Contract Practice Flashcards
What are the main parts of the NEC contract?
For NEC ECC there are 9 core clauses + Option W1/W2/W3 + contract data part 1 and part 2 + Schedule of Cost Component/ Short Schedule of cost component (dependent on which main option chosen), Y clauses, X clauses and Z clauses.
There are 6 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 are the 9 core clauses on the NEC ECC?
- General
- The Contractor’s main responsibilities
- Time
- Quality Management
- Payment
- Compensation Event
- Title
- Liabilities and insurance
- Termination
What are the main parts of the JCT contracts?
- Recitals - Outlines the agreement and describes the works
- Articles - Overview of the contract i.e. contract sum, adjudication
- Contract Particulars Further details i.e. section sums, LD’s etc
- Attestation - Execution of works (under hand or deed) (signing)
- Conditions (divided into 9 sections, 7 for minor works)
- Schedules (cover procedures and options that add to the operation of the conditions)
Name the 9 sections of the conditions in a JCT Contract
(9 sections of the conditions in a JCT contract)
1. Definition and Interpretation
2. Carrying out the works
3. Control of the works
4. Payment
5. Variations
6. Injury, damage and insurance
7. Assignment, Third Part Rights and Collateral Warranties
8. Termination
9. Settlement of disputes
What experience do you have with the NEC contract?
I have completed a contractor’s application and completed assessment of compensation events. I have also under NEC PSC provided fees and activities for CEs.
How is a contract under hand different from a deed?
- A deed is signed by a witness & traditionally authenticated by a seal.
- The limitation period of under hand is 6 years whereas a deed is 12 years.
Execution: A contract under hand is typically signed by the parties involved and may require witnesses, while a deed must be signed, witnessed, and delivered with the intention of it being immediately binding.
Consideration: A contract under hand requires consideration (something of value exchanged), but a deed does not require consideration to be enforceable.
Formality: Deeds generally require more formalities, such as being written on parchment, and must clearly state that they are intended to be a deed.
Limitation Period: The time limit for bringing a claim under a contract under hand is usually 6 years, whereas for a deed, it is 12 years.
In essence, deeds are more formal and have a longer limitation period for enforcement than contracts under hand. They are often used for significant transactions where no consideration is passed or where a longer enforcement period is desired.
What is Execution as a deed?
Execution as a Deed – is when the contract must be in writing and clear that the contract is a deed. Liability period is 12 years and signatory is:
* signature of director and company secretary or two directors.
* Affixing the company’s common seal in the presence of a director and company secretary or 2 directors.
* Signature of a single director in the presence of a witness who attests the signature.
What is Execution Under Hand
Can come into effect orally and no requirements to sign (however it is good practice to execute and signify acceptance to prevent future disagreement).
Liability period is 6 years
Signatory is: Single Director in the presence of a witness who attests (confirms) the signature.
What is a contract?
A legally binding document (between two parties) to provide goods and services with a specified timeframe.
What happens when ‘time is at large’?
‘Time is at large’ – Main Contractor has not fulfilled their obligation to make PC however a certificate of non-completion has not been issued. This means there is no set completion date. The Contractor’s only obligation to complete the works in a ‘reasonable time’. LDs cannot be claimed as there is no date to take them from. The employer in this event would have to try and prove that the contractor has not completed in a reasonable time.
How do you form a contract?
OACIC
Offer
Acceptance (or counter-offer)
Consideration
Intention (to create a legal relations)
Capacity (to make agreement).
What are Compensation Events?
Compensation events are similar to relevant events and matters, they entitle a contractor to claim both additional time and additional costs in relation to the completion of the works. Both PM and Contractor can notify of a CE. PM gives an instruction that will change the scope pf works and then notifies the Contractor of the Compensation event.
Why might you advise the client on a standard contract form (ie vs amended form or bespoke)
- Accurate – drafted by construction industry bodies or trade associations avoiding ambiguity and errors, clarity on rights and obligations.
- Standardised T&Cs for &C to contract upon.
- Time and Money saver – can avoid drafting, negotiating and fully understanding bespoke contracts for each new project.
- Understood – create a known set of T&Cs and risk allocation for the construction industry can become familiar with over time.
