Contract Administation. Flashcards
1
Q
What are the two elements needed to issue practical completion? (2 points)
A
- Draft O&M manual
- The works are substantially complete - premises are fit for beneficial occupation.
2
Q
How can a contract end? (4 points)
A
- Performance under the contract
- Breach of contract
- Discharge by agreement
- Frustration
3
Q
How can a construction contract be terminated? (3 points)
A
- Termination by the Employer
- Termination by the Contractor
- Termination by either party
4
Q
Can you name some typical JCT contracts? (4 points)
A
- Minor works Building Contract.
- Intermediate Works Building Contract.
- Standard Building Contract.
- Design & Build Contract.
5
Q
Do you know any other contract types? (2 points)
A
- NEC3 Contract – New Engineering Contracts: typically used for larger public sector works.
- FIDIC Suite of contracts – typically used for international projects which are contracting and funded across multiple legal jurisdictions.
6
Q
What is retention? (1 point)
A
• Retention is a sum, usually deducted at each monthly payment notice, to provide the employer with some security in the event that defects occur after practical completion.
7
Q
What is repudiation? (2 points)
A
Abandonment or refusal to carry out the work without lawful excuse is a repudiation.
Bad workmanship is unlikely to constitute repudiation, unless the breaches are so serious that the contractor is clearly unwilling or unable to complete the work.
8
Q
What is ‘time is of the essence’? (3 points)
A
- Completion needed by a particular date.
- Considered fundamental breach if not achieved.
- For example, construction works required for a stadium before a certain big event.
9
Q
When is the base date? (3 points)
A
A ‘base date’ is a reference date from which changes in conditions can be assessed.
The base date sets the reference date from which the conditions under which the tender was prepared are considered to have been known by the contractor and so are properly reflected in their price.
Typically, it is around 7-10 days prior to the date of the return of tenders.
10
Q
What is the difference between the date for practical completion and the date of practical completion? (2 points)
A
- The date for practical completion is the date by which the contactor is required to finish the work as stated in the contract particulars or subsequently extended by the CA.
- The date of practical completion is when, in the opinion of the CA, the contractor has completed the works. It can be certified where there are very minor (de minimis) items ‘not affecting beneficial occupancy’ that remain incomplete.
11
Q
What is the rectification period?
A
The period stated in the contract that provides for:
- the making good of minor faults and omissions; or
- items that fail to perform suitably that may be outstanding, or occur after practical completion has been reached and the contractor has handed the building over.
12
Q
What is a patent defect?
A
A patent defect is visibly obvious or discoverable at time of construction before the Practical Completion certificate or the certificate of making good is awarded.
13
Q
What is a latent defect?
A
A latent defect is hidden and only discovered at a later stage.
14
Q
What certificate is issued at the end of the rectification period assuming the contractor has made good all patent defects?
A
The certificate of making good.
15
Q
What are liquidated damages and how do these differ from unliquidated damages? (2 points)
A
- Liquidated damages are genuine pre-determined estimates 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: loss of rent calculated on a weekly basis is the norm.
- Unliquidated damages are damages that are payable for a breach of contract, the exact amount of which has not been pre-agreed, and are typically determined by the courts.
16
Q
When can LDs only be claimed? (2 points)
A
- On receipt of a certificate of non-completion by the CA (or EA) and
- When the employer has notified the contractor of his intention to do so.
17
Q
Explain the situation when ‘time is at large’? (2 points)
A
- The phrase ‘time at large’ describes the situation where there is no date for completion, or where the date for completion has become invalid. The contractor is then no longer bound by the obligation to complete the works by a certain date.
- This is not a preferable to be in as it means that contractor it only obligated to complete the outstanding works in a reasonable time and as a certificate of non-completion has not been issued the employer cannot claim LD’s.
18
Q
What is a collateral warranty? and provide 2 examples. (3 points)
A
- Agreements which are associated with the main contract and link a third party contractually to one of the members of the original contract.
- Example: tenant and contractor in case building is sold so tenant is recourse if defect in fit-out.
