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TARJI JONES APC 2024 > Contract Practice > Flashcards

Contract Practice Flashcards

1
Q

Can you explain how the Local Democracy, Economic Development and Construction act affects construction contracts?

A

Employer/Contract Administrator (“paying party”) must issue a payment notice no later than 5 days after due date
Payment notice must specify the sum (even if its zero)
The sum notified becomes payable (subject to ‘Pay Less’)
Paying party must notify if they intend to issue a Pay Less

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2
Q

What did the Local Democracy, Economic Development and Construction act supersede?

A

Construction Act

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3
Q

Can you explain what the changes were from the construction act to the local democracy, economic development and construction act?

A
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4
Q

Can you explain the main differences between JCT and NEC?

A

JCT is a suite whereas NEC has 6 main options

There are different roles (e.g., project manager in NEC is the Employer’s agent or Contract administrator in JCT)

There is not quantity surveyor in NEC

Changes are compensations events in NEC and Variations in JCT

The programme is a contract document in NEC

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5
Q

What factors would you consider when advising a client on contract selection?

A

The type of procurement (e.g., design and build is generally suited to D&B contracts)

Size, value and complexity of the works (bigger more complex projects require different contract provisions)

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6
Q

What are the main differences between the contracts you have worked on?

A

JCT MWD did not have provisions for bonds, sectional completion and had different contract documents

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7
Q

What is a collateral warranty and where might it be used?

A

A collateral warranty is a mechanism which creates a contractual link between a party in the main contract and a third party beneficiary). So in the event of defects the Employer or funder has a link with the party who undertook the design or construction.

We used a collateral warranty on Dyson and Okehampton where there were elements of the contractor’s design portion.

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8
Q

What else can you use in place of a collateral warranty?

A

Third Party Rights Act can be used in the same principle as a collateral warranty but I would not advise relying on the court system to adjudicate because its timely, could affect reputation and is not as straightforward

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9
Q

What is a bond?

A

A security given to the employer in the event of contract default to cover costs up to a financial limit

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10
Q

What types of bonds are you aware of?

A

Performance bond
Retention bond
Advance payment bond

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11
Q

Are you aware of the different types of bond redress?

A

On-demand bond
Conditional bond
Default bond

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12
Q

Can you explain the payment provision dates included in Okehampton Station Refurbishment project?

A

7 days before the due date the contractor issued a interim application

5 days after the due date I would issue the payment recommendation to the Contract Administrator and they would issue a Payment notice to the Client

30 days after the due date the client would make final payment to the contractor (amended to suit internal invoicing)

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13
Q

What contract documentation did you compile for Dyson D9?

A

Contract
Schedule of amendments
Employer’s Requirements (dyson standards, drawings, specifications)
Pre-construction information
Pricing document

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14
Q

What is included in a pre-construction information document?

A
  • Security
  • Site hoarding
  • Permit to work system
  • Emergency procedures
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15
Q

You mentioned you have a schedule of contract amendments, can you give me a few examples?

A

The final date for payment was amended from 14 days to 33 days to suit the client’s internal payment procedures

Key subcontractors required for design portions

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16
Q

What pricing options are there for a JCT ICD?

A

Option A - pricing schedule based on drawings and specification

Option B - contract sum analysis or schedule of rates

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17
Q

What is a contractor’s design portion?

A

A section of the works where a specialist completes design

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18
Q

What was the limit of liability for the contractor’s design portion on the Dyson 9 project?

A

£5,000,000

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19
Q

Why was CDP used on Dyson and what benefit did it give your client?

A

M&E was complex and required specialist input

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20
Q

What insurance was included for the Dyson D9 project and why?

A

Contractor’s Public liability insurance - covers injury or damage to person or property

Contractor’s professional indemnity insurance - contractors design portion

Works insurance - option C because D9 was an existing building

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21
Q

What different options does the JCT have for work insurance?

A

Option A - Joint names all risk insurance taken out by contractor
Option B - Joint names all risk insurance taken out by employer
Option C - Joint names existing structure and content insurance taken out by employer

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22
Q

When might an employer opt for option B or option A?

A

The employer may have an annual policy for different assets so it may be more cost effective to use their umbrella policy

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23
Q

What is liquidated damages?

A

Liquidated damages is a pre-estimate of revenue loss suffered by the client which is levied to the contractor if they fail to complete on time

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24
Q

What level of LD’s was included in the Okehampton Station Refurbishment and Dyson D9 project?

A

Dyson D9 = £6,000 per week
Okehampton station refurbishment = £Unliquidated damages apply (court to make decision)

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25
Q

What is a contract?

A

A binding promise written or oral by one party to fulfill an obligation to another party in return for consideration

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26
Q

What makes a binding contract?

