Contract Compilation & Execution Flashcards
What is a contract
A legally binding agreement
Needs offer, acceptance and consideration under English law and both parties must be intended to be bound and fit to enter into contract
Unilateral vs bilateral contract
Unilateral - one promise in exchange for another promise
Bilateral - exchange of mutual promises
Deeds vs under hand
Deeds - solemn promise, signed and witnessed, consideration not required, 12 year limitation period
Under hand - can have any form, simple signature required, 6 year limitation period
What is tendering
Process of finding and appointing a contractor
Client approaches market (invitation to treat)
Contractors submit bids (offers)
Bids are reviewed and evaluated
Most suitable tenderer becomes contractor (acceptance)
Best value or lowest price award
What is a letter of intent
A letter from an employer to a contractor (or from contractor to SC) indicating the employer’s intention to enter into a formal written contract for works described in the letter
And asking the contractor to begin those works before the formal contract is executed
What is determination
A contract being stopped before completion
Usually a result of one party not being able to continue (insolvency, default of payments from client)
What is discharge
Extinguishing rights and obligations
By performance (normal), agreement or frustration (contract now impossible to perform at no fault of the parties)
Unliquidated damages basis for assessment
Assessed on basis of reasonably arising loss
What are liquidated damages
A genuine attempt to pre-estimate loss in the event of specific breaches
What are the implications of privity of contract
No third party can be affected (obligations)
Only the parties can enforce terms (rights)
Third party cannot sue under contract they were not party to
What are collateral warranties
Agreements used where the contract creates an obligation from one party to provide a warranty to a third, independent party outside the contract (e.g. residential development extending to tenants)
Key elements of NEC4 contracts
Clauses (terms and conditions)
A section for project parameters (Contract Data)
Definition of works (Scope, site information)
Pricing information (the Prices)
Design content (Scope including drawings and specifications)
Composition of NEC4 Contract
Core clauses
Main option (provides payment method)
Secondary options (X clauses)
UK specific clauses (Y clauses)
Dispute resolution (W clauses)
Custom options (z clauses)
What is a compensation event
An event which can affect the cost to the client, the time when the works will be completed or both
There are up to 29 potential CE’s under NEC4 dependent on X clauses selected
What are early warnings
Obligation to notify other party of any event that may:
Increase the prices
Delay completion
Delay meeting a Key Date
Impair the performance of the works once in use
Contract Data part 1
Completed by client
States contract options
Describes key information (the works, contractor’s responsibilities, important dates, retention percentage if option used etc.)
Contract Data part 2
Completed by each tendering contractor including:
Key persons
Programme
Completion date
Total of the Prices (main options A-D)
Payment structure
What are the Prices
If there are no CE’s, the Prices are the amount the contractor will receive for completing the works
Priced contract options
A - activity schedule
B - bill of quantities
Target contract options
C - activity schedule
D - bill of quantities
Pain/gain share
Reimbursable contract options
E - cost reimbursable contract
F - management contract
What is Scope and what does it define
Work to be done
Defines:
Activity schedule
Client’s liabilities
CE’s
Early warning decisions
Core clauses
1 General
2 Contractor’s main responsibilities
3 Time
4 Quality Management
5 Payment
6 CE’s
7 Title
8 Liabilities and Insurance
9 Termination
Who is the Client
Legal entity executing the contract with the contractor
Pays for the works and the process of delivery
Appoints PM and Supervisor
Provides site and Key Dates
Who is the Contractor
Legal entity executing the contract with the client
“Provides the works in accordance with the scope” (20.1)
Proposes programme
Who are the Key Persons
Proposed in CD part 2
Specific individuals Contractor proposed as management team
Their presence and skills are part of the offer
Who is the PM
Appointed by client to administer contract
Oversees works, instructs contractor, accepts Contractor programmes and quotations, assesses CE’s and certifies interim payments
Tells Contractor which “others” to allow onto site
Who is the Supervisor
Appointed by client to oversee quality of the works
Performs tests and inspections, instructs Contractor to search for defects, issues Defect Certificate when all defects corrected (44.3)
Who are named suppliers
Suppliers who require access to the Project Bank Account if required
Who are the senior representatives
Senior members of the client and contractor’s organisations who are not involved in the project
Provide initial dispute resolution method in W1 & W2
Who are the dispute avoidance board
Independent body of 1 or 3 people (both parties choose one and agree on the 3rd or agree on just 1)
Provided by option W3
Who is the adjudicator
An experienced, trained, neutral and independent individual with specialist knowledge
Used under options W1 & W2
Investigates and provides a decision
What is the tribunal
The next level in the hierarchy of dispute resolution
Forms are litigation and arbitration (both binding)
Twintec Ltd v Volkerfitzpatrick Ltd 2014
Injunction granted to a SC to restrain the contractor from pursuing a reference to adjudication after the appointment of an adjudicator
In the absence of agreement by the parties as to the appointment, any decision made by the adjudicator would be a nullity
