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RICS APC > Contract Practice > Flashcards

Contract Practice Flashcards

1
Q

How do variation requests work?

A

Covered under Section 5 of the JCT Contract, and is defined as an alteration or modification of the design, quality or quantity of the work.

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2
Q

What are the JCT suite of contract options?

A

JCT Minor Works Building Contract
JCT Intermediate Building Contract
JCT Standard Building Contract
JCT Major Project Construction Contract
JCT Construction Management Contract
JCT Design and Build Contract
JCT Management Building Contract
JCT Prime Cost Building Contract
JCT Repair and Maintenance Contract

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3
Q

NEC Contracts?

A

A = Priced Activity Schedule
B = Priced Bill of Quantities
C = Target Cost Activity Schedule
D = Target Cost BofQ
E = Cost Reimbursable
F = Management
NEC4 Design, Build and Operate Contract (DBO), released in 2017

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4
Q

How do the two suites of contracts differ?

A
  • NEC promotes collaborative working
  • A programme is a contract document under NEC
  • JCT has variations, NEC has compensation events
  • Each has a person allocated on behalf of the employer (CA in JCT, PM in NEC)
  • JCT has provisional sums, NEC does not
  • QS is only mentioned in JCT contracts
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5
Q

How does a standardised form benefit a project?

A

A standardised form benefits a contract as it is inexpensive, saves time and resources, and ensures both parties are familiar with their rights and obligations. It is drafted by a legal professional so it should reduce the chance of disputes and improve overall efficiency.

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6
Q

What typical amendments have you encountered?

A

Amendments I have encountered are when clients have proposed to amend the payment dates on contracts or remove some relevant events or matters, notably adverse weather.

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7
Q

Do you agree with them?

A

No, I do not. You should not amend standardised forms as it is expensive for the client and contractor to appoint legal professionals and can increase the risk of dispute.

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8
Q

What if you were asked to provide advice?

A

I would tell a client that is best practice to work under an amended standard form, but if an amendment was important, they must appoint a legal professional to do this and it is outside my scope of competence.

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9
Q

What are the parties’ responsibilities and duties under a contract?

A

Under a JCT contract (excluding D&B), the client is responsible for the design, appointing a CA and PQS for the contract. It is their responsibility to ensure these roles are filled through the duration of the works.

It is the contractor’s responsibility to manage the budget alongside the PQS and ensure the project is completed on time.

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10
Q

What is the significance of the Local Democracy, Economic Development and Construction Act 2009?

A

The LDEDC introduced the following:
* Contracts – oral contracts are now covered under this act and allows parties to adjudicate even though the contract is not in writing.
* Pay when certified clauses have been removed
* Payment Notice must be issued 5 days after the due date
* If no payment notice is issued, the payee is entitled to issue a default payment notice
* Right to suspend work – contractor can suspend work in the event of non-payment, the payer must pay costs or expenses for the contractor to suspend the work.

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11
Q

What are the essential components of a valid contract?

A

Offer, Acceptance, Consideration, Intent to create legal relations and Capacity

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12
Q

Can you name 2 types of performance bond?

A
  1. Performance bond
  2. Retention bond
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13
Q

What is the principal difference between a parent company guarantee and a performance bond?

A
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14
Q

What type of letter of intent was used?

A
  1. Consent to Spend – allows work to proceed up to a certain value while the contract is being finalised. The type of letter will create a legally binding contract which will pre-date the principal contract and will be suspended once that contract is executed.
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15
Q

What were the key terms?

A
  1. Consent to spend up to £300,000.00
  2. Allowed programmed activities to commence up to a specific date (31st May 2023)
  3. Start Date
  4. Retention
  5. Right to adjudicate
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16
Q

What are standard forms of contracts?

A

JCT Suite
FIDIC
NEC 3/4
PPC 2000

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17
Q

What is PPC2000 for?

A

Partnering contracts

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18
Q

Why use standard forms?

A
  • saves time and cost
  • benefit from familiarity
  • provide benchmark for negotiating
  • flexibility
  • checklist for items to be agreed
  • judicial decisions on contract terms
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19
Q

How do you select the most appropriate form?

A
  1. Understand client’s objectives
  2. Undertake a broad review of standard contracts
  3. Advise client on contract terms and obligations
  4. If client wants to make amendments advice them to consult with a lawyer
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20
Q

What should a Letter of Intent include?

A
  1. How work is to be valued
  2. A cap of the value of work
  3. Does the client have step in rights to subcontractors if the contract is terminated
  4. Contract the standard form is to be based on
  5. Scope of work covered
  6. Insurances
21
Q

Is it possible to have a contract that is GMP?

