Contract Administration

Question 1

When would there be a requirement for a performance bond and what does it mean?

Answer 1

Performance bonds and guarantees are commonly used to ensure that contractors fulfil their obligations, offering a level of protection against risk and uncertainties.

The bond typically covers a percentage of the contract value. It is a common requirement for most major construction contracts, especially for public sector projects, as it provides reassurance to the project developer that the contractor can fulfil its contractual obligations.

Question 2

What is a collateral warranty and how does it work?

Answer 2

A collateral warranty creates a contractual link between the two parties that are not linked via the contract. They are used as a supporting document to a primary contract where an agreement needs to be put in place with a third party outside of the primary contract.

Sometimes an contractor, or sub-contractor will need to warrant to a funder, tenant or purchaser that it has fulfilled its duties under a building contract.

Collateral warranties often contain obligations that affect the contractor, such as using materials of an appropriate quality, and carrying out work in a professional, workmanlike manner. It can also provide the third-party contractual rights enabling it to claim for losses which would not otherwise be recoverable.

Question 3

Can you please expand on what the role of a Contract Administrator is?

Answer 3

Their responsibility is to administer construction contract between client and contractor, and carry out activities such as site visits, reports, variations, issue instructions, valuations and certificates etc.

Question 4

Can you expand on your knowledge of the JCT Intermediate contract?

Answer 4

The intermediate contrcat allows for a number of additional elements in comparison to the JCT MW including:
Clerk or works
Sectional completion
Partial possession
The use of bonds.

Question 5

Can you expand on your knowledge of the JCT Standard Building Contract?

Answer 5

The JCT SBC allows for additional elements to the intermediate contract such as:

Employers representative, listed sub contractors, retention bonds, variation and acceleration quotations, third party rights.

Question 6

What contract allow for sectional completion and named sub contractors ?

Answer 6

Intermediate and standard building contract.

Question 7

What JCT contracts allow for a clerk of works ?

Answer 7

JCT Standard building contract
JCT Intermediate Contract
Not JCT MW

Question 8

What is a traditional lump sum contract ?

Answer 8

A lump sum contract is the traditional means of procuring construction, and involves a single ‘lump sum’ price for all the works being agreed before the works begin.

This means that the contractor is able to accurately price the works they are being asked to carry out.

Question 9

What is a contract instruction and how would you deal with it ?

Answer 9

In simple terms, a contract variation occurs when the parties agree to do something differently from the way they originally agreed, whilst the remainder of the contract otherwise operates unchanged.

Such an agreement, if valid, would amount to a variation of the existing contract.

Question 10

What is a letter of intent?

Answer 10

A letter of intent is a document outlining the understanding between two or more parties which they intend to formalise in a legally binding agreement.

Question 11

Under JCT MW does the programme form part of the contract?

Answer 11

No however the contract promotes the use of one for reference generally.

Question 12

What is the base date?

Answer 12

Base date: the base date is usually set at around the time of return of tenders.

It is a reference date from which changes in conditions can be assessed.

Question 13

Does JCT MW make reference to a possession date?

Answer 13

MW16 does not refer to the contractor being given ‘possession’ of the site, but states simply that ‘The Works may be commenced’ on the date stated in the contract

Question 14

What are the grounds for termination?

Answer 14

Insolvency
CDM breaches
Corruption of the contractor
Contractor failing to proceed regally and diligently
Employer failing to pay amounts
Either party can terminate is the works are suspended for a period of more than one month due to neutral events

Question 15

Does JCT MW require a contract programme?

Answer 15

MW16 does not require the contractor to produce a programme.

Although there would be nothing to prevent such a requirement being included in the specification; a programme might be very useful to the contract administrator, particularly when monitoring progress and assessing extensions of time.

Question 16

Why is it important to define a completion date?

Answer 16

The significance of having a completion date is that it provides a fixed point from which damages may be payable in the event of non-completion.

Generally in construction contracts the damages are ‘liquidated’, and usually expressed as a rate per week of overrun.

