice in procurement / contract?
- Nature of project (new build, extension, serial works)
- Scope of works (size, complexity)
- Measure of control by client
- Accountability (does client want single point of responsibility?)
- Appointment of a contractor (does client want negotiated or competitive? Does client want contractor to take on design?)
- Certainty of final cost
- Start/completion times (fast track?)
- Restrictions (e.g. sectional completion, occupation of building etc)
- Likelihood of post contract changes
- Risk; what are the priorities re the apportionment of risk concerning cost/time/quality, how much risk does client wish to take on
- Building relationships w. supply chains (will there be future work? If so supply chain relationship important, maybe serial tendering)
170
What will the choice in procurement route & contract influence?
- Composition of team (who takes on what roles, where risk lies)
- Compatibility of documents (what is required of professional consultants in building contract must be reflected in the schedule of professional services).
- Documents for tendering purposes??????? JCT
- The contract sum (/Q /XQ)
171
How are design obligations passed on to contractor in JCT suite?
- Having Contractor's Design Portion in Intermediate Contracts or SBC
- Major Project Construction Contract or Design and Build Contracts
- Optional integrated provisions in JCT SBC
- Using integrated named sub-contractor/employer agreement
172
What is a package deal or turnkey project?
Where the client settles on a complete package, usually to some standard specification from a commercial firm.
173
What are JCT's view on amendments?
- Contract should not be amended unless absolutely necessary
- When necessary must only be done following appropriate professional advice
- JCT contracts are generally accepted to be fair and evenly balanced for parties to which the project is designed
174
When is a D&B contract appropriate?
- Where detailed contract provisions are necessary
- Where ER's have been prepared and provided to the Contractor
- Where the Contractor is to carry out design not just construction
- Where the employer appoints an Agent to administer the conditions (may be external consultant)
Can be used:
- When work is sectioned
- By private and local authority employers
175
What are third party rights?
The Contracts (Third Party Rights) Act 1999 enabled third party rights to be created by a contract.
Alternative to collateral warranties
The right is created to enforce a term in a contract, e.g. contractor is required to carry out works to be fit for purpose.
Must expressly state that a third party has specific rights (often excluded)
176
What are examples third party rights?
The right created is to enforce a term of a contract, not the whole contract itself. For example, if a building contract contains a term that the contractor is required to use materials of good quality, then that term might be the subject of a third party enforcement right.
Alternative to collateral warranties
The Contracts (Third Party Rights) Act 1999 enabled third party rights to be created by a contract.
Must expressly state that a third party has specific rights (often excluded)
177
What are the differences between collateral warranties and third party rights?
- Collateral Warranties can be laborious to compile, sometimes expensive
- CW's seen as more effective as they mirror building contract
178
Why would you use a JCT ICD over JCT MWD contract?
ICD includes provisions for:
- QS
- Site sections
- Partial possessions
- EoT and full (not restricted) list of events
- Loss and expense expressly
- Detailed rules of valuations
- Testing and inspecting
- Advance payment bond
- Bond for off site materials
- Insurance for new buildings by employer
- Collateral warranties
179
Why would you use JCT SBC 16 over IC or MW?
JCT SBC includes provisions for:
- Quotation provision for variations (changes)
- Code of Practice covering testing of other work
- Retention Bond
- Third party rights
180
What are the key different provisions between JCT DB 2016 and JCT SBC?
Unlike a SBC, a DB:
- Doesn't require QS, CA, Clerk of Works
- Requires an Employers Agent
- Contractor is responsible for design
- Silent on ground condition risk (Contractor takes no risk in SBC)
181
What are the conditions of contract and how to they relate to the contract particulars?
These are the rules in the contract.
The contract particulars "fill in the blanks" and confirm which clauses are relevant by stating the particulars for this contract, for example which payment method is used.
182
List the key sections to a JCT IB contract.
- Agreement
- Recitals
- Articles
- Contract Particulars
- Attestation
- Conditions
183
In JCT IBC 2016, what are the headings under Conditions?
```
Section 1. Definitions
Section 2. Carrying out the works
Section 3. Control of the works
Section 4. Payment
Section 5. Variations
Section 6. Injury, damage and insurance
Section 7. Assignment, performance bonds and guarantees, third party rights and collateral warranties
Section 8. Termination
Section 9. Settlement of disputes
```
184
In JCT IB 2016, what are the headings under Schedules?
