CONTRACT PRACTICE Flashcards
What is a contract
A legally binding agreement to provide goods and services within a specified timeframe.
What are the 3 conditions that need to be in place for a contract to be in place
Offer
Acceptance
Consideration
What are the 3 conditions that need to be in place for a contract to be in place
- Offer
- Acceptance
- Consideration
- Intention
- Legality
- Capacity to make agreements
- Consent
- Possibility of performance
What are the main suites of construction contracts and what do they stand for
JCT. - Joints Contracts Tribunal
NEC 3 & 4 - New Engineering Contract
ECC. - Engineering and Construction Contract
ICE. - Institution of Civil Engineers
FIDIC. - (International Engineers Federation) Federation internationale des ingenieurs civils.
Name the main types of JCT Contracts
a. Minor works
b. D&B
c. SBC (with and without quants)
d. Intermediate
e. Construction Management
f. Management Contract
g. Intermediate
What are the main parts of the JCT contracts
• Recitals.
• Articles.
• Contract Particulars.
• Attestation.
• Conditions divided into 9 sections (7 for minor works).
• Schedules.
Name the 9 sections under the main section of the JCT
Section 1 - Definition and interpretation.
Section 2 - Carrying out the works.
Section 3 - Control of the works.
Section 4- Payment.
Section 5 - Variations.
Section 6 - Injury, damage and insurance.
Section 7 - Assignment, Third Party Rights and collateral Warranties.
Section 8 - Termination.
Section 9 - Settlement of disputes.
How is a contract executed?
Under hand, signed by both parties, 6 year limitation period. Means that a party must bring about any claim for breach of contract within 6 years of the breach taking place. Any later and the claim will be time-barred.
Under Seal (as a deed), signed and witnessed, 12 year limitation period. Valuable consideration not required,
Why use standard forms of contract?
They are cheaper than getting a bespoke contract drawn up
Offer a level of familiarity between the parties
Tried and tested contracts in court, therefore you should be able to predict the outcome in the courts
Why would you not use a bespoke contract?
They are costly to produce and time consuming
Contractors do not like them, as they usually put alot of the risk onto the contractor
They are not tried and tested like a standard form
What should you consider when selecting the contract
The criteria of the client
The procurement method you are going to use
Nature and value of the works
Timings, are the works required to start quickly or do you have time to produce robust set of docs
When is a JCT minor works suitable for recommendation
The project is fairly simple.
The project should last no more than 12 months
The client is responsible for procuring the design, including drawings, a specification
. Contractor’s design portion is required
When is a JCT Intermediate Contract suitable?
Works are of simple content involving the normal, recognised basic trades and skills of the industry
Works are designed by the Employer
Fairly detailed contract provisions are necessary
Can you provide more information on the JCT Design and Build Contract 2016?
Client must produce the Employers Requirements
Contractor is not only to carry out and complete the works, but also to complete the design
Can you provide more information on the JCT Management Building Contract?
Used when a management contracting route is chosen on large-scale projects requiring an early start.
Works are designed by the client and used by experienced clients
It is not possible to prepare full design information before the works commence
Can you provide more information on the JCT Construction management contract?
Used when a CM route is chosen on large-scale projects requiring an early start.
Works are designed by the client and used by experienced clients
It is not possible to prepare full design information before the works commence
What is the main contractor responsible for
The construction of the project, through either direct labour or sub-contracted labour
What are domestic subcontractors
This is a standard appointment of a Subcontractor by the Main Contractor.
What are named subcontractors
Clients provide the Main Contractor with a choice of named Sub Contractors for a portion of the works.
Additional names may be added if approved by all parties.
This allows the client a level of control over the quality of the works packages and in some cases cost.
The named sub-contractor becomes a domestic sub-contractor, they are paid by the main contractor and the main contractor is responsible for their works
What is the “date for completion” and how does it differ from the “Completion date”?
Date for completion is the contract agreed completion date
Completion date is the out turn effect after any EOT and delays
What happens if ‘time is at large’
There is no set completion date
The contractor has to complete the work in reasonable time
LDs cannot be claimed or it would be upto the client to prove the contractor didn’t complete work in reasonable time to recover damages
What is an extension of time
An adjustment to the contract completion date. In this period the Contractor is relieved of paying LDs.