Question 17

What is the reason for an extension of time?

Answer 17

One important reason for an extension of time clause is to preserve the employer’s right to liquidated damages in the event that the contractor fails to complete on time due wholly or in part to some action for which the employer is responsible.

Question 18

When must a contractor give written notice regarding an extension of time ?

Answer 18

Under MW16 the contractor must give written notice to the contract administrator - ‘If it becomes apparent that the Works will not be completed by the Date for Completion’ (cl 2.7)

The notice must be given regardless of the reason for the delay, i.e. whether it is caused by the employer, by a neutral event (such as bad weather) or by the contractor itself.

Question 19

When would you issue a certificate of non completion?

Answer 19

If the completion date is not achieved, under JCT MW the certificate is not required but this failure should be recorded and circulated to all.

Question 20

What triggers practical completion?

Answer 20

Under clause 2.9 the contract administrator is obliged to certify the date at which, in the contract administrator’s opinion, works have reached practical completion and the contractor has complied sufficiently with clause 3.9 (its CDM obligations, for example the supply of information required for the health and safety file).

It is implied that it will be a fair and reasonable exercise of professional judgment.

However, the contract administrator can certify practical completion where there are very minor items of work left incomplete, on de minimis principles.

Question 21

What does practical completion trigger?

Answer 21

Start of the rectification period.
release of half of the retention.
Employer takes responsibility of the site.
liability for liquidated damages ends.

Question 22

What is culpable delay ?

Answer 22

Culpable delay (sometimes referred to as ‘contractor delay’) on the other hand is a delay that is entirely the fault of the contractor. Where the contractor is culpable for a delay, they have no entitlement to an extension of time or loss and expense.

Question 23

How and where would you process liquidated damages ?

Answer 23

May deduct damages from the amount due under the next certificate or reclaim the sum as a debt.

Under MW16 the contract administrator is not required to certify non-completion, but it may be prudent to record the failure in a letter to both the employer and the contractor.

Once the date for completion has passed, the contractor is said to be in ‘culpable delay’.

Question 24

What notice would you need to submit if you are planning to recoup liquidated damages form a payment?

Answer 24

A pay less notice.

Question 25

What are the key powers of the contract administrator JCT MW?

Answer 25

Agree variations
Issue a pay less notice on behalf of the client
issue certificates
certify practical completion making good defects

Question 26

At what point can you no longer issue variations under the contract?

Answer 26

Following practical completion/Final account.

Question 27

How long does the contract administrator have to notify the contractor of the existence defects?

Answer 27

MW16 requires the contract administrator to notify the contractor of the existence of defects within 14 days of the end of the rectification period.

Question 28

What are prolongation costs?

Answer 28

Prolongation costs are the additional costs that a contractor has incurred as a result of the completion of the works being delayed by an event that is the responsibility of the other party (usually the Employer). Such events might include; failing to give the contractor possession of the site on the date specified in the contract; delays in giving instructions, and so on.

Question 29

Does JCT MW allow for advanced payments?

Answer 29

No, the contract would have to be amended to suite.

Question 30

What does a valuation include?

Answer 30

The value of the work properly executed and the value of materials and goods properly brought onto site.

Question 31

Can you allow for defective work to remain?

Answer 31

The contract administrator should obtain both parties’ agreement, and ensure that its proposed adjustment to the contract price is agreed and confirmed in writing.

The rates and prices for that work as set out in the contract can be used as a starting point for negotiation, but are not the only matters to be taken into consideration.

The contractor may prefer to correct the work, especially if the proposed reduction in the contract price is significant, and in general it cannot be denied the opportunity to do so.

Question 32

What risks are attached with including materials on site within interim payments?

Answer 32

The employer could be at risk, however, where materials have not yet been built in, even where the materials have been certified and paid for. The contractor might not actually own the materials paid for because of a retention of title clause in the sale of materials contract.

Question 33

What is a payment notice?

Answer 33

When the CA has not produced a payment certificate the contractor can produce a payment notice.

Question 34

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