Contract Practice Flashcards
JCT 2016- Name Mechanisms to manage the life cycle of a project.
- Practical completion
- Letter of Intent
- Extension of time
- Loss and expense
When do you issue practical completion certificate?
According to RICS guidance note “Defining completion of construction Works” 2011.
Practical Completion implications - trigger RICS Guidance Note
- Certifying Completion of works
- Certifying payment after the completion of works
- Analysing delay
- Advising on the deduction of delay damages
- Advising on insurance provisions
- ## Advising client of their occupancy options if works are delayed. ,(JCT 2016 Partial Possession)
Practical completion - When a project is completed?
- Completion is subject to any express provisions in the contract.
- any relevant provision of the specification
- the purpose for which the works are intended
- any statements made by the contractor prior to their appointment, such as specific skills or experience.
What triggers Practical completion?
- The client takes possession and control of the building.
- Cessation of any further liability for delay damages, whether liquidated or unliquidated.
- Terminates any insurance requirement from the contractor. Insurance passes to the client.
- Commencement of the defects liability, rectification or maintenance period.
- Mile stone payment, or release of retention monies
- Final account to be prepared
- Obligations under third party: funding arrangements, bonds, guarantees, leases, etc.
Project Completion difference between NEC and JTC
- JTC - Practical completion. If works are not finished the client is not obliged to take possession. But certification of completion should be refused due to minor defects.
- NEC. completion is achieved when all the works required by the “ works information is completed. Defects that doesn’t prevent use wont prevent completion.
Sectional completion under JTC vs Partial possession
- Included in the contract documents. When the client wishes to take one or more sections of the works without waiting for the whole of the works to be completed. Subject to EoT, liquidated damages etc. Same as PC.
- When the client wish to take possession of part of the works even though this is not specifically anticipated in the contract documents. Only can take place if the contractor agrees.
What happens if the contractor or client disagrees with PC date?
I the contractor disagrees with the CA’s decision best course will be through adjudication.
PC - Works not in accordance with the contract and incomplete works
CA has the discretion to certify completion after consultation with the client.
Agreement between client & contractor shoudl be recorded, including additional restrictions to complete the works.
Latent and patent defects.
- Defects liability period.
- latent defects cannot prevent PC
Client using works before completions. I.e moving furniture.
This can only happen with the contractor consent.
Practical completion L3. Check list.
- Building control sign off.
- Risk Liability and insurance. On completion of the works the client becomes liable for any loos or damage.
- Bond and guarantees given to the client often expire once the works have reached completion.
- Also triggers payment to the contractor.
- CA needs to make sure that third parties interests are taken into account.
JCT practical completion clause
15.4
Letter of intend - Types
- Comfort letters.
- Instructions to proceed with consent to spend.
- Letters recognising the existence of a binding contract(s).
What is a letter of intend?
Letters of intent are used in the construction industry as a way of letting procurement, site preparation or indeed construction works commence before the negotiations for the detailed construction contract have been completed.
A letter of intent is a document expressing an intention to enter into a contract at a future date but creates no contractual relationship until that future contract has been entered into. A letter of intent is not an ‘agreement to agree’.
Employers agent vs Contract administrator
Employers Agent performs the contract administration role within design and build contracts whereas the Contract Administrator performs the same contract administration role in traditional forms of contract.
Roles and responsibilities of a contract administrator.
1 BUILDING CONTRACT
- 1 General administration
- 2 Records
- 3 Site inspections
- 4 Meetings
- 5 Reporting to the client
- 6 Instructions
- 7 Time
- 8 Contract Instructions / variations
- 9 Contract completion date - EoT - early or partial possession - Practical completion
- 10 Loss and expense
- 11 Adjusted contract sum
- TO THE EMPLOYER
- 1 Terms if appointment
- 2 Overall budget - total project cost
- 3 Compliance with the specification of works
- OTHER CONSIDERATIONS
- 1 Health and Safety
- 2 The construction regulations 2007
- 3 Environmental legislations
- 4 Statutory obligations
- 5 Consents licensces
- 6 Insurance
- 7 LoI
- 8 The Housing Grants, Construction regeneration Act 1996.
JCT stands for?
Joint Contracts Tribunal
What is an EoT?
An extension of time defers the contract completion date and thereby gives the contractor a longer period within which to complete the works. In order to decide whether a contractor is entitled to an extension of time, it is necessary to establish the cause of the delay and the period of delay.
Process for claiming and EoT
Typically, the contractor has a responsibility to notify the Project Manager, when an issue might affect the project schedule. Often, a formal letter should be sent to the contract administrator outlining the request for the extension of time.
The granting of an Extension of Time relieves the contractor from liability of damages such as Liquidated Damages from the original date of contract completion for the period of the claim.
Can an EoT be claimed after PC?
JCT - yes but is not good practice
NEC s binded by time scales
What is loss and expense in a contract? JCT
Construction contracts will generally provide for the contractor to claim direct loss and/or expense as a result of the progress of the works being materially affected by relevant matters for which the client is responsible, such as:
- Failure to give the contractor possession of the site.
- Failure to give the contractor access to and from the site.
- Delays in receiving instructions.
- Opening up works or testing works that then prove to have been carried out in accordance with the contract.
- Discrepancies in the contract documents.
- Disruption caused by works being carried out by the client.
- Failure by the client to supply goods or materials.
- Instructions relating to variations and expenditure of provisional sums.