A

Many JCT contracts can be amended to be GMP, however it is hard to see how a contractor can be held to a contract sum when changes occur.
The JCT Constructing Excellence contract uses the term but will adjust the sum is changes occur.

22
Q

Under a JCT Design and Build form, is there a precedence between the employer’s requirements and contractor’s proposals?

A

There is some uncertainty as the JCT form does not expressly state what takes precedence. Amendment should be made to the third recital to make this clear.

23
Q

Should a standard form be ammended?

A

Not necessarily but amendments are currently fairly standard, such as the removal of inflation/fluctuation provisions. amendments can be made to suit the project but these should be kept to a minimum.

24
Q

What is a fixed price contract?

A

A contract where the contract sum is not to be adjusted for price/inflation increases.

25
Q

What is a lump sum contract?

A

A lump sump contract requires a contractor to perform all obligations in the construction contract for a specified sum of money.
NOT to be confused with GMP

26
Q

Who takes the risk on ground conditions under a JCT contract?

A

JCT contracts do not have express clauses for ground conditions so it is likely the risk is with the contractor. If the contract is a re-measurement contract, there may be ability to recover cost of additional excavation and earthworks.

27
Q

What are typical contract documents?

A
  • Contract Sum Analysis
  • Drawings
  • Programme/Dates
  • Specification
  • CPHSP
  • TMP
  • Site Rules
28
Q

What are the 3 types of insurance covered under a JCT contract?

A

Option A - New Buildings by Contractor
Option B - New Buildings by Employer
Option C - Existing Buildings by Employer

29
Q

What is a collateral warranty?

A

A collateral warranty is a formal contractual agreement which runs alongside another agreement to create a contractual relationship between two parties.

30
Q

What is an alternative to to a collateral warranty?

A

Third Party Rights

31
Q

What different types of bonds are there?

A
  1. Retention Bond
  2. Tender Bond
  3. Performance Bond
  4. Advance Payment Bond
  5. Materials off site bond
32
Q

Who pays for bonds?

A

Contractor will pay for the bond with the bank but charge the client through insertion of the cost into their tender price.

33
Q

What is a parent company guarantee?

A

A parent company guarantee is where the contractual performance of one company in a corporate group is underwritten by the holding group. Provides security for employer if contractor becomes insolvent.

34
Q

What is the difference between a guarantee and a bond?

A

A guarantee provides security against non-performance, i.e performance is guaranteed by a third party
A bond provides security against financial loss

34
Q

How can you get payment security under a contract?

A
  1. Escrow Account
  2. Project Bank Account
35
Q

What is the procedure for valuing materials off site on an interim application?

A
  1. Check contract particulars to see if materials off site are applicable
  2. Check the materials are part of the listed items
  3. Arrange a visit to check materials off site, ensure they are:
    - correctly labelled
    - Stored separately
    - Insured
    - Provide vesting certificate
36
Q

What are the components of a vesting certificate?

A
  • Name of parties
  • Payment sum
  • Location of storage
  • Schedule of materials stored
  • Signatures
  • T&C’s
37
Q

What are the components of a contract?

A

Recitals
Articles
Contract Particulars
Attestation
Conditions
Schedules

38
Q

What different types of JCT Standard Building Contract are there?

A

With quantities
Without quantities
With approximate quantities

39
Q

What are the disadvantages of a names subcontractor?

A
  1. Performance is client’s responsibility
  2. If the contractor delays the project the contractor can request an EOT
40
Q

Can a contractor reject a named subcontractor?

A

Yes, but they must make a ‘reasonable objection’

41
Q

What is the design liability under JCT contract’s for contractors

A

Reasonable skill and care

42
Q

What are the provisions relating to PI Insurance?

A

Where there is CDP the contractor must take out PI Insurance, with the limit of indemnity and time scale specified in the contract particulars (6.19)

43
Q

Who provides bonds?

A

A bank or financial institution

44
Q

What is the standard value of a performance bond?

A

Usually 10% of the contract value

45
Q

Can you explain what a CVI is?

A

A CVI is a confirmation of verbal instruction, and it a written record by the contractor confirming a verbal instruction on site from the CA/Architect. If the CA/Architect do not contest the instruction within 7 days, the instruction takes effect.

46
Q

Does the NEC4 form allow verbal instructions?

A

No, written instruction only from the PM. The employer nor the supervisor have the authority to issue an instruction.

47
Q
A

RICS APC (24 decks)

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