A

Offer
Acceptance
Consideration
Intention (to create legal relations)

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27
Q

What are expressed and implied terms?

A

Expressed terms are written into the contract through negotiation
Implied terms are written into the contract by statute

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28
Q

What are the risks of a verbal contract?

A

It is more difficult to prove the specific terms and conditions

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29
Q

How is the NEC contract made up?

A

Main options
Secondary options
X clauses
Z clauses

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30
Q

What are the main options of the NEC?

A

Option A: Price contract with an activity schedule
Option B: Priced contract with a bill of quantities
Option C: Target cost contract with an activity schedule
Option D: Target cost contract with a bill of quantities
Option E: Cost reimburseable contract
Option F: Management contract

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31
Q

What are the main contracts included within the JCT suite?

A

Standard building contract
Intermediate building contract
Minor works building contract
Design and build contract
Prime cost contract
Management building contract

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32
Q

What are the headings within a typical JCT contract?

A

Recitals ~ Recites facts including works, project etc
Articles ~ Contractor’s obligation, contract sum, roles,
Contract Particulars ~ key information (base date, practical completion, payment dates, retention, insurance, liquidated damages)
Attestation ~ execution of contract (under hand or deed)
Contract conditions ~ definitions and interpretations of clauses
Schedules ~

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33
Q

If there is no due date specified within the Contract Particulars what date does the due date become?

A

One month after date of possession

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34
Q

Can you give me an example of when a ‘Pay Less’ might be used?

A

Liquidated Damages

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35
Q

What are fluctuation clauses?

A

Provisions in the contract for monetary adjustments made to the original contract prices to compensate for changes in pricing levels at a macro-economic level

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36
Q

What is an extension of time?

A

An extension to the programme due to a relevant event

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37
Q

What’s the difference between a relevant event and relevant matter?

A

A relevant event is related to time and not always subject to monetary claim. Whereas a relevant matter is the employer is at fault for effecting contractors progress and consequently receives a monetary claim

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38
Q

Can you give me some examples of relevant events?

A

Severe weather, COVID 19, Employer change, delayed possession of site

39
Q

Can you give me some examples of a relevant matter?

A

Delayed start on site, delays in receiving instructions, discrepancies in contract documents

40
Q

What can a contractor claim for under loss and expense?

A

Prolongation of preliminaries
Thickening of preliminaries
Distribution to labour

41
Q

What is the main reason why building contracts include a provision for an extension of time?

A

To preserve the employer’s right to liquidated damages
If a delay occurred caused by the employer and there was no extension of time provisions then the contractor would no longer be bound to complete by the completion date

42
Q

What is a contract?

A

A binding promise written or oral by one party to fulfill an obligation to another party in return for consideration

43
Q

What makes a binding contract?

A

Offer
Acceptance
Consideration
Intention (to create legal relations)

44
Q

What are expressed and implied terms?

A

Expressed terms are expressly agreed in a building contract

Whereas implied terms are not stated within the contract but implied through statue

45
Q

What are the risks of a verbal contract?

A

It is more difficult to prove the specific terms and conditions

46
Q

What is the difference between assignment and Novation?

A

Assignment is the transfer of rights

Novation is the transfer of rights and obligations

47
Q

Where would you use assignment?

A

Specialist work

48
Q

Does Novation and assignment need to be contractually agreed?

A

Novation does

Assignment doesn’t

49
Q

What is a collateral warranty?

A

A document which creates a contractual link between a main body of a contract and a third party

50
Q

Where might you advise a client to use a collateral warranty?

A

Where a consultant, contractor or sub-contractor has offered services to a third party to ensure there is a resolution for defect claim

51
Q

What are step-in rights?

A

Step in rights allow on party to take the place of another.

For example a funder can step into the place of a insolvent developer in the event of defects with a consultant, contractor or subcontractor

52
Q

What is an alternative to collateral warranties?

A

Third-party rights

53
Q

Are third party rights act implied or expressed terms within a contract?

A

Expressed

54
Q

What is the typical period of a collateral warranty?

A

12 years after practical completion

55
Q

What is your understanding of a net contribution clause?

A

Associated with collateral warranties

Where two or more parties are jointly liable for the same loss or damage on a fair and reasonable basis

56
Q

Can you give me an example of an expressed term?

A

Valuation date

Final date for payment

57
Q

Can you give me an example of an implied term?

A

Payment notice date

58
Q

What are letters of intent?

A

Documents used when a contract cannot be signed before the start of a project

59
Q

When should a letter of intent be considered?

A

A a last resort for a delay of construction works due to contract negotiations

60
Q

What different types of letters of intent are there?

