CONTRACT PRACTICE

Question 1

What is a contract?

Answer 1

A legally binding agreement between two or more parties.

Question 2

What is needed to create contractual relationships?

Answer 2

Offer, Acceptance, Consideration and Intention to enter into legal relationship

Question 3

What are the different forms of standard building contract available in the UK?

Answer 3

JCT
NEC
FIDIC

Question 4

What are some advantages and disadvantages of each? Where are they used?

Answer 4

• JCT – most commonly used
• NEC – more suited to engineering contracts
• FIDIC – more suited to large international project e.g. Channel Tunnel

Question 5

What is the JCT and what are their suite of contracts?

Answer 5

Joint Contracts Tribunal, formed in 1931
Suit of Contracts includes:
•	Standard (with quants, without, with approx.)
•	Intermediate
•	Minor works
•	Design and Build

Question 6

What are the advantages with a standard form of contract? How is it formed?

Answer 6

The advantages of a Standard Building Contract include:
• Developed over a long period
• Has input from legal, contractor, local authority
• Has more case law
• Less costly and time consuming to produce

Question 7

What is an intermediate Contract?

Answer 7

• Contract for simple works without any major complex service adjustments
• It is a form of traditional procurement
• Design must be in place
• Can have sectional completion

Question 8

What is included in a payment notice?

Answer 8

• Date
• Issue number
• Contract sum
• Valuation sum
• Valuation sum minus retention
• Valuation sum minus amount previously certified

Question 9

What are the timelines for payment? Where can this information be found?

Answer 9

Interim valuation/applications date is stipulated in the contract, and is same day each month (or nearest business day).
- This is outlined in section 4 of the contract particulars

• Contractor can submit their application, is 7 days to review.
• CA/EA has 5 days from the due date to issue payment notice/cert.
  Employer has 14 days from the due date to issue payment.
• Payless notice has to be issued 5 days before due date.

Question 10

What is Practical Completion? What does it Trigger?

Answer 10

When all works in the contract have been deemed to be completed and the client can take occupation.

Deminimus in nature.

• It releases half of the retention
• Ends the contractor’s liability for LD’s
• Starts the defects liability period

Question 11

What documentation is required at PC?

Answer 11

• Testing and commission certs
• Health and safety files
• Building control sign off
• O&M’s
• Clients insurance in place

Question 12

What is sectional completion and what is partial possession?

Answer 12

• Sectional completion is defined in the contract
• Partial possession is not determined in the contract, and is up to the contractors discretion to grant.
• Both will mean that section is ‘practically complete’
• LD’s will cease for that period.
• Contractors decide whether to grant partial possession.

Question 13

What are staged payments?

Answer 13

OPTION A in the contract
Pre-agreed stages defined in the contract particulars – milestones in the project
On completion of a stage, payment is awarded.

Question 14

What were the risks to the client by using staged payments?

Answer 14

The risk was this could leave the client exposed if they had not completed an amount of work in line with the payment amount.

Question 15

What is the interim payment process? Where is this specified in the contract?

Answer 15

OPTION B

In comparison, a 2-weekly valuation and interim payment solution would be the optimum, as this would check.

This is outlined in the contract particulars and timings in section 4 of the contract conditions.

Question 16

What guidance documents are available?

Answer 16

• RICS – Appropriate Contract Selection

* JCT – Guide to selecting the appropriate JCT

Question 17

What is the difference between an Employers Agent and a Contract Administrator?

Answer 17

CA = Standard form/ traditional of contract. Role only takes place when in contract. Administer the contract impartially.

EA = D&B role takes place before contract.

Question 18

What is the Housing, Grants and Regeneration Act 1996?

Answer 18

Ensure payments are made promptly

Any project over 45days must have interim payments

Question 19

What is a collateral warranty?

Answer 19

A side agreement which established a contractual link between two parties which would not otherwise exist.

• Subcontractor warranties to client.

Question 20

What impacts the clients choice of contract?

Answer 20

• Size, value & type of project
• Appetite for design risk
• Need for cost certainty
• Employers experience
• Scope for design change

Question 21

What would you include when pricing an EOT?

Answer 21

• Prolongation of prelims
• Subcontractor mobilisation costs
• Management staff, security, cleaners etc

Question 22

Why use a JCT minor works contract?

Answer 22

• Adopted on smaller more basic construction projects where the work is of a straightforward nature.
• Limited provision for sectional completion.
• Suitable for traditional forms of procurement

Question 23

When use a JCT D&B contract?

Answer 23

• Used for projects where the main contractor retains risk for the design and construction.
• When client has less appetite for risk.
• Contain detailed provisions for SC and insurances.

Question 24

What is force majeure?

Answer 24

Certain events beyond the control of the parties.

War, Hostility etc

Question 25

What are relevant events? and example?

Answer 25

An event on or off site that delays completion of the works.

E.g. variations, late possession of site, adverse weather.

Contractor is entitled to claim an extension of time.

Question 26

What is a relevant matter? and example?

Answer 26

A relevant matter is a matter for which the client is responsible for affecting the progress of works.

• Delays in receiving instructions
• Discrepancies in the contract docs
• Disruption by the client
• Issued relating to CDM.

Contractor is entitled to claim direct loss and / or expense.