Contract Practice Flashcards
Level 3 - Sectional completion
LED project - Tell me about when you provided reasoned advice on any specific matters of a contract and why?
- Advised on dividing contract in sections
- Enabled the client to plan their operations as sections are clearly identified with start/completion dates and rate of LDS.
- Meet client requirements
- Allowed client to vacate areas at agreed times rather than vacate entire space
Level 3 - Sectional completion
What were the benefits of dividing the contract into sections, as apposed to doing it any other way?
- Both parties understand their liability/obligation
- Allows the employer to plan/programme their operation (decant/vacate)
- Pre-agreed and written in the contract, scope & extent clearly identified
*
Level 3 - Contract selection
Why did you advise on a JCT IC 2016?
Why were other forms or suites discarded?
- Simple nature
- Contained appropriate provisions such as; Sectional completion to meet client requirements
- Minor Works doesn’t allow for sections
- Standard Building Contract for larger more detailed projects
Level 3 - LDs
On your LED lighting project, how did you advise your Client on the Liquidated Damages provision in the contract?
- Genuine pre-estimate of likely loss
- Reasonableness of LD’s
- Method of calculation
- How the LDs are specified in the contract (days/weeks)
- Obligation under contract - how LDs become payable
- Risks involved in under/over valuing or leaving blank
- Termination
Level 1 - LDs
What are the risks of unreasonable LD amounts?
- Construed as a penalty
- Unenforceable
- Employer will have to claim unliquidated damages
- Will have to prove actual loss, remoteness, causation, reasonable steps to mitigate loss
Level 1 - LDs
What are the risks of under/over valuing or leaving LD’s blank?
- Employer cant change or increase under valued LDs if sums doesn’t cover their loss.
- Employer cannot levy damages against contractor if damages are stated as ‘Zero’
- Unreasonable sums are construed as a penalty and left to claim unliquidated damages
- Leaving the provision blank assumes unliquidated damages.
Level 1 - LDs
What are the Pro’s and Con’s of Unliquidated Damages?
Pro’s
* Employer could be compensated for sums not previous considered or forseeable
Con’s
* Employer has to prove actual loss, remoteness and loss mitigation
* Hard to prove
* Contractor doesn’t know their liability and cannot budget for risk of delay or adjust tender accordingly.
Level 2 - LDs
On your LED project, what considerations were mad in calculating the LD’s?
- Loss of rent
- Level of occupancy
- Storage costs
- Fee’s
- Financing costs
- Accommodation costs
Level 1 - LDs
What are the advantages of LD’s?
- Pre-defined sum
- Recoverable without proof of loss
- Contractor knows the limit of their liability
- Allows contractor to budget risk of delay and adjust tender
- Confirms remedy to the Employer
Level 3 - Completion
On your LED Lighting scheme, how did you advise your client before including Sectional Completion provisions in the contract?
- Provisions required for sectional completion to apply
- Risks associated with incomplete information
- Consequences of sectional completion
- EOT provisions
Level 1 - Completion
What are the advantages of sectional completion?
- Gives you a clear cut off point
- Allows parts of the business to remain operational
- Minimises disruption to client operations
- Removes need for entire vacation
- Parties understand their liability for each section
Level 1 - Completion
What are the consequences of completion?
- End of liability for LD’s.
- The client takes control of the building and should transfer and maintain building insurance.
- Risk of loss and damage passes to the client, which terminates any further requirement for the contractor to insure the works.
- Beginning of rectification period
- Half retention releases
- Preparation of final account
- Assessmennt of EOT claims
Level 1 - Design potions
What is CDP?
- Contractos design portion
- Contractor designs and builds discrete parts of the works
Level 1 - Design portions
What is required from the contractor for their CDP?
- Collateral Warranty
- Take out and maintain Professional Indemnity Insurance
- Contract sum analysis
Level 1
Post completion, can the contractor still be liable for damages?
- If the client suffered loss or damage as a result of the contractors defective work
Level 2 - Contract practice
You mention preparing contract documents, can you tell me what you’d include within a contract document?
Depends on standard form or suite of contracts, but namely;
JCT –
* Contract particulars
* Contract drawings
* Contract bills/pricing schedule,
* CDP analysis,
* Contractors proposal,
* Employers requirements.