What is the mechanism under the contract for an extension of time
Contractor should put delay notice in writing to advise the CA/EA of delay at the start of delay or when they delay becomes apparent
The contractor should state the cause of delay and identify the relevant event
CA has 12 weeks to assess the period of extension
Contractor should do what they can to mitigate the delay
What are Relevant Events under the JCT
They are events which would entitle the contractor to EOTs
What are the Relevant Events listed
o Variations.
o Instructions.
o Execution of an approx. quantity that is not a reasonably accurate forecast. (Undefined Prov Sum)
o Deferment of possession of the site.
o Suspension by the contractor for non-payment.
o The carrying out of work by statutory authorities.
o Impediment, prevention or default by the employer.
o Loss or damages occasioned by the Specified Perils.
o Exceptionally adverse weather conditions.
o Strike or lock out.
o Civil commotion or terrorism.
o The exercise of any statutory power after the base date by the UK gov.
o Force majeure.
What are the benefits of being able to grant an EOT
a. It relieves the contractor’s liability for paying LDs for delays they didn’t cause
What is a concurrent delay?
Concurrent delay refers to a situation where a delay to completion is caused by two or more events
How do you assess concurrent delay?
If a dominant cause can be identified, this must be the relevant event.
If no dominant cause can be identified, an apportionment should be made in a fair and reasonable way.
Note EOT is not allowed if the contractor is already delayed through their own fault.
What should a contractor do if they discover Antiques or come across an archaeological discovery?
Contractor should notify the client and continue working around the discovery
Client should notify the relevant authorities and contractor to be accommodating
What entitlements does a contractor have when they discover Antiques or come across an archaeological discovery
Entitled to Extension of Time and any associated Loss and Expense
What are liquidated damages
A genuine pre-estimate of the loss incurred if the completion date is not met
What must be in place before LDs can be deducted
A non-completion certificate
A pay less notice
What are Un-liquidated damages?
Unliquidated damages are damages that are payable for a breach, the exact amount of which has not been pre-agreed. The sum to be paid as compensation is said to be ‘at large’ and is later determined by a court
What is a fixed price contract?
Where adjustments of the contract sum are limited to changes in statutory contributions, taxes and levies.
What is a fluctuating price contract?
Where the contract sum is adjusted for changes in the costs of materials and labour as well as statutory contributions, taxes and levies.
What are the main elements you would include within an interim valuation?
a.Prelims
b.Measured work
c. Variations
d. Materials off site
e. Materials on site
f. Loss and Expense
g. Retention
What needs to be in place to include materials on site
a. Materials for the works
b. They should be adequetly protected
c. Delivered to programme
d. In a reasonable quant
What needs to be in place to include materials off site
a. Vesting cert (proof that ownership will transfer to client after payment)
b. Insurance
c. Materials need to be labelled
d. A bond has been provided
e. There is a provision in the contract
What is a retention of title clause?
Where the contractor retains ownership of materials until they are paid for them by the contractor.
This legal principle can lead to disputes in the event of insolvency.
How do you evaluate interim payments
a. Go to site to value measured works
b. Evaluate materials on and off site
c. Value prelims
d. Value variations and claims
e. Prepare payment notice
f. Share recommendation for payment with CA for issue
What should be included within interim valuations?
Assessed Gross Valuation, less retention, less previously paid equals net valuation
Can you explain the payment under the JCT D&B 2016
Contractor submits his interim application
Due Date occurs 7 days after
Quantity Surveyor values the works and issues a valuation before the due date expires
Contractor Administrator Issues the Payment Certificate within 5 days after the Due Date
Contractor has right to issue Payment Notice, if the CA fails to issue a Payment Certificate
Client can issue a Payless Notice 5 days before the Final Day for Payment
The final date for payment is 14 days after the due date
What happens in the situation where there is a failure to issue an interim certificate
Where the contractor has made an interim application 7 days before the due date, The interim application shall become an interim payment notice
Where the contractor hasn’t made an interim payment notice, the payment mechanism hasn’t been triggered
What is a payless notice?
Is issued by the employer is situations where they disagree with the payment notice
Can a client issue a payless notice after they have received a payment notice?
Yes they can issue a payless notice after receiving a payment notice.
What happens if the final date for payment is missed and no payment made?
The contractor is entitled to interest payment as per HGCRA 1996
What is retention
A percentage of each interim certificate deducted and retained by the employer from each interim payment to the contractor.
What is the purpose of retention
It provides an incentive for the contractor to rectify any defects within the contract defects liability period.
It provides some financial security to the client in the event of a contractor default.
