Contract Administration Flashcards
What is meant by the ‘privity of contract’ ?
The privity of contract means that in the absence of any contract with those responsible for the mistake, the third party would not be able to successfully claim in contract to recover such loss. Further, it would be very difficult to recover losses from the consultants or contractor on a ‘non-contractual’ basis, such as under the law of tort (common law).
What is collateral warranty ?
Collateral warranty is a binding contract between a third party such as tenant/purchaser/funder, and a party involved in the design, management and construction of the project. Collateral warranty enables third party to make a claim against for example structural engineer if the building was proven to be built defectively.
What changed the rule of privity if contract ?
The Contract (Rights of Third Parties) Act 1999
What is Third Parties Act ?
Third Parties Rights Act enables third parties to make a claim against any consultant or contractor for defective design or workmanship.
What are construction security and performance documents ?
Parent Company Guarantee; bonds; collateral warranties; third party rights; payment security methods such as escrow accounts and project bank accounts.
How would you define bonds ?
Bonds are undertakings given by one party to another to pay money if a third party defaults. Bonds are procured by contractors in favour of employers to cover losses caused to employers by a contractor.
What types of bonds
Default bond where the employer must demonstrate that contractor has failed to comply with the relevant obligations under the building contract; On demand bonds where bank is liable to pay on receipt of a simple statement from architect/engineer that the contractor is in default under the contract.
What type of default bonds do you know ?
Performance bond where the employer must demonstrate that contractor has failed to comply with the relevant obligations under the building contract
What on demand bonds do you know ?
Advanced payment bond (used when employer makes advanced payment to cover contractor’s costs for a particular part of the project); Retention bond (used when there is an early release of the retention monies by the employer); Tender bond (would entitle the employer to payment if they have incurred substantial costs in a tender process and the contractor withdraws their tender.
