Contract Admin Flashcards
What changes did the HGCRA 1996 change to Building Contracts?
This implies two important procedures into certain defined construction contracts (which will cover most general building and civil engineering works):
the right to adjudication at any time, and
certain minimum requirements on payment terms.
Note that this Act was amended with the Local Democracy, Economic Development and Construction Act 2009, which was effective for contracts created after 1 October 2011.
What changes did the Local Democracy, Economic Development and Construction Act 2009 change to Building Contracts?
This provides:
a revised definition of insolvency in section 6, Termination
revised payment guidance, including pay less notices for reduced payment, and pay when certified clauses have been outlawed. It is no longer permitted to make payment conditional on performance of obligations under another contract.
What changes did the Contracts (Rights of Third Parties) Act 1999 change to Building Contracts?
This allows third parties to have the benefit of a contract. It normally requires an express term in the contract. This Act is rarely used in practice in construction. The 2016 JCT revision inserts an option to use third-party rights.
What is a collateral warranty?
A collateral warranty is a contract which is ancillary or ‘collateral’ to a principal contract, such as a building contract, a subcontract or a consultant appointment. It is entered into between the person employed under the principal contract (for example, a contractor) and a third party (known as the ‘beneficiary’) having or acquiring an interest in the development, such as a funder, a purchaser, a tenant or a management company. In a collateral warranty, the person employed under the principal contract (‘the Warrantor’) generally warrants to the third party that it has complied with its obligations under the principal contract.
What is privity of contract?
As a general rule, the doctrine of privity of contract states that only a party to a contract has the benefit of that contract or is subject to the obligations contained in it. Put simply, only a party to a contract can enforce the terms of that contract. Despite the existence of the Contracts (Rights of Third Parties) Act 1999 a collateral warranty remains the industry’s preferred way to overcome the restrictions on remedies for third parties, created by the doctrine of privity of contract.
What are the key clauses included in a collateral warranty?
The key clauses found in a collateral warranty, whether they are industry standard forms or bespoke forms, are:
Scope of services and associated fees
duty of care;
copyright;
prohibited materials;
professional indemnity insurance;
assignment; and
step-in rights.
Timeframes for settling the Final Account
The Contractor must provide the CA all documents reasonably required for the adjustment of the contract sum within 6 months after PC of the works.
No later than 3 months after receipt of this information, the CA must prepare a final account statement and all computations must be sent to the contractor for agreement.
This means that within 9 months after PC the final account should be agreed.
Difference between uniquely and not uniquely identified items
Uniquely identified items are those materials or goods which are easy to recognise, such as heating boilers or sanitary fittings or the like. Items not uniquely identified cover such items as bricks, sand, tiles,
timber and anything which it would be difficult to recognise as belonging to a particular site.
What is the definition of a variation?
Variations are defined in these contracts, in clause 5.1 in each case, as the alteration or modification of the design or the quality or quantity of the Works from that shown in the contract documents. They include: additions, omissions and substitutions; alterations of kinds or standards of materials; or the removal from site of materials delivered for the Works, unless the removal is because the materials are defective.
What is the difference in varations between traditional and D&B contracts?
In D&B they are referred to as ‘Change instructions’, because the employer may only instruct a change in the Employer’s Requirements which may, in turn, require an alteration in the design, quality or quantity of the Works. Indeed, the contractor has the right to refuse to put a change instruction into effect if it has sufficient reason such as its affect upon the design.
What is the general procedure for valuing variations?
Additions and substitutions which are similar in character and executed under similar conditions and without significant change in quantity to work in the bills are to be priced using those rates. If there are changes in the conditions and quantity,
valuations are to use the bill rates as a basis. If the work is not of a similar character or involves other than additions, omissions or substitutions or if it is not reasonable to value it using bill rates as a basis, then a fair valuation must be made. Rules are set out for the valuation of work on a daywork basis if it cannot properly be measured.
Outline the roles and responsibilities of the contract administrator?
- The overall role is to administer the contract between the employer and the contractor.
- Key tasks include:
o Chairing meetings.
o Periodically inspecting the works.
o Issuing instructions relating to variations.
o Authorising interim payments to the contractor.
o Determining applications for extensions of time.
o Certifying practical completion.
What are the key qualities required of a contract administrator?
- Knowledge of relevant contract provisions.
- Knowledge of construction in order to assess changes and the impact of changes.
- Ability to act in an independent and impartial manner when making decisions.
- Be able to maintain accurate records.
