Contract Practice

Question 1

What is a contract?

Answer 1

a legally binding promise which can be written or oral by one party to fulfil an obligation to another party in return for consideration

Question 2

Define Express terms?

Answer 2

terms expressly agreed between the parties.

Question 3

Define Implied terms?

Answer 3

contract term that has not been expressly agreed between the parties but has been implied into the contract by common law

Question 4

How do statutory provisions and contract provisions differ?

Answer 4

Stat provisions are set out by law and must be complied with regardless. Contract provisions relate to the contract in question and specific project.

Question 5

What do you think of oral contracts?

Answer 5

Whilst they are a legally binding it is difficult to prove specific T&C’s of the agreement. I would always recommend a written contract .

Question 6

What is a breach of contract?

Answer 6

When one party in a binding agreement fails to deliver according to the terms of the agreement.

Question 7

What is the Construction Act 2009?

Answer 7

The act amended the Housing Grants Construction and Regeneration Act 1996 and changed the way construction contracts are entered into and in particular introduced a payment regime and a regime for adjudication.

Question 8

What is a Letter of Intent

Answer 8

A letter from the employer to the contactor outlining the employers intentions to enter into a formal written contract for the works described. Its used so works can begin before the formal contract is executed.

Question 9

What is included in a letter of intent?

Answer 9

Works to be completed, date for possession, date for completion, costs if they have been agreed, method of payment, insurances if required.

Question 10

Who issues the Letter of Intent?

Answer 10

The client

Question 11

Are there any acts which govern third party rights?

Answer 11

Contracts Acts 1999

Question 12

What is the overarching purpose of the act?

Answer 12

Allows third parties to enforce terms of contracts that they are not a party to, but which benefit them in some way or which the contract allows them to enforce.

Question 13

Why might you use Third Party rights rather than Collateral Warranties?

Answer 13

If a lot of CW are required it can involve a lot of admin and cost. Third party rights are easier to get into place as there is no separate document required.

Question 14

What is a Collateral Warranty?

Answer 14

to create a contractual relationship between two parties where one would not otherwise exist.

Question 15

What is a Collateral Warranty?

Answer 15

to create a contractual relationship between two parties where one would not otherwise exist.

Question 16

Who may want a CW?

Answer 16

any third party that has a financial or inherent interest in the project but is not party to the main contract.

Question 17

Who may want a CW?

Answer 17

any third party that has a financial or inherent interest in the project but is not party to the main contract.

Question 18

Who may want a CW?

Answer 18

any third party that has a financial or inherent interest in the project but is not party to the main contract.

Question 19

Who may want a CW?

Answer 19

any third party that has a financial or inherent interest in the project but is not party to the main contract.

Question 20

what is the difference between a bond and a CW?

Answer 20

A bond is a financial commitment backed up by a third party and a CW passes on contractual obligations. Bonds are in the contract. CW are separate document

Question 21

what is the difference between a bond and a CW?

Answer 21

A bond is a financial commitment backed up by a third party and a CW passes on contractual obligations. Bonds are in the contract. CW are separate document

Question 21

what is the difference between a bond and a CW?

Answer 21

A bond is a financial commitment backed up by a third party and a CW passes on contractual obligations. Bonds are in the contract. CW are separate document

Question 22

What are defects?

Answer 22

broadly defined as a defect in workmanship, design or materials

Question 23

• What are the insurance options within a JCT contract

Answer 23

Option A – sits with the contractor
Option B – sits with the employer
Option C – Sits with the employer for works within a building so it insures the current building and new works.

Question 24

• Whats the difference between JCT and NEC

Answer 24

NEC names the project manager in the contract
The JCT Contract contains provisional sums, whilst the NEC Contract does not
JCT does not have a programme as a contractual document where as the programme is at the heart of the NEC contract and is to be updated regularly
The JCT Contract is a fixed price lump sum contract. NEC Option B offers a fixed price lump sum contract but Options C and D are target cost contracts

Question 25

• What type of bonds are you aware of and what value of the contract sum do they cover

Answer 25

Performance bonds – they are usually 10% of the total contract price
A performance bond is issued to one party of a contract as a guarantee against the failure of the other party to meet obligations specified in the contract.

Question 26

• What is a PCG

Answer 26

Parent company guarantee - A parent company guarantee (PCG) is a form of security that may be required by clients to protect them in the event of default on a contract by a contractor that is controlled by a parent company (or holding company.

Question 27

when Would you advise your client to use a letter of intent

Answer 27

When they want to mobilise the site and the contract is still in negotiations

Question 28

• Please list out 5 relevant events and relevant matters

Answer 28

Relevant events – forje majuire, exceptional weather, variations, terrorism, delay in giving the contractor possession of the site
Relevant matters – delays in receiving instructions, delay in giving the contractor possession of the site, discruption caused by works carried out by the client, discripencies with the contract documents.

Question 29

• You talk about EoTs within your submission. If the delay wasn’t impacting the critical path. What would be the contractors entitlement.

Answer 29

No additional time.

Question 30

• You mentioned valuations in your submission. Please talk me through the payment process in an unamended JCT contract.

Answer 30

Interim valuation date is agreed between parties if cant agree its 1 month from date of possession.
Due date is then 7 days from the interim valuation date
Payment notice is due 5 days from the due date
Last date for payment is 14 days from the due date

Question 31

• When can a pay less notice be issued

Answer 31

When the payment notice has been sent to the contractor and the client then a pay less notice is required when a change of mind about an agreed amount Has to be issued before the last date for payment?

Question 32

• If your client fails to pay. What contractual options does the contractor have.

Answer 32

Issue a default payment notice which extends the deadline , claim interest and walk off site

Question 33

• What is time at large?

Answer 33

There is no enforceable date for completion

Question 34

• What is the rectification period?

Answer 34

6-12 months following PC

Question 35

• What is the difference between underhand and as a deed?

Answer 35

The limitation period for a underhand contract is 6 years were as a deed is 12 years – deeds are normally used when the project/contract involves long term risk for example a contract for a block of flats or houses would be signed as a deed so the contract could still be held liable for latent defects

Question 36

• What needs to be in place for a contract to be valid?

Answer 36

Offer and acceptance

Question 37

• What cluses in the JCT contract dela with EoT’s?

Answer 37

2.26

Question 38

• How many Relevant Events are there?

Answer 38

•

13

Question 39

• Would you advise a client to execute a contract as a ‘deed’ or ‘under hand’? Why?

Answer 39

It would depend on the liability period required

Question 40

• What is the importance of the base date in a contract?

Answer 40

The base date in construction contracts is generally used as a mechanism for the allocation of risk between the client and contractor for changes that might occur in the period between the contractor pricing the tender and the signing of the contract.

Question 41

• What is the difference between assignment and novation?

Answer 41

Novation required consent of the original party In Novation, transfer of obligations is possible, while in assignment, obligations cannot be transferred