Contract Practice Flashcards
What is the difference between defect liability period and the limitation period?
The expiry of the DLP does not provide a defence to any claims for breach of contract. On the contrary, it would be unusual for the client to sue the contractor within the DLP unless the contractor had made clear his refusal to carry out the remedial works requested.
The limitation period is for breaches of contract and are at 6 years or 12 years depending if it the contract is underhand or by deed.
How do you define practical completion?
Completion of all works described in the contract. Not limited to physical works but also include documentation such as certificates, operation and maintenance manuals and health and safety files.
What happens at practical completion?
+ The client takes possession and control of the building
+ Cessation of any further liability for delay damages, whether liquidated or unliquidated
+ Risk of loss or damage to the works passes to the client, which therefore terminates any further requirement on the contractor to insure and secure the works
+ Commencement of a defects liability, rectification or maintenance period
+ Milestone payment or release of retention monies
+ Obligations under third party agreements such as funding arrangements, bonds, guarantees, leases, sale agreements etc.
What would happen if there is a disputed completion date?
The CA/EA will need to certify the completion. If there is a disagreement, the contractor can try to persuade the client representative however if this does not work, the best course would be adjudication.
The contractor would need to have very detailed records for being able to prove they completed the works at a prior date.
What are consequential damages?
Any costs incurred that would have not if the negligent party had performed their contractual role properly. As long as the impact of the delay was not reasonably foreseeable at the time of contract then the claimant is entitled to the consequential damages.
What is consequential damage?
Any costs incurred that would not if the contracting party had carried out their obligations properly. If the damages were not foreseeable at the time of the contract then the claimant is entitled to claim.
Generally excluded on loss and expense claims are they are only for ‘direct loss’.
What is the summary list of relevant events?
- Changes such as variations and instructions
- Delay in receipt of any permission or approval for the purposes of development control requirements and deferment of possession of the site
- suspension
- works by statutory undertakers
- exceptionally adverse weather
- civil commotion
- terrorism and strikes
- any impediment, prevention or default, whether by act of omission by employer
What are the relevant matters for a loss and expense claim?
Where matters are either the fault of the employer or where the employer bears the risk.
- Failure to give contractor possession of the site
- Failure to give the contractor access to and from the site
- Delays in receiving instructions
- Discrepancies in the contract document
- disruption caused by works being carried out by the employer
- failure by the client to supply goods or materials
- instructions relating to variations and expenditure of provisional sums
- issues relating to CDM
What are the heads of claim for loss and expense?
Prolongation costs General disruption Finance charges Loss of profits Wasted management time
What are the provisions under the Construction Act? (HGCRA 96)
o The right to be paid in interim, periodic or stage payments.
o The right to be informed of the amount due, or any amounts to be withheld.
o The right to suspend performance for non-payment.
o The right to adjudication.
o Disallowing pay when paid clauses.
When does a claim for loss and expense need to be completed by the contractor for the claim to be valid in JCT?
No longer than 2 months after it became apparent the works would be affected.
What is included within prolongation costs on a loss and expense claim?
Site set up costs - only where additional plant is brought on site or inflation costs which are not reimbursable under fluctuation clauses.
Removal costs
Additional hire charges
Additional running charges
What is the Hudson and emden formula?
Used to assess the OH and P in a loss and expense claim. Looks at calculating this using the contract sum, period of delay and the OHP %.
This is only used if actual costs for OHP are not calculated. This can be calculated by time records and sheets, proof of payments and details showing build up of general head office overheads.
What are the changes from JCT 2011 to 2016?
- introduction of the IVD to make sure all payments in the supply chain are at the same time each month
- Valuations after PC now every month rather than every 2 months
- Incorporation of CDM Regs 2015
- provisions for performance bonds and PCG
- Insurance with existing structures - Option C
- Incorporates BIM.
When are NEC contracts used?
