Contract Administation. Flashcards
What are the two elements needed to issue practical completion? (2 points)
- Draft O&M manual
- The works are substantially complete - premises are fit for beneficial occupation.
How can a contract end? (4 points)
- Performance under the contract
- Breach of contract
- Discharge by agreement
- Frustration
How can a construction contract be terminated? (3 points)
- Termination by the Employer
- Termination by the Contractor
- Termination by either party
Can you name some typical JCT contracts? (4 points)
- Minor works Building Contract.
- Intermediate Works Building Contract.
- Standard Building Contract.
- Design & Build Contract.
Do you know any other contract types? (2 points)
- 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.
What is retention? (1 point)
• 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.
What is repudiation? (2 points)
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.
What is ‘time is of the essence’? (3 points)
- 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.
When is the base date? (3 points)
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.
What is the difference between the date for practical completion and the date of practical completion? (2 points)
- 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.
What is the rectification period?
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.
What is a patent defect?
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.
What is a latent defect?
A latent defect is hidden and only discovered at a later stage.
What certificate is issued at the end of the rectification period assuming the contractor has made good all patent defects?
The certificate of making good.
What are liquidated damages and how do these differ from unliquidated damages? (2 points)
- 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.
When can LDs only be claimed? (2 points)
- 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.
Explain the situation when ‘time is at large’? (2 points)
- 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.
What is a collateral warranty? and provide 2 examples. (3 points)
- 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.
What contracts are collateral warranties available under, and which are they not available under? (4 points)
Available under:
- Intermediate
- Design and Build
- Standard Building Contract
Not available under:
- Minor Works
What is an ‘all risks policy’? (2 points)
- 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.
What is a vesting certificate, and when are they typically used? (2 points)
- 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.
What is the difference between executing a contact under hand and under seal?
- 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.
What is a variation?
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.
What is a letter of intent and why would you use one?
Tool that allows work to commence on site while contract negotiations are concluded.
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
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. The receiving party is typically a lender who is sent the comfort letter in relation to credit being granted by them to organisation.
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.
When would you use the JCT minor works contract?
- Works are simple
- Employer led design
- Employer produce drawings, etc.
- Architect/CA can administer contract
When is a minor works contract not suitable?
- Bills of quantities
- Named Specialists
- Detailed control procedures
- Sections required
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
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
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.
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.
When can the CA issue an extension of time?
- Upon receipt of written notice by the contractor of delay to the works
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
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.
What is the process for interim payments under the JCT Minor Works contract and what are the typical timescales?
- 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). - The CA has 7 days from the interim valuation date to visit site and prepare the interim payment certificate.
- After the 7 days is the due date. Starting a 5 day window whereby the CA issues the interim certificate.
- The final date for payment is 14 days from the due date.
What is the due date?
The date which triggers the payment process.
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.
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
