Contract Administration Level 3 Flashcards
What is a Collateral Warranty?
A collateral warranty is a contract under which a party involved in the works warrants to a third party beneficiary that it has fulfilled its obligations under its underlying building contract, subcontract or professional appointment
Creates a contractual link where maybe there wasn’t one previously.
What is the benefit of a collateral warranties?
They avoid issues of bringing a claim
When a contractor is working on a Building who insures the existing building?
The employer
What is a letter of intent?
Used when it is not commercially feasible to delay the commencement of works awaiting full agreement of the contract.
Why do we have letters of intent? -
Ensuring works can start on site promptly but only in certain circumstances.
When contract work scope and price are agreed or mechanism in place for doing so
T&Cs are going to be agreed (or likely)
Start and finish dates are broadly agreed
Good reasons for the works to be commenced in advance of the contract
What are the risks with letters of intent?
Not legally defined terminology
May or may not create a binging contract and there is often some confusion, uncertain or differing terms whether (and on what terms) contracts have been created.
Real risk of actual contract not been completed once the works have started
What would go into a letter of intent
Limiting the scope of the letter (i.e in time and money)
Should the contractor stop working once limit is reached if no full contract in place
Works to take place
Levels of insurance/ Warranties
What is the risk of not paying the contractor in time?
cash flow/ subcontractor payments
What is the differences between the JCT contract and the NEC3 contract?
As many will be aware, the JCT contract focuses on liabilities and risk in the manner of a traditional contract.
NEC requires and enables a more proactive and collaborative approach to managing the contract.
JCT = Contract Administrator NEC= Project Manager
JCT = Master Programme NEC = Update programme regularly
Insight and cost clarity is better with NEC
-Why did you advise on 90/10 price evaluation model?
Gauge the effort and thought the contractor has put in. Encourages the contractor to think about the element of quality.
Mark it accordingly
Price only means price only and that’s it.
Only 90/10 because we have a framework for works where we have greater control over the contractors.
What quality elements did you assess?
Programme (check they could meet the date)
Method Statement (What they were going to do and how)
ESP - Encouraging into construction, impact on local economy and opportunities for young people.
How did you deal with the purchase of the materials?
Materials on site - clear on payment certificate.
Carried out inspection checked materials were on site.
If not on site would be dealt with via a vesting certificate
Withholding retention what is your thoughts?
Way of ensuring the contractor complies with the contract during defects period or defects date
For example in a heating system you would want the equipment to go through a full cycle (12 months)
When would not bother to hold retention?
Whether to hold retention would be such as
Nature/ Complexity
Value
Risk
What are they trying to do with retention nationally ?
Remove retention practices
Old fashioned methods and potentially could be increasing prices. Contractors may be allowing the additional incase they do not get the retention back at the end of the defects period.
Why did you use 100% price on a job?
Low risk - Not specialist works
How did you deal with the reduction of the valuation?
Pay less notice
Under the NEC contractor can only claim for works 100% complete. A way in which to achieve for example a roofing works job would be to split it into percentages i.e a quarter
What is the difficulty with NEC timescales for the type, size and timing of the works we do?
The timescales i.e period for reply and compensation events are too long. However these can be altered.
What loss and expense mechanisms are there?
Early Warning Notices
Extension of Time
Delay Damages
Would loss and expense claims cross over with disputes resolution?
Possible if an agreement could not be reached ADR or in our contract litigation.
What is a term service contract?
Intended to be used for the appointment of a supplier for a period of time to manage and provide a service.
What is partial possession?
The effect of partial possession is that:
Any part for which partial possession is given is deemed to have achieved practical completion.
Half of the retention for that part must be released.
The defects liability period (or rectification period) begins for that part.
Liquidated damages reduce proportionally.
The client is responsible for that part and should insure it.
Why NEC over JCT in this instance?
More Collaborative
Language can be a more objective and less ambiguous
Variations along the way and not at the end
Early Warning Notices
Risk management
What insurances are in place during Building Works?
Existing Building - Existing Building Insurer
For example specified perils i.e storm, flood etc are not the fault of the contractor
Contract Works Insurance - Insurance for works which is not the employers property yet
Public Liability Insurance - ER = minimum £5million
Employers Liability Insurance - ER = minimum £10million
All Risks Insurance - Loss or damage to equipment or materials i.e tools
How is Insurance written into the construction contract?
Joint-Named Policy - Contractor cannot be pursued by their own insurance provider
What are subrogation rights?
The rights of an insurance company to recover its loss from a third party
What insurance may you need to underpin next to a property?
21.2.1 Insurance - UNDER JCT JCT 21.2.1 - Insurance protects against expenses, liability, loss, claim or proceedings which may arise as the result of an injury or damage to any property which is not directly attributable to a negligent act
Non-Negligence Insurance, also known as Party Wall Insurance or JCT 6.5.1, gives property owners protection against damage to any property which is not caused by contractor negligence
What happens to the insurance on completion of the works?
Joint-named policy reverts back to the existing building owner?
What is a latent defect?
A defect that could not have been reasonably foreseen during a routine inspection.
What is a patent defect?
A defect discovered by inspection during at any point until the final certificate
What are the differences between a Contract Administrator under the JCT contract and a Project Manager under the NEC3 contract?
Under the JCT, the employer will appoint a ‘Contract Administrator’ to oversee the contract. The Contract Administrator must act impartially between the parties and must guide the parties through the process, procedures and timelines set out in the contract.
Under an NEC contract, a ‘Project Manager’ deals with the administration of the contract. As set out in the table above, the NEC is geared towards collaborative working under a shared responsibility. The Project Manager takes a more proactive role in the administration of the project, with a duty to co-operate and collaborate with both the developer and the Contractor.
What is the significance of Rights of Third Party Act?
Makes third parties privvy to a contract