To date NEC has most often been used for infrastructure and building contracts, most specifically in the UK, South Africa, Hong Kong and New Zealand. The contracts are designed for worldwide application. Known for helping to improve project management, they can be used in any sector.
Are you aware of on demand and conditional bonds?
The essential difference between an ‘on-demand’ bond and a ‘default’ bond is that, under an ‘on-demand’ bond, the employer does not have to prove default. Provided that they can show that they have complied with the conditions for ‘demanding’ the bond, the employer can call on it. This is not true of a default bond where the employer must prove that the conditions necessary to call on the bond have been met.
What are the different valuation types?
Activity schedule in terms of percentage achieved orcompletionof theactivity.
Milestonesreached on a pre-agreedprogramme.
Measurementagainst abill of quantities.
Stagepaymentsagainst calendar dates.
What are the NEC options?
Option A: Priced contract with activity schedule
Option B: Priced contract with bill of quantities
Option C: Target contract with activity schedule
Option D: Target contract with bill of quantities
Option E: Cost-reimbursable contract
Option F: Management contract
What is a bond?
Bonds are undertakings given by one party - a bondsman - to another to pay money if a third party defaults.
What are construction security methods?
Parent company guarantee Bonds Collateral warranties Third party rights Direct agreements Payment security methods
When are on demand bonds used?
- Advance payments - used when the employer makes an advance payment to cover the contractor’s costs for for a particular part of the project
- Tender bond - would entitle the employer to payment if they have incurred substantial costs in a tender process and the contractor withdraws their tender
What are the differences between NEC and JCT?
- Relevant events not in NEC
- Programme not a contractual document in JCT
- Provisional sums not allowed for in NEC
- Unexpected ground condition - all contractors risk in JCT, however NEC
What were the 2011 changes to the construction act?l was it the construction act or the local democracy,economic development and construction act where the changes were made?
o Amended local democracy, economic development and construction act October 2011 to close loop holes within its provisions. Effectively changed the construction act.
o The act now applies to construction contracts including those that are not in writing.
o Adjudication clauses must still be in writing, otherwise the scheme applies.
o No longer allowable to define within a contract who should bear the cost of adjudication.
o Adjudicators have the right to correct errors in their decisions within 5 days.
o The dates for payments must be set out in the contract.
What were the benefits of issuing a certificate of practical completion on St Leonard’s Court?
- Occupational use for the client
- Releasing half of the retention (an amount retained from payments due to the contractor to ensure they complete the works).
- Ending the contractor’s liability for liquidated damages (damages that become payable to the client in the event that there is a breach of contract by the contractor - generally by failing to complete the works by the completion date).
- Signifying the beginning of the defects liability period.
What are collateral warranties?
Collateral warranties are agreements which are associated with another ‘primary’ contract. They provide for a duty of care to be extended by one of the contracting parties to a third party who is not party to the original contract.
What were the benefits of a PCG over performance bond?
Under a PCG it is certain that the parent company will take over if the contractor defaults. This means that there is no delay to find a new contractor as there would under a performance bond.
What were the contract documents on Tolworth - JCT Intermediate with CDP?
- Pricing document
- Contract including contract particulars
- Cashflow
- Drawings
- Preliminaries
- Appendices including surveys eg. topography, utilities report, asbestos
What was an alternative to a deed of variation for sectional completion on St Leonards Court?
- Advance payment
- Partial possession
How should you advise on PI from a contractor?
Cost consultant cannot advise on PI.
When should an intermediate contract be used?
Designed to be used when the traditional procurement route has been chosen. To help fill the gap between the detailed and lengthy provisions of the SBC and the simplicity of the minor works contract.
What are JCT options A and B?
Interim certificates will be issued at monthly intervals (Alternative B) or at the completion of pre-agreed stages (Alternative A), dependent on what is agreed within the contract. Generally, monthly payments are the standard position: interim valuations shall be carried out monthly prior topractical completionand bi-monthly subsequently until agreement of the Final Account.
What are the JCT payment provisions?