- Example: employer and sub-contractors in case main contractor becomes insolvent.
19
Q
What contracts are collateral warranties available under, and which are they not available under? (4 points)
A
Available under:
- Intermediate
- Design and Build
- Standard Building Contract
Not available under:
- Minor Works
20
Q
What is an ‘all risks policy’? (2 points)
A
- Contractors All-Risks (CAR) provides cover against loss or damage to the works and materials during construction.
- Typically issued under joint names of client and contractor.
21
Q
What is a vesting certificate, and when are they typically used? (2 points)
A
- They are certificates which prove ownership of off-site materials to the employer.
- Typically used when advance payment by the employer is required to order particular materials/goods which have long lead times.
22
Q
What is the difference between executing a contact under hand and under seal?
A
- Under hand = limitation period of 6 years – executing the contract as a simple contract.
- Under seal = limitation period of 12 years – executing the contract as a deed.
23
Q
What is a variation?
A
A change to the work that the contract administrator instructs on behalf of the employer.
Variations may be an addition or omission from the work as originally specified.
24
Q
What is a letter of intent and why would you use one?
A
Tool that allows work to commence on site while contract negotiations are concluded.
25
What are the typical contents of a letter of intent? (6 points)
* Commencement date
* Requirement to proceed with works or services
* Completion date
* Overall contract sum
* Undertaking to pay reasonable costs in the interim
* LDs provision
26
What is a comfort letter?
A written document intended to give assurance that an obligation will be met.
Typically, a comfort letter is provided by an accountant to give assurance about the financial soundness of an organisation and its [assets](https://www.designingbuildings.co.uk/wiki/Asset). The receiving party is [typically](https://www.designingbuildings.co.uk/wiki/Ties) a lender who is sent the comfort letter in relation to [credit](https://www.designingbuildings.co.uk/wiki/Credit) being granted by them to organisation.
27
What is a Pre-Construction Services Agreement (PCSA)?
Enable clients to employ contractors before the main construction contract commences.
Typically they are part of a two-stage tender process, used in the first stage to procure contractor involvement in the design process. This can enable the contractor to contribute to the design and advise on the buildability.
28
When would you use the JCT minor works contract?
* Works are simple
* Employer led design
* Employer produce drawings, etc.
* Architect/CA can administer contract
29
When is a minor works contract not suitable?
* Bills of quantities
* Named Specialists
* Detailed control procedures
* Sections required
30
What provisions are there for the appointment of Named Sub-contractors in minor works?
* There are none, the JCT Minor Works does not provide for Named Sub-Contractors
31
In terms of commencement, how is this different to the JCT Intermediate Works building contract?
* Minor Works, contractor is not given possession of the site – ‘Works may be commenced’ (Failure to enable Contractor proper access can result in EoT)
* Intermediate contract, Date of Possession is when the contactor is to start works
32
What are the effects of completion under most contracts?
* Half of the retention is released.
* Insurance transfers to the employer.
* Possession transfers to the employer.
* Liquidated Damages not recoverable.
* Rectification period commences.
* Instructions no longer given by the CA.
33
Do oral instructions need to be confirmed in writing, what is the procedure?
* Instructions can be made orally, followed with written confirmation.
* Either CA should confirm to Contractor in writing, if not, the contractor can put in writing and issue to the CA.
* If neither dissent, it is deemed to be effective.
34
When can the CA issue an extension of time?
* Upon receipt of written notice by the contractor of delay to the works
35
In the event of non-completion, how can damages be claimed?
* Deduct from sums due to contractor or recover them as debt.
* Notice has to be provided.
* Take place from date for practical completion to the date of PC
36
How does the minor works contract expect variations to be valued?
* Fair and reasonable basis using relevant prices from the specification.
* Valuation will include direct loss and expense in compliance with variation instruction.
37
What is the process for interim payments under the JCT Minor Works contract and what are the typical timescales?
1. Contractor issues Application for payment 3/4 days before the interim valuation date.
* (The interim valuation date is the same date each month or the nearest business day).