When is the retention released to the contractor
50% is released in the interim certificate after Practical Completion (at the issue of the PC Cert)
The remaining retention is released in the final certificate after the certificate of making good is issued.
What is a typical retention percentage under JCT contracts
Between 3-5%
What works value does retention
apply to?
Preliminaries
Measured Works
Variations
Materials on-site
Materials-off site
What works value does retention not apply to?
Statutory fees and charges..
Cost of opening up and testing the works.
Loss and/or expense claims
Fluctuations
What is loss and or expense under JCT Forms of Contract
Entitles the contractor to claim for losses and expenses incurred as a result of additional work or a breach of contract
What is the loss and expense mechanism under the JCT
- Contractor to notify employer as soon as a relevant matter becomes apparaent
- Contractor should submit assessment of initial loss incurred
- EA has 28 days to assess or request more info/substantiation/assess and agree
- After further information has been recieved, EA provides assessment within 14 days
What are the procedures for claiming loss and expense under JCT Forms of Contract
As soon as the the contractor becomes aware of any other matter that would cause them to incur loss and expense, they should notify the architect in writing.
The contractor should submit any further information as requested by the architect.
The contractor should also submit any further information as requested by the Architect or QS to enable the amount of loss and expense to be ascertained.
Under the JCT what entitles the contractor for the claim of loss and expense?
Relevant matters listed in payment section 4
What are Relevant Matters under JCT Forms of Contract
There are 5 relevant matters:-
1. Variations.
2. Instructions.
3. Execution of an approximate quantity that was not a reasonably accurate forecast of quantity (undefined prov sum)
4. Suspension by the contractor for non-payment.
5. Any impediment, prevention or default by the employer.
What is the key thing to remember when assessing loss and expense claims?
It should be the actual loss incurred by the contractor
What are the common heads of claim in loss and expense
applications (what can they claim for)
• Prolongation.
• Thickening of preliminaries for example extra supervision required due to variations.
• Disruption causing plant or labour to be underemployed.
• Increases in labour or material costs during the period of delay.
• Head office overheads.
• Loss of profit.
• Finance charges.
• Acceleration costs.
• Claim preparation costs.
What is a bond
Financial guarantees provided by a third party.
Usually written as a deed, for a period and specified amount of money
A surety bond is a guarantee from the surety in favour of the employer that the contractual obligations will be fulfilled by the main contractor.
The bond will provide financial compensation up to a stated value if the other party does not fulfill their obligations under the contract.
It does not guarantee the completion of the works.
What are the different types of bonds and guarantees
Bonds
Retention Bonds
Performance Bonds
On-Demand Bonds
Highway Bonds
Tender Bonds
Materials Off Site Bond
Guarantees
Parent Company Guarantee
What form must a bond be in and what will it contain
It must be in writing, it is common for it to be executed as a deed.
It will contain a duration (usually until practical completion) and a financial limit.
What is a Retention Bond
A bond provided by the contractor in lieu of taking retention from interim payments.
It should be equal to the same value as the retention deducted.
The requirement for the bond should be stated in the contract particulars.
A standard form is provided in the JCT contract schedules.
What happens if the contractor does not maintain the Retention Bond
The employer can deduct retention from interim payments
If the bond is subsequently taken out, the retention deducted must be repaid to the contractor
Why might a Retention Bond be used
It may be used in difficult market conditions to aid the contractor’s cashflow.
What are the disadvantages of a Retention Bond
The employer would have to pay the premium for taking out the bond.
It may reduce the contractor’s incentive to complete making good defects promptly.
‘What happens with variations to a Contract in relation to a retention bond?
Bond value needs to be updated to suit, new contract sum
additional retention can be deducted from interim payments.
What is a Parent Company Guarantee (PCG)
The contractual performance of one company in a corporate group is underwritten by the other members of that corporate group.
This means that it must complete the works itself if it can or pay the financial equivalent.
What are the advantages of a PCG
They do not need to be paid for by the client
They can be unlimited
They can make the parent company responsible for performance as well as a financial guarantee.
What are the disadvantages of a PCG
They are not as secure as Bonds because of the financial link between a parent company and subsidiary whereas a performance bond is provided by a third-party finance institution.
There may be no Parent Company
Insolvency may affect the whole company
The parent company may not be a contractor
What are conditional bonds
With conditional Bonds, the employer must satisfy the surety that the default has occurred and the bond must identify what this condition is.