IVD - when the contractor is due to send their application
Due date - 7 days after contractor submits their application
Payment notice date - 5 days after due date
Pay less date - at least 5 days before payment date
Payment date- 14 days after due date
Why didnt you use a performance bond and PCG on St Leonards Court?
After a financial check was done by the client’s in house team, they found that because of the contractor’s healthy financial position and the PCG it was not necessary.
What does it say in the JCT DB 2011 regarding liquidated damages?
Liquidated damages can only be claimed by the employer if they have, first, issued a non-completion notice and, second, given written notice that they may require payment of liquidated damages, before the due date for final payment.
What is the time period for issuing a certificate of non-completion after the planned completion date?
This must be under a payless notice which is 5 days before the final date for payment.
How does the QS assist the EA on a JCT DB Contract?
On my project the scope of service sets out that my duty is to assess the cost of changes, attend monthly project team meetings and conduct monthly interim payment recommendations.
What must a contractor do if a relevant event occurs?
The contractor must give notice if and whenever it becomes reasonably apparent that the progress of the works is being or is likely to be delayed. The notice must set out the material circumstances including cause or causes of the delay and must identify any event that is considered a relevant event.
What must the CA/EA do once the contractor has sent an extension of time claim?
The CA/EA if required to consider any notice of delay given by the contractor and to fix a new completion date if it is considered fair and reasonable to do so. A written notice of the decision must be provided as soon as reasonably possible, but must be within 12 weeks of receipt.
What must happen at completion of the works if an EOT was given during the project?
The period of extension must be reviewed after completion of the works. A review of the time originally awarded for an EOT must be made within 12 weeks of PC.
What certificates can be issued under a JCT contract?
- Interim certificate
- Certificate of Practical completion
- Certificate of non-completion
- Pay-less notice
- Payment notice
- Certificate of making good
What are the conditions of a JCT DB contract?
1) Interpretations and definitions
2) Carrying out the works
3) Control of the works
4) Payment
5) Variations/Changes
6) Injury, damage and insurance
7) Assignment, 3rd party rights and warranties
8) Termination
9) Settlement of disputes
Why use a standard form of contract?
- Save time
- Allocates risk fair and reasonably
- Comprehensive - covers previous pitfalls already occurred in previous projects.
How would you go about a monthly interim payment recommendation on St Leonard’s Court?
- Wait for the contractor to send their application (IVD)
- Go to site to check measures and make sure that works are in accordance with the contract drawings and the ERs
- Check against the CSA.
- Compile the certificate, valuation summary, CSA and variations
- Get checked by a director
- Issue certificate and valuation to contractor
What is acceleration?
o Increase in the originally planned/current rate of progress of the works to complete earlier
o JCT – schedule 2 deals with variation and acceleration quotations
o JCT – the CA shall invite proposals from the contractor with regards to acceleration
What are the provisions of the Construction Act 1996 (Housing Grants Construction Regeneration Act 1996)?
o Intended to ensure that payments through the supply chain are prompt
o The right to be paid in interim, periodic or stage payments
o The right to be informed of the amount due or any amounts to be withheld
o The right to suspend performance of the works for non-payment
o The right to adjudication
o Disallowed pay when paid clauses
What is the Scheme for Construction Contracts (England and Wales) Regulations?
o A scheme which applies when construction contracts do not comply with the Housing Grants Construction Regeneration Act 1996.
o Supplements contractual provisions where the contract has deficiencies
o Part 1 – Makes the provision for adjudication
o Part 2 – Replaces provisions in relation to payment
What are the differences between contract Administrators and an Employer’s Agent?
o As well as acting as the CA, the Employer’s Agent also typically acts as the Employer’s cost manager, project manager and other roles on the Employer’s behalf.
o EA’s are often also given the responsibility for;
o Drafting the project execution plan
o Managing clients and 3rd party liaison
o Preparing ER’s/tender documents
o Implementing change control
o Procuring design consultants/contractors
o … and so on
What were the aims of the amendment to the construction act in 2011?