1. The CA has 7 days from the interim valuation date to visit site and prepare the interim payment certificate.
2. After the 7 days is the due date. Starting a 5 day window whereby the CA issues the interim certificate.
3. The final date for payment is 14 days from the due date.
38
What is the due date?
The date which triggers the payment process.
39
What happens if no interim certificate issued?
* The contractor can at any time after the 5 day period from the due date submit payment notice to the CA with sum due & calculation.
* If no pay less, it is the sum due.
* Final date for payment of the contractor’s payment notice is the original date for payment but postponed by the number of days after the 5 day period when the contractor issued the payment notice.
40
What happens if the employer thinks he should be paying less than the amount shown on the certificate?
* Employer issue a pay less notice not less than 5 days before the final date for payment.
* Pay less must state the amount he considers to be paid and calculation.
* If payment notice is given (when certificate is not issued), the amount due is sum on pay less
41
What happens if the issued payment notice is not paid by the employer?
* Employer will pay interest on the amount.
* Contractor can suspend works = eventual termination
42
What should have been issued prior to the issue of the final certificate for payment?
* Interim payments (every 4 weeks)
* PC certificate
* Penultimate certificate
* Certificate of Making Good Defects
43
What are the timescales with the final certificate for payment?
* The due date will be 28 days after whichever occurs last:
1. receipt of all information from the contactor to calculate the final payment; or
2. the date stipulated in certificate of making good under 2.11.
* Not more than 5 days from expiry of the 28 day period, the CA will issue the final payment certificate which will be payable not more than 14 days from the due date.
44
What happens if the CA does not issue final certificate for payment?
* Contractor give Employer a payment notice showing amount and calculations.
* Payment by employer 14 days from the original due date + the number of days after expiry 5 day period in which the CA should have issued a notice that the contractor issued his certificate.
45
In what ways can termination of the building contract occur under Minor Works?
* Termination by the employer
* Termination by the contractor
* Termination by either party
46
In what circumstances can the employer terminate the contract?
* Default by the contractor
* Insolvency of the contractor
* Corruption of the contractor
47
What are the consequences of the employer terminating the contractors building contract?
* No further sums are payable.
* Employer employs others to finish off.
* Following completion of works and expiry of the rectification period, the employer can produce an account and submit it to the original contractor showing the amount of expense incurred as a result of the termination of the contract. If the sum on the account exceeds the adjusted contract sum, contractor to pay employer and VICE VERSA.
48
Describe how the contract can be terminated by the contractor?
* Default by the employer
* Insolvency of the employer
49
Describe how the contract can be terminated by either party?
Before PC, the works are suspended by one month or more due to:
* Force Majure
* CA instruction as a result of negligent statutory undertaker
* Civil commotion (terrorism)
* Damage by specified peril
* UK government exercising statutory power.
50
What are the consequences if the contract is terminated by either party?
* No further sums will be payable.
* Account prepared by the contractor (Total value of work executed at date of termination, Cost of materials and goods ordered and any direct loss or damage caused to the contractor by the termination).
* Employer to pay contractor amount due less previously paid in 28 days of submission of account by the contractor. (No retention).
51
When is it appropriate to use the Intermediate Building Contract?
* Where the proposed works are of a simple content but detailed contract provisions are necessary
* When the works are designed on behalf of the employer
* Where an Architect/CA or QA will administer the contract.
52
What are the differences between MW and IC?
* More extensive design provision
* PI clause is included
* Name sub-contractors
* Deferment of possession
* Partial possession and sectional completion
* Collateral warranties
* More detailed provisions for an extension of time
* Early use
53
When is the intermediate contract not suitable for use?
* Contractor to design discrete parts
* Consider ICD.
54
What are ‘listed materials’?
* Items off-site = property of the employer
* Contractor must insure against the specified perils
55
What is a named sub-contractor?
The clients lists acceptable sub-contractors. The Main contractor selects and appoints one, assuming responsibility for their performance.
56
What is an acceleration clause?
* Allows the employer to bring forward date for PC after payment to Contractor.
