Contract Practice Flashcards
What are the Valuation Rules, where are they found in the contract and when are they used?
- Rules which reflect a sliding scale of options to agree variations based on how closely the variation resembles the work within the contract documents
- Found in Contract Conditions
- Used when an agreement has not been made with the contractor
What are the 3 types of Standard Building Contract
- with Approximate Quantities
- with Quantities
- without Quantities
What are the Valuation Rules?
- Pricing document
- Fair rates and prices
- Dayworks
Explain the process of using the pricing document as a means of valuing variations and what considerations need to be made?
- Pricing document is used when work is of similar character
- Valuation should include a fair allowance to reflect any change in character / conditions / quantity of work carried out
- Allowance for preliminaries
When would you use fair rates and prices as a means of valuing variations and what considerations need to be made?
- Used in instances where work is not of a similar character
- Considerations including quantity (economies of scale), preliminaries
When would you use dayworks as a means of valuing variations and what considerations need to be made?
- a method of valuing additional or substituted work which cannot properly be valued by measurement
- a last resort basis of valuing works
- records need to be prepared by the contractor recording the labour, plant and materials used in the operation
- submit to CA/EA for verification
What sort of variations could give rise to a change in character?
- change of material (e.g. medium duty containment to heavy duty containment)
- change of method of fixing to other work (i.e. containment being chased in to a wall instead of surface fixed)
- change of background of other work
What sort of variations could give rise to a change in conditions?
- work carried out at varied depth (less productivity the deeper you go)
- seasonal variation e.g. winter working
- working in completed areas e.g. protection requirements
- working with varied access constraints e.g. increased number of trades working in one area
- height at which work is carried out
When evaluating a variation, what sort of preliminaries should you consider?
- access equipment
- temporary protection
- insurances
- staffing / labour
- plant / tools
- temporary services
- waste removal
- OOH working
What sort of variations would need to be valued using dayworks?
- a method of valuing additional or substituted work which cannot properly be valued by measurement
- minor additions of quantity to completed works
- disjointed operations with extreme changes of conditions
- opening up the works which are found to be in accordance with the contract
- cleaning and clearance operations
- testing and commissioning
What is acceleration?
refers to increasing the originally planned or current
rate of progress of the works so as to complete the
project earlier than would otherwise be the case.
Why might a contractor choose to accelerate the works?
- to complete the project early in order to reduce site running costs or to free up staff to work elsewhere
- to avoid claims of LDs
Why might an employer want to accelerate the works?
- to avoid the building being handed over late
- if the project is no longer going to achieve PC, the costs / repercussions of not achieving PC might outweigh the costs for compensating the contractor to accelerate the works
How is Acceleration dealt with in JCT?
- Schedule 2 Variation and Acceleration Quotations
‘If the Employer wishes to investigate the
possibility of achieving practical completion
before the Completion Date … the Architect/
Contract Administrator shall invite proposals
from the Contractor in that regard.’
How should a contractor respond to an invitation from the CA to provide an acceleration quotation?
- must provide either an acceleration quotation or explain why it would be impracticable to achieve an early completion of the works
What should an acceleration quotation identify / contain?
- the amount of time that can be saved
- the adjustment to the contract sum
- adjustments to the contract sum can include:
- direct costs,
- consequential loss and expense
- expenses for preparing the quotation
What are the timescales of an acceleration quotation?
- The quotation must be provided within 21 days unless otherwise agreed and remain open for acceptance for 7 days (the start date = the date at which the contractor receives the invitation / sufficient information)
- 28 days to agree acceleration might be too long so this can be amended upon agreement however it must be noted that sufficient time must be allowed to fully understand the scope and submit accordingly to avoid ambiguity / disputes
What if the contract does not provide for acceleration quotations?
If there is no mention of acceleration in the contract
that does not mean that the employer cannot ask
the contractor to accelerate. It is always open to
the parties to agree additional or separate
contractual terms and an acceleration agreement
can be entered into whether expressly envisaged
under the construction contract or not.
How is risk allocated on an acceleration quotation?