- To increase clarity and certainty as to payment in construction contracts;
- To introduce a ‘fairer’ payment regime, and improve rights for contractors to suspend their work in non-payment circumstances; and
- To make adjudication more accessible for the resolution of disputes
The words used in the JCT Design and; Build Contract are similar but different to those within the JCT Standard Building Contact, which is used for Traditional Procurement. Are you able to give me 4 examples of these.
Non-completion notice/Non-completion certificate
Payment notice/ Payment Certificate
Employer’s agent/ Contract Administrator
Change/ Variation
Can you give me two examples of Relevant Events
- Variations.
- Exceptionally adverse weather.
- Civil commotion or terrorism.
- Failure to provide information.
- Delay on the part of a nominated sub-contractor.
- Statutory undertaker’s work.
- Delay in giving the contractor possession of the site.
- Force majeure (events that are beyond the reasonable control of a party, such as a war or an epidemic).
- Loss from a specified peril such as flood.
- The supply of materials and goods by the client.
- National strikes.
- Changes in statutory requirements.
- Delays in receiving permissions that the contractor has taken reasonable steps to avoid.
What is a Payless Notice?
A notice which must be issued (under the Construction act 1996) by the client if they are intending to pay less than what the contractor invoiced, or if they are deducting liquidated damages.
What is a Non Completion Notice under DandB and what is the name of this document under JCT SBC?
The non completion notice is known as the certificate of non-completion in JCT SBC. This 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).
Who issues the Non Completion Notice?
The EA in JCT DB and the CA in JCT SBC.
What is a Payless Notice?
Under the Construction Act 1996 it became law that contractors need to be notified at least 5 days before the payment date if they are to be paid less. The payless notice should be issued by the employer, however the amount can be advised by the QS/EA/CA.
Can you give me two examples of Dispute Resolution provided in JCT DandB 2016 in hierarchy order?
Subject to article 7, if a dispute arises which cannot be resolved by 1) negotiation…. then each party will need to give serious consideration to 2) mediation. However, each party has the right to 3) adjudication under the construction act 1996.
What is the difference between Mediation and Adjudication?
Mediation is the settlement of disputes through an independent mediator who will give their verdict of the dispute, however the parties will need to agree on the mediators verdict to proceed. Adjudication is when an independent adjudicator makes a decision which will be binding unless they are revised by arbitration or litigation.
What are typical Contract Documents?
Pricing document (eg. CSA in JCT DB)
Contract including contract particulars and amendments
Preliminaries
Employers requirements including contract drawings, specification, site information, surveys, scope of services
Within the JCT form of contract what insurances are there within the contract?
Construction all risk insurance
Option A – New building taken out by contractor
Option B – New building taken out by employer
Option C – Existing building taken out by employer
Contractor will need to take out public liability and employers liability.
What is Assignment, Novation and Vicarious Performance?
Assignment is the transfer or rights from one party to another.
Novation is the transfer of obligations and rights from one party to another.
Vicarious performance is when a party wants their contractual rights carried out by someone else, whilst remaining legally responsible for those obligations.
What are the consequences of a Practical Completion Statement
Releasing half of the retention
- Ending the contractor’s liability for liquidated damages
- Signifying the beginning of the defects liability period.
- Insurances liabilities move from contractor to client
- Client takes possessions for occupation
What would you advise a client to opt for , a bond or a PCG and why? Give an example
If possible i would recommend both, however they both have advantages. A PCG can mean that the work is carried out without having to go through another tender process. However, there is the chance the parent company could be liquidated too. A performance bond has the disadvantage of extra expense however gives the client the finances to seek another contractor in case of a default.
What would you do if the client disagreed with your assessment (regarding a change request)?
I would confirm with the client and design team that the change is necessary. I would explain to the client that the change I have priced is in accordance with the contract and that the rate is fair and reasonable.
What are the rules for changes on JCT DB?