* (not available under IC, MW or D&B)
57
What is the purpose of a valuation?
* Detailed breakdown of the works progress and the money to be assigned to that progress.
58
What are the Valuation Rules for the IC?
* Measurable work: Similar works to be measured using rates from specification (cl. 5.3.1.1).
* Measurable work: Work is of similar character to those set out in Contract Documents but not executed under similar conditions. Priced on a fair basis (cl. 5.3.1.2)
* Non-measurable work: Day works (cl. 5.4).
59
What are the 5 warranties that the intermediate form referrers to?
* Contractor warranty to purchaser or tenant;
* Contractor warranty to company providing finance;
* Sub-contractor warranty to purchaser or tenant;
* Sub-contractor warranty to Employer;
* Sub-contractor warranty to financer;
(Contractor execute from 14 days from receipt and 21 days for the Sub-contractors)
60
What is deferment of possession?
* The employer prevents the contractor having possession of the site to start works on the site or section.
* This period must not exceed 6 weeks from the Date for Possession.
61
What is partial possession?
* Employer wishes to take back possession of site or section ahead of PC.
* The contractor must agree to this.
62
What happens if the contractor fails to complete the works by the completion date?
* CA issue a certificate of non-completion (conditional requirement for LADs)
* Following issue and/notice of intention, Employer can claim LADs
63
In IC, what can the CA do if it is suspected that there might be defective works?
* CA can instruct contractor for opening up and testing (cl. 3.14).
* The contractor reimbursed for the cost if not defective.
64
In IC, can the contractor be reimbursed for direct loss and/or expense?
* Yes, the contactor apply in writing with details of alleged loss
65
What is a relevant matter?
* Employer is responsible that materially affects the progress of the works
66
What are typical relevant matters?
* Variations
* CA Instructions (expenditure of Provisional Sum, named sub-contractors, opening up and testing)
* Any impediment, default, prevention of employer to the contractor.
67
In IC, how can the contract sum be adjusted?
* Variations and their attributed amounts
* On-site materials and off-site materials as ‘listed items’
* Deduction of all provisional sums and approximate quantities
* Deduction for retention
68
In IC, what is included on each interim payment notice?
* Total value of work properly executed
* Value of materials on-site
* Value of material off-site as ‘listed items’.
69
What is the Joint Fire Code?
* An optional scheme which is designed to reduce fires on site.
70
What happens if there is a breach of the joint fire code?
* Insurers send notice to Employer or Contractor specifying remedial measures.
* Contractor will ensure remedial works are carried out by such date as specified by insurers.
* CA will issue for instructions for the required remedial works.
71
What happens if the contractor does nothing?
* 7 days of receipt of notice contractor does nothing, Employer can employ another and recover costs from original contractor.
72
What are day works?
* A means by which the contractor is paid for specifically instructing work on the basis of the cost of labour, materials and plant + mark-up OHP.
73
What is the process for awarding an extension of time (MW)
* Contractor gives CA written notice
* For variations instructed by CA = EoT.
* Delay beyond contractor control CA to use Relevant Events list to make ‘reasonable judgement’.
* Date for PC shifts by the period of time awarded.
74
Can you list some relevant events?
* Variations
* CA instructions such as opening up works
* Any impediment or default by the employer
* Civil commotion (terrorism)
* Force Majeure (Act of god)
* UK Government statutory power
75
What is the contractor still required to do after issue of request for an EoT?
* Prevent or mitigate the delay and loss, even if Contractor is not at fault.
76
Is the extension of time mechanism just for the benefit of the contractor?
* No, if there were no EoT provisions and a delay occurred due to fault of the Employer, this would be a breach of contract.
* The contractor would no longer be bound to complete by the completion date.
* Client loses right to claim LDs.
* (known as 'time at large'.)
* The contractor is still under obligation to complete within reasonable time.
77
What is ‘Time at large’
* When the contractor only has to complete the works within a reasonable period
* Date for PC not adjusted by an extension of time.
78
Can you list some scenarios in which ‘time at large’ could occur?
* No date for PC in contract.