```
Schedule 1. Insurance options
Schedule 2. Named Sub- Contractors
Schedule 3 Form of bonds
Schedule 4 Fluctuations - Contribution, levy and tax fluctuations.
Schedule 5 supplement Provisions
```
185
What's the difference between a final certificate and final statement?
Both certify the final amount to be paid to the contractor.
Final certificate is from a CA in SBC
Final statement is from EA in DB
186
List relevant matters.
Anything that has had a cost impact on the contractor causing them to lose out, e.g.
- Site access delay
- Delay in instruction
- Client interference that has meant they've had to suspend work temporarily, resulting in longer hire of cranes, scaffolding etc.
187
What are some challenges with Collateral warranties
JCT does not issue a Consultant Collateral Warranties. However they do have a range of collateral warrenties for Contractors/Subcontractos/Employers/Tenants/Purchasers. It has been noted that clients often claim that industry standard warranties favour contractors and designers.
Onerous terms that designers or contractors are unable to agree to as their insurers will not provide cover. As a consequence many collateral warranties are bespoke.
On large projects with many consultants and sub-contractors and multiple occupants, there can be a great number of warranties. The Contracts (Rights of Third Parties) Act can offer a way around this difficulty by allowing the primary contracts to confer benefits upon third parties even though they are not a party to that contract.
188
What is the JCT suite of Collateral Warranties?
JCT does not issue a Consultant Collateral Warranties. However, their suite of collateral warrenties include; Contractors/Subcontractos/Employers/Tenants/Purchase
189
What is a novation agreement
A novation agreement is the process whereby contractual rights and obligations (i.e both benefits and burdens) of a contract are transferred from one party to another.
In building design and construction, novation normally refers to the process by which design consultants are initially contracted to the client, but are then 'novated' to the contractor.
This is usual in design and build projects, where the design team is appointed by a client to carry out initial studies or prepare a concept or detailed design. When subsequently a contractor is appointed to carry out or complete the design and construct the works.
190
What clauses are typically included in a novation agreement
- The parties - Client, Consultant, Contractor (typically)
- Definitions - Defining key terms so they are not open for interpirtation
- Affirmention of consultants apointments
- Warrenties and indemnity in favour of the contractor
- Release from obligations and claims
- Collateral warrenties in favour of the employer
- Governing law and third party rights
191
What can be typically included in LAD calculation
Calculations might include, amongst other things:
- Loss of rent
- Loss of income
- Professional fees
- Storage costs.
- Rental costs.
- Fees and fines imposed by third parties.
- Finance costs.
192
How can LADs be beneficial for the client
LADs remove the clients obligation to prove actual losses in the event of delay occurring.
193
How can LADs be beneficial for the contractor
LADs can limit the contractors liability to a known amount in the event of delay.
194
What did the case Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd establish
The case related to LADS. specifically If the predetermined calculation is not genuine, the courts may consider it to be a penalty by the courts and will be unenforceable
195
When are LADs not applicable in the event of a delay
If the delay is not the fault of the contractor and constitute a 'relevant event' the contractor may be granted an extension of time LADs are not applicable
196
What is a contract
A legally enforceable agreement that gives rise to rights and duties between those who agree to it's terms.
197
What is a bilateral contract
contains a set of promises that each party has made to another
198
What is a unilateral contract
only one party makes a promise to do something if the other party does something stipulated by the former
199
What is required to create a contract
```
Offer,
Acceptance,
Consideration,
Intention to create legal relations,
Certainty of terms.
```
200
What is an offer
An offer is a promis from one party to enter a contract on certain terms.
Offers must be specific, complete, capable of acceptance and made with the intent of it being accepted.
201
What is the difference between an offer and an invitation to treat
an invitation to negotiate e.g. adverts or shop displays
202
What is acceptance
Must be certain and unambiguous. This can be written or oral.
A counter offer can be made and does not qualify as an acceptance. If the offer does not match it is up to the offferer to accept or not.
203
What is consideration
Consideration in a contract is the exchange of anything of value by each party. Most often, services or goods are exchanged or promised in a contract. The items do not have to be of equivelant value.
204
What is intention to create legal relations
mutuality of the contract is required. If there is no intention this needs to be stated clearly in the documentation.