1) Similar nature to CSA
2) Fair and reasonable rate
3) Dayworks
What is dayworks?
Daywork is a means by which a contractor is paid for specifically instructed work on the basis of the cost of labour, materials and plant plus a mark up for overheads and profit. It is generally used when work cannot be priced in the normal way.
How is dayworks calculated on a JCT contract (Clause 5.5)?
The prime cost of the work must be calculated using the RICS Prime Cost of dayworks guidance using the percentage additions.
Why did you recommend an intermediate contract with CDP on Tolworth enabling?
Works not significant enough for it to be viable to use the lengthy provisions of a standard contract. Certain contract provisions such as EOT and detailed rules for valuation of variations were necessary and these are not applicable in the minor works contract.
Explain the process of defining liquidated damages?
Liquidated damages are an amount of losses incurred by the client from the failure of the cotnractor to complete their works by the planned completion date. This could include:
- Loss of rent
- Loss of income
- Fees
- Storage costs.
- Rental costs.
- Fees and fines imposed by third parties.
- Finance costs.
What is the benefit of issuing a non-completion notice?
- Client can seek liquidated damages
- Contractor can continue claiming for extension of time which may result in a new non-completion notice and cancel the original non-completion notice
- Possession will still be with contractor until Practical completion
When does a variation need to be settled by ?
These need to be settled at the latest when the final account is, however I would advise they should be settled as soon as possible in order for better cost control.
When should final accounts be settled?
Final account should be ascertained no later than 3 months after receipt of final account information.
On Tolworth, you say you have made contract amendments. Are you qualified to do this?
I collated a list of amendments and particulars which the client advised me of. I advised that it would be prudent for a legal team member to be present at the signing. These were then filled in by the client and in the presence of a legal team member, the amendments were signed.
On St Leonards, advise me of the process that will occur at the end of the defects period?
Any defects which have been discovered during the defect liability period must be rectified. The EA will need to assess whether these defects have been rectified and if they have, they will issue a certificate of making good defects which will in turn trigger the remaining retention amount.
What methods of paying a contractor are available? Why might you advise one over another?
- Interim payments (work is measured and valued)
- Stage payments (pre-agreed values paid at pre-determined times)
- Activity schedules (NEC option similar to milestone - only difference is that activity schedule is assessed at regular intervals and payment made against completed activities only)
- Milestone payments (type of stage payment triggered by the completion of a pre-agreed milestone).
What are the risks associated with Stage Payments?
Stage payments are pre-agreed amounts and not an accurate assessment of work that has been done to date. If the contractor goes into liquidation, and the work has been over certified, the client may struggle to reclaim this over-payment.
What did you include in the Tolworth contract and why?
- Rectification period being extended as the client was concerned the main contract may not start until later.
- The payment date was changed to 21 days rather than 14 days.
What is a cause and effect claim?
Shows the detail of a variation which could result in an EOT or loss and expense.
What is prelim thickening?
If a relevant matter has occurred and the costs to the contractor have increased, for example, they need more site managers as a result of the claim - this will thicken the prelim costs.
What is an advance payment and how are these dealt with?
Where the contract particulars state that an advance payment is to be made, it shall be paid to the contractor on the date and reimbursed to the employer on the terms stated in the contract particulars.
What are the problems to the PQS regarding provisional sums?
- if the PQS puts the number in, the contractor may treat it like that’s the amount they’ve got to spend so they would have no incentive to provide cost effective price.
- PQS wouldnt know about any national discounts/ economies of scale the contractor may benefit from so their allowance wouldnt be as accurate as contractor’s would be
What do you do if signing a contract under a deed?
1) through signature by director and the company secretary or by 2 directors
2) By affixing the company’s common seal
3) By signature of a single director
When should a payless notice be issued?
- For when a deduction to the contractor’s application is to be applied. This is when there is a disagreement of the cost for the month or when LDs are deducted.
What can you tell me about termination?
Section 8 of JCT DB covers termination.