It may also require litigation or arbitration resulting in delays and costs.
What is an ‘on demand’ bond?
A bond which is paid straight away upon the default occurring
There is no requirement to satisfy any review or specific condition to demonstrate the default.
What are Performance Bonds and who are they provided by
They give the employer a guarantee of payment up to a stated amount of money should they suffer a
loss as a result of the contractor’s breach of his contractual obligations
Performance bonds are typically provided by banks or insurance companies.
What is the standard value of a Performance Bond and how is it paid by the Contractor?
10% of the contract value
The premium for taking out the bond is added to the contract sum.
How can the employer call for payment?
They have to prove that the contractor has defaulted in their obligations under the main contract and that loss has been suffered
What is the purpose of a Tender Bond?
Issued as part of the tender process by the tenderer to ensure the winning bidder undertakes the works under the terms which they bidded
What is the standard value of the Tender Bond
1-5% of the tender sum
What is the purpose of Advance payment bond
Used if the employer can not recover the advance payment
Why would you use an Advanced payment bond?
If a contract had high upfront costs, and the contractor wanted advanced payment to ease the upfront cost
What is the purpose of a Materials Off Site Bond
It covers the employer against loss or damage to materials already paid for through interim valuations before the materials are delivered to site.
What are the arguments against requesting bonds
They shouldn’t really be needed if the tenderer selection process is operated effectively as only reliable and capable contractors selected.
Unnecessary premiums are added to the contract sum, which are unlikely to be called upon.
If the developer is a serial developer this may add a lot to their project costs
Where might bonds be appropriate
If the contractor is new or unproven.
To protect the interests of a ‘one off’ developer.
In a difficult economic climate, when the risk of insolvency is higher and PCGs are risky.
What is a Highway Bond
Developer who undertakes housing developments will frequently be required to enter into an agreement with a Local Authority for the adoption of roads and sewers.
If for any reason the Developer fails to complete the adoption of the roads and sewers to the required standards, then the Local Authority will complete this on his behalf and call on the bond to claim back costs.
What are letters of intent?
A document outlining an agreement between two parties, before a formal contract has been created
Intention is to ensure works can commence sooner and have orders secured for long lead items.
What should be included within a letter of intent?
The overall intended scope of works and its contract sum and completion date.
Are Letters of Intent legally binding
There is no legal significance of letters of intent.
The courts will look at all the correspondence between the parties to establish if a contract has been formed.
In order for an LOI to be legally binding it must have the basis of a simple contract (offer, acceptance & consideration) & both parties must intend to create legal relations.
If it is found that a contract exists, then it will determine obligations.
If there is no contract, then the letter of intent will have no contractual effect and quantum merit will be
applied.
What is acceleration
Acceleration is the completion of works in a shorter time frame than that anticipated at tender
or
the act of programme recovery by the contractor if they are in delay.
What options may be considered to achieve acceleration
Longer working hours
Resequencing the programme
Increasing resources
Changing working methods e.g using a dehumidifier to dry out the works
What is practical completion and what happens at PC
Work is substantially complete
Employer gains possession of the site and is responsible for insurances
Half retention is released
Employer can no longer claim LDs
What is partial possession
Where the Employer occupies part of the site which is treated as practically completed
What are the consequences of partial possesssion
Any part for which partial possession is given is deemed to have achieved practical completion
Half of the retention for that part must be released
The defects liability period (or rectification period) begins for that part.
Liquidated damages reduce proportionally.
The client is responsible for that part and should insure it.
What is the difference between Partial Possesion and Sectional Completion
Sectional Completion is stated and agreed in the contract and partial possession is requested once in contract and needs the contractor’s agreement
What does the CA have to do at partial possession
Issue to a written statement to the contractor showing the relevant part and stating the relevant date.
What is the rectification/defects period
Period in which the contractor has an obligation to make good defects, skrinkages or other faults
How long is the rectification period under a JCT D&B
Depends on the contract but usally 6-12 months
6 months under D&B
What is the process for when the defects have been made good
Making good certificate is issued
Final certificate is issued releasing the remaining retention
What is a non-completion certificate
This is issued by the CA to certify that the works or works section have not been completed by the relevant completion date
What are the consequences of a non-completion certificate
The employer has the right to request liquidated damages
What are the different certificates you are aware of under JCT forms of contract?
