Contract Practice Flashcards
What is concurrent delay?
- Where one or more events occur at the same time that is caused by different parties involved in a project.
- These events will typically occur independently of each other
Both events have an effect on the completion date of the project.
-City Inn v Shepherd
Can you provide more information on the JCT design and build contract for 2011?
They are used by all types of client, create a single point of responsible for the design and construction with the contractor • Can be used on projects of all sizes • Client must produce the Employers Requirements • Has a sub-contract derivative broken into two parts: JCT DB11 Sub-contract Agreement, JCT DB11 Subcontract Conditions • All derivatives have a Yellow and pink cover
What are the main contract suites?
• JCT (Joint Contract Tribunal) • NEC (New Engineering Contract) • FIDIC (International Federation of Consulting Engineer) • ICE (Institution of Civil Engineers)
What is an extension of time claim?
• An adjustment to the completion date,
relieving the contractor’s liability to pay
LADS for the period of additional time
granted.
What are the other forms of contracts within the JCT suite?
• SBC 2011/2016 • Intermediate building contract 2011/2016 Minor works Building contract 2011/2016 • Major Projects building contract 2011/2016 • Design and build contract 2011/2016 • Management Building contract 2011/2016 • Construction management contract 2011/2016 • Prime cost building contract 2011/2016
What is the contract?
A legally binding agreement (between
two parties) to provide goods and
services within a specified timeframe.
What are the advantages of using a standard form of contract?
• They are cheaper than getting a bespoke contract is drawn up • Offer a level of familiarity between the parties • Tried and tested contracts in court, Therefore, you should be able to predict the outcome in the courts.
What is a compensation event?
Events that occur during the course of
the works that cause the completion
date to be changed or additional cost
to the contractor as a result of the client
How would draft an Novation agreement?
Any Novation agreement has to be contractually and legally drafted and that’s outside of my scope and professional
What are the key legislative documents involved in your project?
Town and country planning act 1990 Health & Safety Act 1974 NHBC standards CDM Regulations 2015 Lifetime Homes BREEAM Building regulations
What do you know about the Fire Safety Act?
The Bill has been designed to “ensure that people feel safe in their homes and a tragedy like the Grenfell Tower fire will never happen again.”
The changes that come with it mostly apply to multi-occupied, residential buildings – any premises that comprise anything other than a single dwelling. This means that a house converted into two flats needs a risk assessment and adequate fire safety measures as well as a high-rise building with hundreds of apartments.
the Fire Safety Bill was introduced by the Home Office and in April 2021 received a Royal Accent, setting it in on the path to becoming law.
Amending the existing Fire Safety Order 2005, the First Safety Act 2021 (as it is now known) clarifies several points, including the responsibilities of duty-holders and/or building owners, known as ‘Responsible Persons’.
Can you give me an example where you have to advise the Client on contract matters? (Level 3)
On Dollis Phase 2, a regen project at post-completion, a resident was due to sell their flat as a leasehold.
The lender wants ESW1,
The contractor completed a survey and identified ACM.
My client wanted to see if there were any contractual mechanisms in place to withhold or delay the reversion of the entire leasehold interest from the building being transferred.
I advised my client that there is a clause noted in the development agreement that states that once the final unit has been sold, my client or purchaser much transfer the leasehold transfer.
and stated they were in breach of the contract if they refuse or do not transfer the leasehold interest.
I explored alternate routes to recover remedial costs via the collateral warrant route, I sought legal advice and presented this to my client.
What is practical completion?
There is no set in stone definition of PC
But I would considered PC is when a building is watertight and ready to move in
What conditions needs to be met for a contract to be in place?
Offer by one party (Tender)
Acceptance by another party (Tender return)
Consideration ( Price of the promise)
Intention to form a contract (lending money to a friend)
Legality of contract
Capacity to make an agreement
Consent (must not be forced)
What is a performance bond?
Insures the client should a contractor fail to fulfil its obligations to perform according to the contractual terms.
Gives the Employer/client assurance the contractor completes the project.
If a contractor becomes insolvent, the bond provides compensation guaranteed by a third party up to the amount of the PB.
Bonds are typically set at 10% of the contract sum
Most employers will request one from the contractor, who will, in turn, obtain it from a bank/ insurance company.
Commonly used alternatives to PCG’s.
What is a Retention Bond?
Alternative to retention (cash), protecting the employer after the project is finished that the contractor will carry out the necessary work
What is an Advance payment bond?
This is to guarantee that the advance payment will be returned where the employer has agreed to provide an advance payment to the contractor,
Protects beneficiary for their advance payment
Refund of advance payment is guaranteed if the contractor failed to complete the job or breach of contract
Generally needed on large amount contract
The surety stands as a bondsman to provide a guarantee that if the employer is not able to recover an advance payment from the contractor then the surety becomes liable to reimburse the employer
- What is a letter of intent?
f. Method of instructing the contractor to proceed with the works before the contract has been formally instructed
g. Not advisable & used as a last resort
h. Content:
i. Contract sum
ii. Dates
iii. Full description of the proposed form of contract including warranties and bonds
iv. Insurance provisions and indemnification
v. Dispute resolution procedure
vi. LADs
What is collateral Warranties?
- Collateral warranties are used to bridge the contractual gap and create a direct contractual link between two parties that would have not otherwise exist and have no recourse.
- Agreements associated with the primary contract to extend the duty of care to third party who is not a part of the original contract.
- Main contracts usually contain a clause that the contractor is responsible for obtaining CW from their subbies within a certain time period.