- Can be because of …
What are the 3 ways for transferring benefits on a contract?
- Assignment are the benefits arising under a construction contract such as right to payment, but not burdens such as the obligation to pay. The definition also includes claims for breach of contract.
- Collateral warranties
- 3rd party rights
How should advanced payments be included in the contract and paid?
- Vesting certificate (certifying that ownership of the goods, plant or materials listed in a schedule will transfer from one party to the other upon payment and confirming that they will be will be properly identified, separately stored)
- financial status of contractor
- PCG might be required from contractor
What would be your advice if the client wishes the payment dates to move?
This can be done by agreement between both parties. You can make adjustments to the ‘Due Date’ if it coincides with Xmas or Easter etc. but you must follow the payment timescales after that. So 5 days after revised due date issue IPN etc. You need written agreement (could be an email) from both parties that they agree to the revised due date
What would be your advice if the client asked you to increase spend to meet their target spends?
I would have to advise the client that I would follow section 4 of the JCT contract and make my recommendation based on the measured works on the valuation date.
When would a project be notifiable under the construction act?
Must be more than 45 days.
What is the scheme for construction contracts regulations?
The Scheme either supplements the provisions of the contract where it has deficiencies relative to the requirements of the Housing Grants, Construction and Regeneration Act, or replaces the contract where it is non-compliant. This enables construction contracts to remain remain capable of performance, whilst allowing regulatory control over their provisions.
Part 1 of the Scheme makes provision for adjudication where the contract does not comply with the requirement for adjudication in the Housing Grants, Construction and Regeneration Act.
Part 2 of the Scheme replaces those provisions in relation to payment that do not comply with the Housing Grants, Construction and Regeneration Act.
What are the ways of paying for materials in advance?
- Advance payment bond (client agrees to make advance payment and bondsman will pay out if the contractor has failed to meet their obligations)
- Listed materials (off site payment must be stipulated in contract.)
- Advance payment to contractor
How do you value materials on site under JCT DB?
- Work properly executed including any design work carried out by the contractor
- Site materials provided they are adequately protected against weather and not on the works prematurely (eg ready to be installed)
- Listed items where conditions have been met.
What is a hierarchy clause?
- If this is set out in contract conditions in clause 2.11, where there are discrepancies in the contract documents this clause would set precedence. Otherwise the ERs would be the document to use unless the accepted contractors proposals or clarifications change this.
On St Leonards, how was the retention for landscaping amendment stated?
In the contract particulars, under clause 2.36 there is a line which states the rectification period is 12 months and another which states for any landscaping element this increases to 24 months.
What in a valuation does not have retention taken off?
- Loss and expense
- Liquidated damages
- Materials off site (if not included in contract)
- Opening up and testing costs
- Statutory charges
What is the recourse for a contractor / client if we fail to meet the payment date?
A “smash and grab” adjudication is one where payment is claimed under a construction contract in the absence of any payment or pay-less notice. In such circumstances, the amount claimed in any application for payment will have become the “notified sum” in accordance with section 111 of the Housing Grants Construction and Regeneration Act 1996 (as amended) (the “Construction Act”). The paying party is obliged to pay that sum regardless of any dispute over the proper valuation of the application.
What other ways could you vary a contract other than deed of variation?
- In writing
- Exchange of emails
- Orally
What are the contents in a deed of variation?
- Legal wording of contract
- Consideration (offer, consideration, acceptance)
- Definitions and interpretations
- Variation details
- Executed as a deed or underhand
- Any appendices such as the GA plan of the sections
What are the differences between standard and Intermediate JCT?
- No quotation provision for in variations in IC
- No 3rd party rights provided for in IC
- No retention bond in IC
What are the differences between intermediate and minor works JCT?
- No QS required in MW
- No clerk of works required in MW
- No full list of events for EOT in MW
- No sections of work in MW
- No detailed rules for variations in MW
What did you include within your contract documents on Tolworth?
