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Building Surveying APC > Contract Administration > Flashcards

Contract Administration Flashcards

1
Q

What if a client tells you liquidated ascertained damages are to be £100,000 per week?

A
  • I would ask if the LADs figure is based on a genuine pre-estimate of financial loss and explain that in the event that LADs are applied, they would need to substantiate this figure.
  • I would also explain that if the figure inserted into the contract is shown to be punitive and not based on a genuine financial loss, it is likely to not be enforceable.
  • In this scenario, the employer will need to pursue the
    main contractor for any direct loss that can be substantiated through a formal dispute resolution procedure.
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2
Q

What are extensions of time?

A

Extensions of time adjust the contract completion date and relieves the contractor’s liability to pay liquidated damages for the period of the extension.

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3
Q

What must be in place before LDs can be deducted?

A
  • A non-completion certificate.
  • A pay less notice.
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4
Q

What if the employer actually hasn’t suffered a loss or damage?

A
  • It doesn’t matter
  • Damages can still be deducted at the value stated on the contract.
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5
Q

What are the benefits of being able to grant an extension of time?

A
  • It relieves the contractor of the liability for liquidated damages to be deducted for a delay that they did not cause.
  • It allows another completion date to be set, which maintains the employers ability to deduct liquidated damages.
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6
Q

What happens when ‘time is at large’?

A
  • There is no set completion date.
  • The contractor only has the obligation to complete works within a reasonable time.
  • No LDs can be deducted as their is no completion date.
  • For LDS to be applied, the employer would have to prove that the contractor hasn’t completed the works within a reasonable time.
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7
Q

What are Relevant Events in an SBCC form of contract?

A
  • They are an event that would entitle the contractor to an extension of time.
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8
Q

What are examples of relevant events?

A

There are 13 relevant events in SBCC contracts including:
- Variations.
- Instructions.
- Deferment of possession of site.
- Execution of an approx. quantity that is not a reasonably accurate forecast.
- Suspension of the works by the contractor due to non-payment.
- The carrying out of works by statutory authorities.
- Impediment, prevention of default by the employer.
- Force majure.
- Civil commotion or terrorism.

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9
Q

What are the main elements you would include within an interim valuation?

A
  • Preliminaries.
  • Measured works.
  • Variations.
  • Materials on-site.
  • Less retention.
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10
Q

How do you evaluate interim valuations?

A
  1. Go to site and inspect the works to form a view of the extent of works undertaken.
  2. Check materials stored on-site.
  3. Value both time related and fixed preliminary items claimed against.
  4. The interim valuation amount is presented as the gross valuation, less the previous payment made, less retention.
  5. Finally, as CA, I would prepare and issue the Payment Certificate.
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11
Q

What is the interim certificate conclusive of?

A
  • the interim payment certificate is not conclusive.
  • They carry no contractual significance in terms of stating that the quality of materials or workmanship is satisfactory.
  • Only the final payment certificate is conclusive.
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12
Q

What is retention?

A
  • It is a percentage of each interim certificate that is deducted and retained from each interim payment to the contractor.
  • Retention provides the client with some security that the contractor/sub-contractor will return to correct any defects during the defects defects liability period.

Retention also provides the client with security in the event of the contractor defaulting/ liquidating.

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13
Q

If a non-completion certificate is is not issued when works continue beyond the completion date what is the consequence?

A

Time is at large.

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14
Q

When is retention released to the principal contractor?

A
  • Half of retention is released in the interim payment following practical completion being achieved.
  • The remaining retention is released in the final payment certificate after the certificate of making good defects is issued.
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15
Q

What is a typical retention percentage under SBCC contracts?

A

Retention is usually between 3%-5%.

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16
Q

What is a retention bond?

A
  • This is where a bond is provided in lieu of taking retention from interim payments.
  • It should be equal to the same value as retention deducted.
  • The requirement for the bond should be stated in the contract particulars.
  • There is a standard form for retention bonds provided in SBCC contracts.
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17
Q

What happens if the contractor does not maintain the retention bond?

A
  • Retention can be deducted from interim payments by the employer.
  • If the bond is subsequently taken out then retention moneys taken can be paid thereafter.
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18
Q

What is acceleration?

A
  • Acceleration is the completion of works in a shorter time period than that anticipated at tender stage or;
  • The act of programme recovery following a delay caused by the contractor if they have caused a delay.
19
Q

What options may be considered to achieve acceleration?