* No issue of EoT.
* EoT time clause accidently taken out
79
What is concurrent delay?
* More than one delay event occurs at the same time, but where not all events allow claim for EoT or Loss and/or expense
80
What is the difference between a relevant event and a relevant matter?
* An event which causes a delay to the completion date caused by client or a neutral event by neither party = EoT
* A relevant matter is a matter where client is responsible for that materially affects the progress of the works. = loss and expense claim.
81
If the employer wants to terminate the contract, what events must have occurred by the contractor?
* Default by the contractor
* Insolvency of the contractor
* Corruption of the contractor or an agent acting on his behalf
82
In terms of contractor default, can you name the different ways this might occur?
* Before PC, contractor suspends the carrying out of the works;
* Fails to proceed regularly and diligently;
* Fails to comply with the CDM Regs.
83
What happens if the default continues? What are the timescales?
* The CA give written notice specifying the defaults.
* If the continues with the default for 7 days from receipt of notice, employer on or within 10 days can issue termination notice.
84
What can the employer do if wanting to terminate the contract owing to contractor insolvency?
* Employer serve a termination notice immediately as soon as insolvency proceedings.
85
What are the consequences of an insolvency?
* The contractor’s obligations to complete the works, cease.
86
What are the consequences of termination of the contract by the employer?
* Employer may employ others to complete the works
* No further sums will become payable (other than due after PC)
87
What are the consequences of termination of the contract by the employer after PC?
* After PC and expiry of the Defects Liability Period, within 3 months the CA will produce an account showing the loss and expense incurred.
* If the sum exceeds contract sum, contractor will pay the employer
88
What employer defaults trigger a termination notice from the contractor?
* Employer does not pay by the final date for payment;
* Employer interferes with the issue of a certificate;
* Employer fails to comply with the CDM Regs.
89
What happens after the service of a termination notice by the contractor?
* If works suspended for one month or more by default of employer, the contractor can give written notice to Employer.
* If default continues for 7 days from issue of notice, then within 10 days from expiry of that notice then contractor can issue a termination notice.
90
What happens if the employer becomes insolvent?
* Contractor gives written notice to the employer terminating their contract.
91
In terms of the termination of the contract by either party, can you name the grounds in which either party can terminate the contract?
* Force Majeure
* CA instruction as a result of Negligent Statutory Undertaker
* Civil commotion (terrorism)
* Damage by specified perils.
* UK exercising statutory power.
92
Can you name any of the specified perils?
* Fire
* Explosion
* Earthquakes
* Flooding
93
What happens if one of the grounds to terminate occurs?
* Either party, on expiry of one month may gave notice, that unless the suspension event ceases, they will terminate contract.
* Termination after expiry of 7 day period from initial notice by further written notice.
94
What are the consequences of termination by either party (or by default/insolvency of employer)?
* No further sums will be payable.
* Account will be prepared by contractor setting out total value of = executed work, cost of ordered materials and loss and/or expense.
* The employer will pay the contractor amount within 28 days (no retention).
95
What is the difference between patent defects and latent defects?
* Patent defect visibly obvious or discoverable at time of construction before Certificate of Practical Ccompletion or Certificate of Making Goof Defects
* Latent defect is hidden and only discovered at a later stage.
96
What impact does the identification have of patent defects before the issue of the certificate of practical completion?
* PC cannot be issued whilst there are patent defects
97
What is the process at the end of the rectification period?
* A schedule of defects issued to the contractor no later than 14 days from expiry of the rectification period.
98
What happens if the contractor refuses to return to site at the end of the rectification period?
* The Employer can arrange for the defects to be addressed and then charged to the original contractor.
* Employer can make deductions from the retention if the contractor refuses to correct the defects.
99
What act links the contractor and the CA in the event of the discovery of defective work?
* Civil Liability (Contribution) Act 1978
* Case law shows culpable building 80% responsible and culpable CA 20% for signing off the works.
100
What are the ways in which action can be brought for defective work?
* Breach of contract;
* Claims in tort;
* Defective Premises Act 1972