* Technical specification
NEC –
* Works information/Scope
* Contract data,
* Activity schedule/BoQ
* Programme
* Site information
Level 1 - Retention
When is retention released to the contractor?
- 50% is released on practical/sectional completion/ partial possession,
- 50% is released on the issue of making good defects certificate.
Level 2 - Valuation
You mention carrying out interim valuations, what did you include/consider when valuing the contractors interim application?
Ascertaining sums to be included in gross valuations such as;
1. Preliminaries
2. Works executed
3. Design fees
4. Provisional sum adjustment
5. Approximate quantities adjustments
5. Prime cost sums adjustments
6. Dayworks
7. Materials on-site
8. Materials off-site
9. Loss & expense
10. Variations
Level 2 - Valuations
What considerations should be made when valuing materials on-site?
- Stored safely to prevent damage
- Materials habe not arrived on-site too premature ahead of their intended install.
Level 2 - Valuations
What are the considerations when valuing materials off-site?
- Material is clearly labelled
- Seperated from other material
- Vesting certificate raised in favour of the employer
- Pictures
- Listed items appended to contract
- Goods are insured
Level 2 - Contract selection
You mention the importance of influencing factors when selecting the appropriate contract, what considerations did you make before advising your client on appropriate contract selection?
- Procurement
- Employer experience
- Risk allocation
- Design responsibility
- Level of control
- Speed from inception to completion
- Certainty of price
- Complexity
Level 2 - Case study
In your case study you mentioned that you managed a 2-stage tender strategy, how did you secure the contractors services for design input for the 1st stage?
- Pre-Construction Service Agreement
Level 1 - Contract Practice
What are the requirements of a contract?
- Offer
- Acceptance
- Consideration
- Intention
- Legality
- Capacity
Level 1 - Rentention
What is Retention?
- Sum of money deducted at each monthly payment notice
- Provides client with security that the contractor/sub-contractor will return to correct any defects during the defects correction period, or defects liability period.
Level 2 - Retention
How do you determine the level of Retention?
- Depending on the standard form
- Unless otherwise stated, the contract stipulates the retention level
Level 1 - Contract Practice
What is a Relevant Event?
- A contractual term for a delay event to the completion date,
- caused by the client or a neutral event not caused by either party.
Level 1 - LDs
What if the employer suffered no loss or damage?
It doesn’t matter, damages would still be due at the value stated in the contract.
Level 1 - Contract Practice
What are Relevant Matters?
- Circumstances where the client is responsible for affecting the progress of the works,
- Enables the contractor to claim direct loss and/or expense that has been incurred.
Level 1
What is a phasing, and how does it differ from a section?
- Phasing involves sequencing construction activities, but does not include contractual provisions.
Level 1 - Valuation
What are the contractual timescales associated with valuations?
- Due date - 7+ days after valuation date
- Certification - 5+ days after due date
- Final payment - 14+ days from due date (unless amended)
- Payless notice - -5 days before final payment date
- NEC - Payless notice -7 days before final payment date
Level 1 - Valuation
Upto what point can the contractor value their works?
- Depends on the form of contract
- Standard/MW/DB - Up to due date
- Intermediate - valuation date
Level 1 - Valuation
What happens if the contractor doesn’t submit their interim application?
- QS should make assessment and CA should certify before expiry of the specified 5 period from the due date.
Level 1 - Valuation
What happens if no sums are certified after the expiry of the 5+ day certification period?
- If the contractor didn’t submit their application, they should issue a payment notice detailing sums due and basis of calculation and reduced amounts.
- If the contractor did submit their application, they should issue a payment notice.
- The final payment date is prostponed and adjusts by the same amount of days the contractor takes to issue their payment notice.
Level 3 -
On your LED project, why did you dismiss the use of the NEC?
- JCT is more familiar with the client
Level 1 - contract
What are the key differences between the JCT and NEC?
- Language
- Time
- Money
- Programme
- NEC more collaborative
Level 3 - contract
What did you advise the client in regards to the disadvantages of executing two seperate contracts?
- Incur additional fees
- Could become confusing
- Increase workload