205
What is Mutuality of contract
That the parties are capable of making a contract e.g. of required age, not illegal, of sound mind e.c.t
206
What is certainty of terms
There must be no ambequity of the terms. Any terms open to interpretation must be defined within the contract. Examples of ambiguous terms are; lots, large many and ish.
207
How can a contract be terminated
```
There are numerous ways to terminate a contract including;
Notice under section 8,
Default by the Contractor,
Insolvency of Contractor,
Corruption,
Frustration,
Convenience,
Rescission
```
208
What is Default by the Contractor,
If the one of the parties to a contract fails to perform as required by the contract, this may constitute a breach of contract. If the breach of contract is serious (a material breach), then the innocent party may also consider that it is discharged from any further obligations under the contract.
209
What are some examples of a Default by the Contractor,
```
Refusal to carry out work.
Abandoning the site.
Removing plant from the site.
Failure to make payments.
Employing others to carry out the work.
Failure to allow access to the site.
Failure to proceed regularly and diligently.
Failure to remove or rectify defective works.
```
210
What is Frustration
Frustration occurs when circumstances that are not the fault of either party to a contract mean it is impossible to continue with the contract. This does not constitute a breach of contract.
211
What are some relevant events that could lead to a contract to be terminated due to frustration
The government imposing unforeseen restrictions on building.
Laws being passed that make it illegal to undertake what was promised under the contract.
The building where works were to be carried out being destroyed.
An event that was crucial for the contractual obligations being cancelled.
212
What is the difference betweena force majure and a frustration event
Force majeure provisions might provide for circumstances that could otherwise be considered frustration events, and so result in termination of the contract. However, most stipulated force majeure quilify as a relevant event which will lead to an extention of time rather than the termination of the contract.
213
What is convinence termination
Contracts may allow termination for ‘convenience’. This can be useful for example if the client fails to secure sufficient funding for the project to proceed.
However termination for convenience can leave the terminating party open to significant claims by the other party. Termination for convenience is only provided for in some forms of contract, and is often only available to the client.
214
What is rescission
Rescission is the process of returning both parties to a contract to the position they would have been in had they not entered into a contract. If a contract is rescinded, it is treated as if it did not exist. This might be appropriate for example if there is a serious error in the contract
215
Why is rescission difficult
circumstances often make it impossible to rescind a contract, for example where works have already been commenced, in which case damages may be awarded.
216
What is Insolvency of Contractor,
A company becomes insolvent when;
it enters administration,
it appoints an administrative receiver,
the making of a winding-up order,
217
What section of JCT contract defines Insolvency
JCT IC 16 Sectioin 8.1 "meaning of insolvency"
218
What notice is required for default by the contractor
the CA may give notice, specifying defaults. if the contractor continues the specified default for 14 days. The employer may provide notice of termination within 21 days of the end of the specified default period.
219
When may the contractor terminate the contract
Default by the employer,
| Insolvency of the employer,
220
What are some examples of Default by the employer,
Does not pay by the final date for the amount due,
Interfears with the issuing of any certificate,
If the employer is in breach of clause 3.18 (CDM),
Assign duties to the contractor without their knowlage.
221
What is the process of terminating a contract by contractor default
The employer must issue a warning notice specifying the default and the relating clause. If the warranty is ignored for 14 days and no attempt is made to rectify the default the CA or employer can submit a notice of termination within 21 days of the end of the 14 day warning period.
222
What if there are multiple contractor defaults
If there are multiple breaches multiple warning notices will need to be issued. If a warning notice has already been issued and another default occours the employer does not need to issue another warning notice and can issue a termination notice straight away.
223
How do you analysis an EOT
Overview of the Facts - The facts will be evidenced by letters, emails, meeting minutes, progress records, photographs, instructions, drawings and other contemporaneous documents. Suitible for straightworward claims.
Critical Path Analysis - The primary purpose of a critical path analysis is to show which activities on a programme of works are critical to completion and which are non-critical.
Comparing actual and planned progress - Quite simply, the duration of the work activities, as actually carried out on site, are plotted on the planned programme, thereby illustrating discrepancies.
224
What notice is required when there is a delay
Clause 2.27 of the JCT contract requires the contractor to give notice if and whenever it becomes reasonably apparent that the progress of the works is being or is likely to be delayed.
225
What is required in a notice of delay
The notice must set out ‘the material circumstances’, including the cause or causes of the delay, and must specifically identify any event that is considered to be a Relevant Event.