- Pricing document
- ERs (Surveys, drawings, specifications)
- CPs
- Preliminaries
- Contract including amendments, particulars and schedules
How did you allow for any amendments or particulars on Tolworth?
- Have a schedule of amendments and the JCT form of contract which I send to the legal team to include.
How would you go about a latent defect after the defect liability period?
This should be covered by the limitation period and will be 6 years or 12 years. If it is after the limitation period it is up to the clients building insurance.
What is the difference between a latent and patent defect?
Latent defects cannot be inspected by a reasonably thorough inspection whereas patent defects can.
What is included within a collateral warranty?
Effectively a contract which is being extended to another party. Includes:
- duty of care;
- copyright;
- prohibited materials;
- professional indemnity insurance;
- assignment; and
- step-in rights.
Can you tell me the contractual amendments on St Leonards other than the rectification period for landscaping being 24 months?
- 21 days payment period
- Rectification period 12 to 24 months
What is included in the form of tender?
- % for prelims and OHP
- signed by tenderer
Latest return time and date.
Date, name and address.
Tenderreference number.
Thepricefor which they are to do theworksand any adjustmentspricesthat have been agreed should thescopeof theworkor period of time change (or a reference todocumentsproviding thisinformation).
The date until which thepriceremains valid.
The period of time that is allocated for theworks, or an actualcompletion dateif required.
What is a list of the particulars and amendments on Tolworth?
x
How can a contractor terminate the works?
There are 3 employer defaults which can trigger the issue of a written notice of default by the contractor. These defaults are where the employer:
- fails to pay any interim payment to the contractor;
- fails to comply with clause 7.1 (the assignment clause - if employer assigns the contract without written consent of contractor); or
- fails to comply with clause 3.16 (CDM Regulations).
- Suspension - if works has been suspended for longer than 2 months (default) then the contractor has the right to issue a termination notice.
How can an employer terminate the works?
If 1 of 5 specified circumstances of contractor default occur, the employer may issue a written notice to the contractor specifying the default. An event of default arises where the contractor:
- without reasonable cause wholly or substantially suspends the carrying out of the works;
- fails to proceed regularly and diligently with the performance of his or her obligations;
- refuses or fails to remove defective work;
- fails to comply with the assignment and subcontracting clauses; or
- fails to comply with the Construction (Design and Management) Regulations 2007.
If the contractor continues with the default for 14 days from receipt of the first written notice, the employer may on or within 10 days from the expiry of that 14 day period terminate the contractor’s obligations under the contract by way of a second written notice.
How does a works suspension work and how long does it need to be for termination under DB?
Both the employer and the contractor can terminate a JCT contract if there is prolonged suspension (usually 2 months) of the whole or substantially the whole of the incomplete work for force majeure reasons.
What document do you need to novate design works?
A novation agreement which includes all of the detail of the contract.
What are 3rd party rights?
Third party rights are an alternative to warranties under the Third Party Rights Act. Instead of asking the professional to execute a collateral warranty, you include provisions in the main contract or appointment which say what rights can be given to third parties. You then just need to serve a notice on the professional or contractor to tell them who you have given those rights to. In the same way as with warranties, the rights you can give and the type if beneficiaries you can give them to will be set out in the main contract.
How does a retention bond work?
Retention bonds are way of avoiding problems associated with retention recovery. Amounts that would otherwise have been held as retention are instead paid, with a bond being provided to secure the amount. Similar to retention, the bond’s value will usually reduce after the certification of practical completion.
Why would a client require a defect liability period if there is the rectification period?
After the rectification period, the contractor remains liable, but after proper notice the employer can pursue an action at common law for damages.
What happens to a project if the contractor goes insolvent?
- Employer must issue a written notice identifying 1 of the insolvency events in clause 8.1.
- If the employer intends to rely on the contractor’s insolvency as a ground for termination of the contractor’s obligations, the employer should notify the contractor as soon as possible of the employer’s intended reliance. Failure to notify of this intention may otherwise be construed as a waiver of the right to terminate.