- Inaccurate forecasting of works described by approximate quantities.
- Issues relating to CDM.
Under NEC contains provision for the contractor to claim payment for ‘compensation events’ rather than loss and expense.
Bingham Chapel Lane - EoT- which clause in the contract the contractor included in the letter?
JCT Design and Build Contract – Relevant Events are under Clause 2.26
Bingham Chapel Lane - Contract - Which options were discussed and that was the advise given to the client?
It was discussed:
- Traditional vs D&B
Was chose D&B for single point of responsibility. For the quality control design developed up to Stage 4
- Single stage tender to ensure best value for money
Coventry - Why you advised to use a traditional procurement approach? What were the risks for the client.
The risks for the client were related to the design and potential delays once the works started. AS only one designer was employed the
Also to minimise time delays once the contractor was appoint prior the works starting the design was reviewed and a sample was produced .
Telford - EoT - How did you review the claim? What are the time scales.
The contractor claimed via a formal letter,
How did you issue a certificate of non-completion?
The certificate of non-completion gives formal written notice to the contractor that they have failed to complete the works described in the contract by the completion date that was last agreed (the original completion date may have been adjusted during the course of the works
Standard template on RICS web page
What are liquidated damages?
Amount the client incur, normally x week, of project delay.
A genuine pre-estimate of the likely loss incurred by the employer should the completion date not
be met
What are extensions of time?
Adjusts the completion date and relieves the contractor’s liability to pay liquidated damages for
the period of the extension
What must be in place before LDs can be deducted?
A non completion certificate
A withholding notice
What if the employer actually suffered no loss / damage?
It doesn’t matter
They can still deduct the liquidated damages stated in the contract
What is the procedure for claiming an extension of time?
As soon as it is reasonable apparent that a delay is or is likely to occur they should write to the architect to notify them
This should identify the cause of the delay and if any of the causes are a Relevant
Event, and give an indication of the extent of the likely delay
They should give any other further information requested by the architect The architect must notify
the contractor in writing of their decision
What are the time periods related to granting extensions of time?
The EA has 12 weeks from receiving the particulars to decide on an extension of time
If there is less than 12 weeks to PC, they should endeavour to decide before PC
The EA has up to 12 weeks after PC to review any previous EOTs previously given or to award
further EOTs
What are Relevant Events?
The events that entitle the contractor to an extension of time
What are the relevant events?
There are 13 relevant events
They are set out in Clause 2.29
1- Variations
2- Instructions
3- Execution of an approx quantity that is not a reasonably accurate forecast
4- Deferment of possession of the site
5- Suspension by the contractor for non-payment
6- The carrying out of work by statutory authorities
7- Impediment, prevention or default by the employer
8- Loss or damages occasioned by the Specified Perils (fire, flood etc)
9- Exceptionally adverse weather conditions
10- Strike or lock out
11- Civil commotion or terrorism
12- The exercise of any statutory power after the base date by the UK gov
13- Force majeure
If work is delayed due to two or more competing causes of delay, one the fault of the contractor
and one the fault of the employer, is there an entitlement to an EOT/loss and expense?
No clear rule on which delay takes precedence where a number of delays occur Each case has to be
judged on its merits
Have to make efforts to identify all causes and effects
What is the purpose of a valuation?
To provide advice to the certifier on value to allow them to issue their interim certificate
How is the Construction Act relevant?
It contains statutory requirements relating to interval and procedure for contracts that have a
duration of over 45 days
What happens if a contract does not contain the provisions required by the Act?
The Scheme for Construction Contracts will apply to fill the gaps
What are the provisions of the Scheme for Construction Contracts?
Payment becomes due 7 days from the end of a relevant period (28 days)
The final date for payment is 17 days later
A notice should be issued to the contractor 5 days after payment becomes due stating the amount
certifier and the basis on which it was calculated
If money is to withheld, a written notice must be given to the contractor no later than 7 days
before the final date for payment
What are the standard provisions for payment under JCT?
The first interim certificate must be issued within one month of the date of possession
The contractor can apply for payment no later than 7 days before the end of the relevant period
An interim certificate should be issued 7 days after application – payment becomes due
The employer has 14 days before the date for final payment
If they wish to withhold payment they have to issue a notice no later than 5 days before the final date
An interim certificate must be issued within one month of practical completion
Interim certificates should be issued ‘as and when’ monies become due to the contractor after PC
What are the main elements of a valuation / what do you expect to be included in a valuation?
Preliminaries Measured work Variations Materials on site Materials off site Loss and expense Retention
What needs to be in place for you to include payments for
materials on site?
The materials should be for the works, adequately protected, delivered to
programme and in a reasonable quantity
What needs to be in place for you to include payments for materials off site?
Proof that ownership will transfer to the employer on payment (vesting certificate)
Insurance until materials arrive at site
Materials are clearly labelled as for the site and set apart from other materials
A materials off site bond has been provided if required
How do you evaluate interim valuations?
Go to site and conduct valuation
Check work done, materials on site, materials off site
Value preliminaries, agreed variations and any claims
Valuation amount is gross valuation, less retention, less previous payment.
Then send recommendation to A/CA.
What are the options for conducting valuations under JCT DB?
Alternative A – stage payments
Alternative B – periodic payments
How do stage payments work?
The stages and their values are set out in the contract particulars
The stages are usually related to the completion of significant design items e.g.
substructure