A
  • Re-sequencing the programme of works to make consequential activities be undertaken in parallel.
  • Increasing the time working time by increasing working hours.
  • Increasing the numbers of personnel on-site.
  • Increasing incentives (i.e bonuses).
20
Q

What are the most and least effective means of acceleration?

A
  • Re-sequencing works can be the most cost effective and efficient.
  • Increasing either working hours or the number of personnel on-site are the least efficient means.
21
Q

What is the date for completion?

A
  • The date for completion is the date stated and fixed in the contract particulars
22
Q

What is the difference between the date for completion and the completion date?

A
  • The completion date is the date for completion that may have been adjusted to take into account any Extension of Time.
23
Q

What does it mean when time is at large?

A
  • It means there is no fixed completion date but the contractor has an obligation to complete the works within a reasonable time.
  • No liquidated damaged can be charged.
24
Q

What is practical completion?

A
  • When the works are ‘substantially complete’ with only minor defects remaining.
  • The employer then takes beneficial possession of the development.
  • Half of retention is released.
  • The employer can no longer apply liquidated damages.
  • The employer takes back possession of the works and is then responsible for arranging insurance.
25
Q

What is sectional completion?

A

This is the completion and handover of the site in agreed stages.

26
Q

Do the works have to be totally complete before practical or sectional completion is granted?

A
  • Practical completion is a vague term.
  • It is not defined in the SBCC contract suite.
  • It is reliant upon the CA’s opinion.
  • It should not be conditional.
  • It is best practice to award PC when the works are ‘substantially complete’ with a limited number of minor defects or no omissions which prevent the employer from taking beneficial occupation.
27
Q

What is partial possession?

A

Where the employer requests, and the contractor accepts, for the employer to occupation of the works or an area of the works prior to practical completion or sectional completion.

28
Q

What is the difference between partial possession and sectional completion?

A

Sectional completion is a contractual obligation to handover the section of works at the stated date whereas Partial possession relies on the contractors consent - although this cannot be unreasonably withheld.

29
Q

What does the CA have to do when partial possession is accepted by the contractor?

A

Issue a statement to the contractor listing the relevant part and stating the relevant date.

30
Q

What is the rectification period?

A

The period in which the contractor has an obligation to make good any defects or other faults that arise in the works undertaken during this period.

31
Q

How long is the rectification period?

A

It depends on the contract but this is typically 12 months to allow for the works to be observed across all seasons.

32
Q

What is a non-completion certificate

A

It is issued by the CA to the contractor where practical completion has not been achieved by the completion date.

33
Q

What are the consequences of a non-completion certificate?

A

The employer has the right to deduct liquidated damages from interim payments if a pay less notice is also issued.

34
Q

What are the different certificates that you are aware of under the SBCC forms of contract?

A
  • Interim payment certificate
  • Final payment certificate
  • Completion certificate.
  • Certificate for making good defects.
  • Non-completion certificate.
35
Q

What are the three ways that benefits can be transferred to a third party under SBCC contracts?

A
  1. Collateral warranties.
  2. Assignation.
  3. Third party rights.
36
Q

What are collateral warranties?

A

They create contractual relationships between the main parties of a contract and a third party.

The contractual relationship with the third party would otherwise not exist due to privacy of contract.

37
Q

Why are collateral warranties used?

A

Due to the principle of privacy of contract, the rights and obligations under a contract can only be enforced by parties of that contract.

Collateral warranties give remedies to external third parties that, due to privacy of contract, would not otherwise have them.

38
Q

What is assignment?

A

Where the contractual rights of one contractual party are transferred to a third party.

39
Q

What is novation and how does this differ from assignment?

A
  • Novation is where a new contract transfers the rights and obligations of one contracted party to a new third party.
  • Assignment is the transfer of contracted rights or contracted benefits only as burdens cannot be assigned.
40
Q

What is the key issue after a design team has been novated?

A
  • Whether the new party has the right to take action against the novated party for breaches that occurred prior to the novation.
41
Q

How does novation affect the employers rights?

A
  • They lose all contractual relations with the novated party and therefor, the right to take action for a breach.
  • It is therefor common for there to be a collateral warranty between the employer and a novated party.
42
Q

What is available to protect clients from sub-contractors failing?

A
  • Collateral warranties can be used as a direct link between the employer and sub-contractor.
  • Performance bonds can also be used.
43
Q

Documents required from the contractor at PC?

A
  • Certificates (PC ETC).
  • Operation and maintenance manual
  • Health and safety plan.

Building Surveying APC (7 decks)

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