- There are industry standard forms of CW, e.g. RICS, RIBA provided for members.
- Most commercial developers will insist on using their own, funder approved, bespoke CW.
What is a third-party right?
Third parties (such as funders, purchasers, tenants, and so on) who is not a party to the contract can enforce the benefit of that contract they are not a party to.
The Contracts (Rights of Third Parties) Act, 1999 enables third party rights to be created by a contract. This is seen by some to offer an alternative to collateral warranties.
What is a parent company guarantee?
A guarantee held by the contractor’s ultimate parent company to answer for debt or default of the contractor.
Form a security that clients may require to protect them in the event that the contractor defaults so that they can hold the subsidiary company accountable.
Can last 12 years, whilst a performance bond expires at PC or end of defects
- What are the types of construction insurances?
m. Professional Indemnity Insurance
i. Protects consultants in respect to claims made against them for negligence or breach of contract for their professional services
n. Employers liability insurance
i. Provides indemnity to an employer for its liability to its employees for death, disease or injury arising out of their employment
o. Latent defects insurance
i. Cover for material damage caused by a latent defect that originate within the structural element (foundations, external walls, stairs, floors, roof)
q. Contractor’s all risk
i. Contractor takes out to cover loss or damage of the works and materials during construction
p. Public Liability Insurance (third party liability)
i. Responds to claims by 3rd parties e.g. members of the public, for injury to persons or damage to property caused by activities of a company.
What is Acceleration?
Either describe the completion of the works in a shorter time than that anticipated at tender or the act of recovery by the contractor if they are in delay
a. Client may wish to instruct acceleration of works
b. Measures include:
i. Additional resource of laboue, plant, materials
ii. Re-sequencing
iii. Increased working hours
iv. Changes to design or specification
v. Reduction in scope
What are Liquidated Damages?
a. Relate to contractor failing to reach practical completion
b. A pre-agreed sum prior to the contract signing often calculated on a daily/weekly rate
c. Contracts usually include a clause for the contractor to pay LADs to the client in the event the contract is breached.
e. E.g. rent on temporary accommodation, removal costs, extra running costs, loss of income, fees by 3rd parties
Tell me about the Loss & Expense claim within the JCT standard form of contract?
• Most of the standard forms include a clause dealing with entitlement of loss & expense provided the event can be proved to have been caused by the employer.
• The contractor must only submit details which are ‘reasonably necessary’ to calculate loss & expense.
• Direct costs the contractor usually claims for are; site set-up costs, overheads & loss of overheads & profit.
• In order to be compensated, the delay has to be as a result of a RELEVANT MATTER (not a relevant event).
• There are conditions the contractor must satisfy to claim for loss & expense:
o The contract must make the application as soon as the progress of work has been affected by a relevant matter.
o The contractor is required on request to issue information reasonably necessary for the contractor administrator/ QS can ascertain the amount of loss.
• Once the amount has been ascertained, the JCT requires that the amounts are to be included within interim payments.
What is Novation?
A new contract that transfers the rights ( contractual benefits) and obligations of one contractual party to a new third party.
Commonly used in Design and Build to allow the Clients Design Team to be transferred to the contractor to keep design intent/continuity.
Is the contractor responsible
for the Novated party’s design
prior to Novation?
No, unless they state they have
adopted the design.
- What is the difference between prelims and preambles?
a. Preliminaries are items required to complete the work but do not form a part of the package of works required by the contract. (e.g. contractors site preliminaries, party wall requirements, pre-construction information etc.)
b. Preamble is an explanation of a document that helps interpret it. (e.g. description of the parties, tendering procedures, project objectives etc.)
What are the problems with
bonds?
They typically come at a costs/premium to the Client
What are the typical values of
a Performance bond?
Typically work approximately 10%
of the Contract Value to the client
What types of Bonds do you
know of?
- Advanced payment bonds
- Retention bonds
- Materials off site bond
- Tender Bond
Why would you use an
Advanced payment bond?
If a contract had high upfront
costs, and the contractor wanted
advanced payment to ease the
upfront cost.
What is Employers Liability
Insurance?
A form of insurance that covers the
injury and death arising from
business activities
Who instructs changes under
JCT?
Contract administrator / Employers
Agent
What is the process for
submitting and granting an
Extension of time?
When the delay becomes
reasonably apparent, the
the contractor gives written notice to
the client identifying the delay.
The client has 12 weeks to
review and respond.
What is a Development Agreement?
An agreement between the landowner and developer to prescribe the use of a piece of land.
What were the routes you considered for your client on Dollis Valley Phase 2?
There was no other recourse under this contract as it was outside the contract and as the building was built pre- Grenfell complied with building regulation
The route I advised Latent defect Collateral warranty Defective Premises Act 1972 NHBC cover
What recourses do you have on collateral warranties?
Contract comes enforceable if there is an breached made.
These could be defective works that the sub-contractor undertook. The employer can go directly to the subcontractor for damages.
What are the changes to JCT from 2011 to 2016?
- Payment provisions - re ordered
- CDM 2015, PCR 2015, PS8 2011 and
BIM - JCT 2012 Named Speclast update
- Insurance within Existing Structures Option C
- Bonds and PCGs
- Warranties and Third Party Rights (TPR)
- other minor Items
- for example:
Fluctuations and I PR changes
What happens after PC is served to the Client?
The contractors insurance on site stops and the clients is liable to insure the site.
Half the retention is release on practical completion
The defect liability period kicks in generally 12 or 24 months depending of the contract
The client is not entitled to liquidated damages after the date of PC