Interim valuation cert
Cert of making good
Final cert
Non-completion cert
What are the three ways that benefits can be transferred under JCT contracts?
a. Collateral Warranties
b. Third Party Rights
c. Assignment
What are Collateral Warranties
They create contractual relationships between main parties of contracts with third parties e.g. client and subbies
Who might want a collateral warranty
Any third party with a financial investment in a project but not party to the main contract.
The employer may want a collateral warranty with key subcontractors or suppliers, as if the main contractor were to go into liquidation, they would have no contractual link with them for redress in case of defective workmanship.
What are the common clauses / terms in collateral warranties?
The obligations of the collateral warranties should mirror that of the main agreement
Therefore, if a party is in breach of the main agreement they would also be in breach of the warranty.
• Common terms include:-
a. Limitation of liability.
b. Reasonable skill and care or fitness for purpose.
c. Requirements for PI insurance.
d. Assignment rights.
e. Novation rights.
Name some standard forms of collateral warranty that may be used
CWa/F – JCT standard form of collateral warranty for a funder
CWa/P&T – JCT standard form of collateral warranty for a future purchaser or tenant
What is a third party right
An alternative to Collateral Warranties
They allow a third party to be written into a contract
Introduced as part of the Contracts (Third Party Rights) Act 1999
Contractor is still liable and still holds the same respnsibilities to thie third party as owed to the client in the main contract.
How can third party rights be included under JCT contracts?
Third parties must be defined within the contract
Why might third party rights be used instead of collateral warranties?
They can be incorporated into building contracts, subcontracts, etc., with a simple notice; avoiding the need to produce detailed additional agreements.
The administrative exercise of organising collateral warranties can be considerable, sometimes costing more in money and time than their actual value.
Why might a collateral warranty be opted over third party rights?
Collateral warranties can be perceived as being more effective since they mirror the responsibilities of the underlying contract
What is assignment
Where the rights and benefits of one contractual party are transferred to a third party
When can Assignment take place
Anytime, as it is a statutory right, however it can be limited within a contract
Can benefits be assigned under JCT contracts?
Neither the employer nor the contractor shall assign the benefits of the contract without permission from the other party
Optional clause 7.2 enables assignment to be permitted
What is novation and how does this differ from assignment
a. Novation is where a new contract transfers the rights and obligations of one contractual party to a new third party
b. Assignment is the transfer of contractual rights or contractual benefits only as burdens cannot be assigned
What is the key issue after a design team has been novated
Whether the new party has the right to take action against the novated party for breaches that occurred before the novation.
How does novation affect the employer’s rights
They lose all contractual relations with the novated party and therefore the right to take action for a breach.
It is therefore common for there to be a collateral warranty between the employer and novated party.
What is a limitation clause
These are clauses that set a limit for a party’s liability for potential losses
e.g Limitation of PI Insurance (there’s a limit of how much a party can claim on PI)
What are step in rights and why do they exist
a. They tpermit funders to step into another parties’ shoes, usually the employer.
b. They provide funders protection in the event employer defaults on its loans.
c. The funder can then take ownership of the development and sell it off if required.
d. A key problem is that the main cause will often result from the developer not being able to sell the development resulting in them being in arrears.
e. The funder will stand less of chance of selling the asset than an experienced developer.
What is reasonable skill and care
The ordinary skill and care expected of an ordinary competent person carrying out a particular service.
What is fitness for purpose
a. The provision of a service that is suitable for the employer’s intended purpose.
b. It is clearly a more onerous obligation than reasonable skill and care.
What section of the JCT deals with insurances
Section 6 - Injury Damage and Insurance
What types of insurance are required under the JCT
Personal Injury and Property Damage
Public and Employers liability
Terrorism Cover
Joint Fire Code
Professional Indemnity Insurance
Insurance of the works
What is the difference between insurance and indemnity
The purpose of indemnity is to protect against legal responsibility or to compensate, it is open ended.
Insurance is a fund that enables the indemnifying party to make any payments that may arise. It includes time and financial limits.
The contract sets out the insurances required to cover the indemnities that the party is liable for.
What is insurance and what are the two main types
A form of risk transfer to an insurance firm for a premium
Liability and Loss insurance
What is liability insurance
Financial cover for the legal liabilities that the insured party owes to others
What is employers liability
All firms who employ staff are legally required to hold Employers’ Liability Insurance (EL)
EL insurance will help pay compensation if an employee is injured or becomes ill because of the work they do for the employer.