- the employer should carry the risk unless the employer asks the contractor to provide a warranty that the acceleration will be successful (however this might mean the contractor prices in risk to the quotation)
- Due diligence should be carried out to ensure that the contractors quotation will have a high chance of succeeding and progress should be monitored to ensure the contractor is keeping to their side of the agreement
- The contractor is advised to ensure that it includes a caveat disclaiming liability in the event that further delays caused by new events that would entitle it to an extension of time
- Terms also should be included to abandon the acceleration agreement if it is not going to be successful
- Parties must agree on what is meant by completion to understand if acceleration has been achieved
How can acceleration be achieved?
The contractor can change:
- the site working hours (consider OOH working 150%, planning approval, productivity)
- the level of resource (must be a balance in resource)
- the amount of temporary works allowing more works to continue
- the programme (focus on critical path, relatively easy and inexpensive but least effective)
- the methods of working
The employer can change:
- the specification, design or scope of works
What are some forms of construction security and performance documents?
- Bonds
- Parent company guarantees
- Collateral warranties
- Third party rights
- Direct agreements
- Payment security methods (Project bank accounts opened in the names of the project parties in to which the employer must make payment in accordance with the contract, funds usually held in trust)
Name some interested third parties to a construction contract?
- Funders
- Tenants
- Purchaser
- Building contractor / subcontractors
- Professional consultants
When is a construction contract complete?
- a construction contract is not complete until all of the services required by the contract have been provided to a standard consistent with the requirements of the contract
- E.g. provision of manuals, demonstrations and training, etc
- When the contractual criteria of workmanship / specification has been met
What actions are triggered upon completion of a construction contract?
- client takes possession of the site
- no further liability for liquidated damages
- risk of loss / damage to the works passes to client
- contractor no longer needs to insure or secure the
works (to be done by client) - commencement of defects liability period
- release of retention monies (typically 50%)
- final account to be prepared
- expiry of bonds / guarantees
Practical completion under the JCT forms of contract
- Completion is referred to as ‘practical completion’
Sectional completion under the JCT forms of contract
- Sectional completion is anticipated by the contract documents and pre planned with separate completion dates, extension of time provisions and liquidated damages
- If delay to one section causes a delay to another subsequent section, then the contract will need to make adequate provision for an extension of time in those circumstances
Partial possession under the JCT forms of contract
- Sometimes the client will wish to take possession o part of the works even through it is not specifically anticipated in the contract documents
- Partial possession can only be taken with the consent of the contractor but that consent may not be unreasonably withheld
- For example, if occupation of completed areas would hinder the ability for the contractor to complete the remaining areas (limiting noise / dust, restricted from working in certain areas, ect)
Clarifying completion
- It is important for both parties to a contract before signing to clarify the basis upon which completion of the works will be certified and the discretion to be exercised by the contract administrator
Conditions precedent to completion
In some instances the contract might state that
completion of specific activities are conditions
precedent to completion being achieved.
Completion is not certified until:
- H&S manuals issued
- Training and demonstrations provided
- O&M manuals
What are some definitions of completion?
- Fault free completion
- Completion for all practical purposes
- The De Minimis Principle
- Impossibility of perfection
- Remedying Defects
Where is extensions of time dealt with in the JCT Standard Building Contract 2011?
- Clauses 2.26 to 2.29
For what reasons might a completion date be adjusted due to an extension of time?
Set out in a list of ‘Relevant Events’
- Variations
- Instructions
- Deferment of possession of the site
- Suspension
- Works by statutory undertakers
- Exceptionally adverse weather
- Civil commotion
- Terrorism and strikes
- ‘any impediment, prevention or default by the employer’
What are delay notices and when might they be issued?
- Issued by the contractor when it becomes reasonably apparent that the progress of the works is being or is likely to be delayed
The notice must set out:
- the cause / causes of delay
- identify relevant event(s)
- what the expected delay upon the completion date is
How are delay notices assessed?
The architect / CA is required to consider any notice of delay given by the contractor and to fix a new (later) completion date if it is considered fair and reasonable to do so
- CA must provide a written notice of the decision about the delay as soon as is reasonably practicable, but in any event, within 12 weeks of receipt of ‘the required particulars’
- ‘Required particulars’ are the cause and effect of the EOT claim and any supporting information (these are to be provided either with the delay notice by the contractor or in writing as soon as possible thereafter)
- The EOT claim will be reviewed after completion of the works; a review of the time awarded must be made within 12 weeks of practical completion, to either confirm or increase the extension of time period unless there has been an omission to the works which justifies a reduction.