While termination does not arise automatically on the occurrence of an insolvency event, certain other consequences do. These are as follows:
-the provisions requiring payment and release of the retention are suspended. Following practical completion of the works and making good of defects, the employer must produce an account within 3 months. This should setting out the losses incurred by the employer as a result of the insolvency which may be set-off against sums due to the contractor. The employer is to pay the balance of that account or the contractor is to pay any shortfall (clause 8.7.5);
-the contractor’s obligation to carry out and complete with the works is suspended (clause 8.5.3.2); and
the employer may take adequate steps to ensure that the site, the works; and the site materials are adequately protected and that the site materials remain on site. The contractor must not to interfere with this right (clause 8.5.3.3).
How can the contract be mutually suspended?
There are 6 reasons this can be done, if they continue for 2+ months then either party can terminate the contract.
- force majeure frees both parties from liability where an extraordinary event or circumstance beyond either parties control occurs;
- the employer issues instructions regarding discrepancies in the contract documents (clause 2.13), the instruction requires a change (clause 3.9) or postponement of work as a result of the negligence of a statutory undertaker (clause 3.10);
- loss or damage to the works occasioned by any of the specified perils (clause 6.8) such as fire, lightning, an explosion, a storm or flood, unless the loss was due the parties own negligence or default;
- civil commotion or terrorist activity or the action of authorities dealing with terrorism;
- the UK Government exercising statutory powers that directly affect the execution of the works; or
- delay in receipt of any permission or approval for the purpose of development control requirements, the delay is one which the contractor has taken all reasonable steps to avoid or reduce.
What is the copyright of the design?
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What are step in rights?
Step-in rights enable one party (the beneficiary) to ‘step in’ to the shoes of another party in relation to the rights and obligations of a contract, typically, if there has been a serious breach of contract.
What will you do if you cannot carry out a valuation?
- Get someone else to do it
- Make an agreement with the contractor and client to agree a changed valuation date which cannot be before the planned IVD.
What is the DHSS cashflow?
The DHSS Expenditure Forecasting was created by KW Hudson for the Department of Health and Social Security for forecasting expenditure on capital projects, particularly for hospital projects. It is in no way limited to hospital projects and has become one of the most popular formulae for deriving S-curves. It is still widely used today by quantity surveyors but alternative formulae are now also available. Its reliability must be considered, particularly its original intended use and age, when producing a cash flow forecast.
How does partial possession work?
- This is not contractual however the contractor can not unreasonably reject partial possession and they may
What are the contractual provisions of sectional completion?
- Different completion dates for different sections of the work
- It is preplanned and part of the contract documents (must be express term in the contract)
- Extent of each section must be clearly defined and liquidated damages, and the amount of retention will be released must be specified for each section.
- There may be some elements which differ from normal practical completion such as commissioning and operation and maintenance manuals as these may only be necessary after all sections are complete.
Does insuring the works become difficult when works are carrying on?
The insurance would be need to be transferred from the contractor to client as each sectional completion. It is important that the sections completed do not have impact on the remaining construction works as this could cause difficulty with insurance provisions.
What are contract particulars in a project?
- Liquidated damages
- Method of payment
- Insurance of the works
- 3rd party rights
- Attestation
What would happen if the EA did not issue the non-completion notice?
In this case, the employer can not claim for LDs. The employer also needs to issue a payless notice in relevant time to be able to claim for LDs. If there is an EOT granted, the LDs will need to be paid back to the contractor.
What is the difference between assignment and novation?
If you want to transfer the burden of a contract as well as the benefits under it, you have to novate. Like assignment, novation transfers the benefits under a contract but unlike assignment, novation transfers the burden under a contract as well.
How are advance payments paid in JCT contracts?
There must be a particular in place in the contract for there to be an advance payment. Alternatively this can be done by a variation. To provide security to the client they can pay for an an advance payment bond which is attached as a schedule in the contract.