- Case Law – precedence that have been set in case law to back up/use how an issue has been dealt with in the past.
- Save time drafting contract
– Benchmark
– Cheaper
– Familiarity
– As a check list of items to be agreed
Why might you advise client to use a JCT SBC?
Standardised for ease/familiar to the project team
Designed for use when traditional procurement has been chosen.
Intended for larger projects where detailed contract provisions are necessary.
Why might you advise client to use JCT D&B?
For D&B procurement route
Earlier time on site - design and programme overlap.
Price Certainty - earlier price certainty
Risk - single point of responsibility
What are key differences between JCT and NEC?
- NEC references compensation events as events which may entitle a Contractor to claim both additional time and additional costs in relation to the completion of the works whereas JCT differentiates Relevant Events and Relevant Matters.
- Under JCT it is the CAs discretion to grant a RE or RM whereas in the NEC it is more defined (e.g. adverse weather the Contractor needs to prove number of days and level of rainfall where as JCT does not define ir).
- JCT contains provisional sums whilst the NEC does not.
- JCT involves cost scrutiny of the CSA and tenders whilst the NEC has an open book procedure with the key concepts are defined and disallowed cost
- JCT does not have a programme as a contractual document whereas the activity schedule is a key contractual document of the NEC and is to be updated regularly (if an activity is not included in the activity schedule they do not get paid).
- No QS in NEC: Client, Contractor PM and supervisor
What benefits does JCT D&B offer the client?
Designed for use when D&B procurement route has been chosen
D&B projects can vary in scale but generally suitable where detailed provisions are needed.
What Risks does the employer undertake for JCT D&B?
Risk – Employers risk pre-contract – planning permission and surveys and investigations.
Employers risk post -contract – relevant events and relevant matters
Contractors risk post contract – event that is reasonably foreseeable.
What are relevant events?
Relevant Events are events that entitle the contractor to EOT when using JCT. They are caused by the client or a neutral event not caused by any party. The contract should set out what constitutes a relevant event in 2.26:
Can you provide an example of a Relevant event?
The JCT contract should set out what constitutes a relevant event in 2.29.
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 (such as a war or an epidemic). Loss from a specified peril such as a 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 are relevant matters?
Relevant Matters are matter for which the client is responsible for affecting the progress of the works.
This may enable the contractor to claim direct loss and/or expense that has been incurred.
They are outlined in 4.22 of the JCT contract.
Can you provide an example of a Relevant Matters?
- 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.
What is a Parent Company Guarantee?
Parent Company Guarantee is an arrangement where the contractual performance of one company in a corporate group is underwritten by the other members of the corporate group. This means that is must complete the works itself if it can or pay the financial equivalent.
What is the most common type (most common parent company guarantee) in the construction industry?
A performance bond.
What are events that is reasonably foreseeable?
What are common contract documents?
- The contract (with any amendments)
- Preliminaries
- Contract Sum Analysis/ Pricing schedule
- Drawings
- Specification
- Planning conditions/ agreements
- Contractors Proposals.
What are the main contract suites?
JCT -joint Contract Tribunal
NEC – New Engineering Contract
FIDIC - International federation of Consulting Engineers
Please explain your understanding of FIDIC?
FIDIC is, when translated into English the International Federation of Consulting Engineers. It was originally founded by France, Belgium and Switzerland in 1913. The UK later joined the in 1949. FIDIC has produced suites of contracts known by the colour of their cover. The most common contracts are:
* The Red Book – Employer’s Design – suitable where the majority of design rests with the employer.
* The Yellow Book – Design and Build – Contractor has majority of the design responsibility.
* The Silver Book – Turnkey – places significant risk on the contractor.
* The Gold Book – Design Build and Operate
* The Orange Book – Design Build and Turnkey
What are Extensions of Time?
EOT adjust the completion date and relives the contractor’s liability to pay liquidated damages for the period of the extension.
This can be achieved by CE’s, Acceleration of Acceptance of a Defect
What are the benefits of being able to grant an EOT?
It relives the contractor’s liability for LDs for a delay that they did not cause.
It enables another completion date to be set, which maintains the employer’s ability to deduct LDs if another delay occurs.