What is the difference between a contract administrator and an employer’s agent?
- Contract administrator is identified within traditional forms of contract and is responsible for administering the terms of the contract between the parties. The decision-making function is impartial meaning either party can challenge the decision of the contract administrator.
- Employer’s agent is identified within the design and build contract and acts on behalf of the employer on all matters. The employer is not normally able to challenge the decision of the employer’s agent.
What is an extension of time?
- An extension of time formally alters the contract completion date and may be issued if there is a delay to the contract completion date caused by the client or a neutral event.
Why did you issue an extension of time on this project?
- An extension of time may be issued to the contractor if there is a delay to the contract completion date caused by the client or by a neutral event.
- Such events are listed as ‘relevant event’s under the JCT Standard Building Contract 2016.
- A ‘relevant event’ can include:
- variations
- instructions
- deferment of possession of the site
- suspension
- works by statutory undertakers
- exceptionally adverse weather
- civil commotion
- terrorism and strikes; and
- ‘any impediment, prevention or default … by the Employer’.
How did you determine an extension of time should be issued on this project?
- Referred to the JCT contract to review procedures relating to extensions of time.
- Request written notice from the Contractor detailing the request and reasons for the request.
- Review the written notice to determine if there is a connection between the delay and relevant event.
- Report the delay and causes to the employer.
- Issue an extension of time certificate to formally alter the contract completion date.
The JCT MW 2011/2016 Contract does not make reference to ‘relevant events’ and so how would you determine if an extension of time should be issued?
- Firstly, the JCT MW 2016 contracts detail that an extension of time should be issued whereby a delay is beyond the control of the contractor.
- For guidance on events deemed beyond the control of the contractor, I would review events listed as ‘relevant events’ under the Standard Building Control 2011/2016.
What is a relevant event?
- Relevant event causes a delay to the contract completion date and is caused by the client or a neutral event.
- Relevant event entitles the contractor to claim an extension of time.
- Relevant event does not necessarily entitle the contractor to claim direct loss and expense.
- Examples include specified perils, exceptionally adverse weather, variations, failure to give contractor possession of site.
What are concurrent delays and why might such concurrent delays cause issues when assessing extensions of time?
- Concurrent delays refers to two or more delaying events occurring simultaneously.
- If concurrent delays comprise of a delay caused by the client and a delay caused by the contractor, there can may be difficulty in determining how long the extension of time should cover.
- Case law suggests an extension of time should be given for the full length of the delay caused by the employer, as opposed to ‘splitting the difference’ on the extension of time.
What is the process for issuing an extension of time?
- The contractor needs to give notice to the employer when it becomes reasonably apparent that progress of the works will be delayed, including the cause of the delay and effect on the completion date.
- The contract administrator needs to assess the notice and determine if there is a clear link between the relevant event and the delay to the completion date.
Are extensions of time for the benefit of the employer, the contractor or both?
- Extensions of time can be beneficial to both the employer and the contractor.
- An extension of time will benefit the contractor as they will not liable for liquidated damages for the contract delay in question.
- An extension of time will benefit the employer as failure to issue the extension of time means the contractor has to complete the works within a ‘reasonable time’ and the employer loses the ability to claim liquidated damages.
What is loss and expense and would a contractor be entitled to loss and expense if an extension of time is given?
- Loss and expense refers to additional costs incurred by the contractor as a result of work progress being materially affected.
- Such costs may include site offices, welfare facilities, plant hire, insurances or site security.
- The contractor may be entitled to loss and expense if the delay to the contract completion date was caused by the client as opposed to a neutral event.
- The contractor needs to give notice to the employer when it becomes reasonably apparent that he is likely to suffer loss and expense.
- The contract administrator needs to assess if there is a clear link between the delay and the loss and expense costs.
What is a relevant matter?
- Relevant matters materially affects progress of works but do not necessarily cause a delay to the completion date and are caused by the client.
- Relevant matter may entitle the contractor to claim direct loss and expense that has occurred.
- Failure to give contractor possession of site, variations, delay in giving contractor instructions.
What are specified perils?
- Specified perils are significant events that would cause significant damage such as fire, earthquakes, flooding, riot and civil commotion.
What remedies are available for a contractor if a client causes a disruption or delay?
The contractor is entitled to claim for loss and expense is there is disruption to the works or a delay to the completion date is caused by the client. The contractor must provide a written application (with sufficient information) to the contract administrator as soon as it becomes apparent they have or are likely to incur a direct loss.