A

Recognition to contract

Consent to spend

Comfort letters

61
Q

What is a recognition of contract (letter of intent)?

A

Used to recognise the existence of a build contract before the document has been signed and binded

62
Q

What happens if a contractor rejects the contract but has started works under a ‘recognition of contract’ letter of intent?

A

Employer is liable for contractors profit and loss

63
Q

How is a contract underhand different from a deed?

A

Underhand contracts are signed by both parties

A deed is signed by both parties, witnessed and sealed

64
Q

What are liquidated damages?

A

Pre-estimated loss of revenue should the contractor not fulfil their obligations by practical completion

65
Q

How would you advise a client if they informed you their LAD’s rate was £100,000 per week?

A
  1. I would check this is a genuine estimate of loss
  2. Inform them that the rate could be unenforceable if it is not a genuine estimate
66
Q

What must be in place before an employer can apply liquidated damages?

A

A certificate of non-completion

67
Q

How are liquidated damages applied?

A

Through a pay-less notice

68
Q

What is the defects liability period?

A

A period stated within the contract for the contractor to rectify any defects which may arise

Generally 12-month period

69
Q

How are defects during the defect liability period delay with if the contractor fails to rectify?

A

The retention monies can be used to employ a contractor to rectify the defects

70
Q

If there is a discrepancy between the employers requirements and contractors proposals, what prevails?

A

Contractors proposals prevail

71
Q

What is a bespoke contract?

A

Contract conditions drafted specifically for a project

72
Q

What advantages do standardised contracts have over bespoke contracts?

A

More legal precedent

More robust

Fairer

73
Q

What are the main elements of a JCT contract?

A

RAPACS

Recitals
Articles
Contract particulars
Attestation
Conditions
Schedules

74
Q

What are the main elements within the conditions?

A

Definitions of the work,
Carrying out the works,
Control of the works,
Payment,
Variations,
Injury, damage and insurance,
Assignment, third party rights and collateral warranties,
Termination,
Settlement of disputes

75
Q

What does completion mean on a construction contract?

A

Where the contractor has fulfilled their obligations including works and documents (e.g., operation and maintenance manuals, collateral warranty)

76
Q

Why is practical completion important?

A

It triggers several contractual consequences
Client takes possession and co trim of building
Cessation of liquidated damages
Client responsible for insuring the works
Commencement of defect liability period
Bonds and guarantees expire
A requirement for an account for the works to be made

77
Q

What is the difference between practical completion and beneficial occupation?

A

Practical completion is where all obligations have been satisfied
Beneficial occupation is client occupation if intended use is satisfied

78
Q

When can partial possession be withheld?

A

If the possession will affect the contractors ability to perform its obligations

79
Q

What are patent defects?

A

Defects which are known at practical completion

80
Q

What are latent defects?

A

Defects which arise months or years after Practical Completion

81
Q

What is the limitation period for latent defects?

A

Depends on the execution of the contract
Under hand = 6 years
Deed = 12 years

82
Q

What is a final account?

A

A statement agreed by the contractor and client stating the full and final amount of all project works including the contract and variable costs

83
Q

What must be in place before liquidated damages can be deducted?

A

Non completion certificate
Pay less notice

84
Q

What two forms of damages can a client take if the contractor is late?

A

Liquidated damagea
Unliquidated damages

85
Q

What is the difference between liquidated and unliquidated damages?

A

Liquidated damages is a pre-estimated figure included in the contract for genuine loss

Unliquidated damages is actual loss estimated by the employer and determined by court

86
Q

How does liquidated damages apply to sectional completion?

A

Separate liquidated damages for all sections

87
Q

What is your understanding of ‘time at large’?

A

Where no completion date is specified within the contract and the contractor can finish within a reasonable time

88
Q

What are the disadvantages with ‘time at large’?

A

The client cannot apply for damages

89
Q

Is a contractor liable for damages of completion has been issued with outstanding works?

A

No

Once completion is issued liquidated damages cannot be applied

90
Q

How are damages typically calculated?

A

Loss of revenue
Leasing alternative accommodation

91
Q

How are liquidated damages deducted?

A

Pay-less notice (HGCRA)

92
Q

What happens if the loss is higher than the liquidated damages stated within the contract?

A

The employer must suffer the loss

93
Q

What happens if an extension of time has not been confirmed but the practical completion date has not been met?

A

Liquidated damages can be applied
Damages can be recalculated and refunded in the next interim valuation

94
Q

What advise would you give to a client regarding a ‘nil’ rate for liquidated damages

A

Risk
Reduces contractors incentive to meet the completion date
Prevents employer recovering losses

TARJI JONES APC 2024 (16 decks)

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