What is loss insurance
Financial cover for losses that fall directly on the insured party
What is subrogation
A legal technique where the insurer steps into the shoes of the insured in order to take the benefit of any legal rights or remedies they may have against a third party responsible for the loss.
What does ‘joint names’ mean (under an insurance policy)
Where the client and contractor are insured under the same policy.
It stops the insurer having the right of subrogation against the other party if they caused the loss.
What are the excepted risks
Ionising radiation or contamination by radioactivity
Pressure waves caused by air crafts
Acts of terrorism that is not within the terrorism cover
What are the types of insurance cover for the “works” in a JCT Contract?
Option A: insurance of new works by Contractor (Joint names)
Option B: insurance of new works by Employer
Option C: Insurance of works to the existing structure
What are the specified perils
Fire & Lightening
Explosions
Strorms
Floods
Earthquake
Riot or civil commotion
What is the procedure for if loss or damage occurs as result of insured risks
Contractor must notify the CA stating the nature, location and extent of damage
Valuations shouldn’t take account of the damage
Once insurers have made their inspection the contractor should then make good
Under option A the insurance payout
Under option B & C contractor recieves reinstatement value
What are the 2 types of defects and what do they mean
Patent Defects
can be discovered by reasonable inspection
Latent Defects
Latent defects cannot be discovered by reasonable inspection.
What is latent defect insurance of the works?
Cover in the events there is defect in the design, workmanship or materials after PC
Does not cover latent defects from non structural parts such as finishes and M&E
What are the advantages and disadvatages of latent defects insurance
Adv
Immediate funds for repairs
Developer’s won’t need to rely on project team PII
Disadv
Insurance and auditors will add to cost
What does the contract say about insolvency?
I understand that it gives the client the right to terminate the contract by notification.
How do you spot contractor insolvency
Credit checks via Dun & Bradstreet or by reviewing their published accounts.
Contractor applies for more money in his applications compared to his cash flow.
Generally slow progress on work and less labour on site.
What do you do if the contractor goes insolvent?
In line with the RICS Guidance Note - Termination of Contract, Coportate Recovery and Insolvency
Secure the site
Value the works completed so far
Stop all payments
Have the CA/EA visit the site and check the works
Discuss with the contractor how he wishes to leave the project .
Ensure the client has insured the site
Call in the bond and use the retention money to complete the works
Consider re-tendering the project.
When the contractor/ client becomes insolvent how is the loss and expense treated?
Contractor/ client are regarded as unsecure creditors
The liquidator/administrator to reserve some money for unsecured creditors
Contractor has no right over retention unless the sums were stored in separate account
What is a Notional Final Account?
A final account that is prepared when the Main Contractor is facing insolvency.
This will typically be of a greater value than the original forecast final account due to costs incurred by the client to appoint a new Contractor to complete the works.
What do you know about termination a contract
Section 8 of the JCT deals with Termination of the contract
Contract can be terminated by the client, contractor or by mutual agreement
What grounds can the client terminate the contract
There are 7 grounds which the client can terminate the contract
1. If the contractor suspends the works without reasonable cause
2. If the contractor fails to proceed regularly and diligently
3. If the contractor fails to complies with instruction
4. If the contractor assigns the contract without authorisation
5. If the contractors fails to comply with CDM regulation
6. If the contractor is guilty of corruption
7. If the contractor becomes insolvent
What grounds can the contractor terminate the contract?
There are 6 grounds which the contractor can terminate the contract
1. If the client fails to pay properly within time periods
2. If the client Interferes or obstructs the issue of any certification
3. If the client suspends the works for a continuous on-going period
4. If the client assigns to the contract without authorisation
5. If the client fails to comply with the CDM regulation
6. If the client becomes insolvent
What are the procedures for terminating a contract
Issue a written formal notification to the other party as a warning of breach
Allow 14 days for the other party to amend/ rectify the situation
Should the other party continue, then the contract can be terminated 21 days after the 14 days
What happens after the contract is terminated?
Client/ contractor accounts are submitted with 14 days detailing what is owed to them and any loss and expense.
Contractor provides copies and information of his contractors design portion
Contractor assign his subcontractors and traders to client.
Contractor removes all his plant/ equipment
What is a contractors design portion?
A section of the design which is allocated to the contractor for completion while he commences works
commonly the M&E Package
What is the difference between NEC and JCT
Its usage.
NEC can be used within the building & civil engineering projects whereas JCT is specifically for building projects.
NEC can be adopted to a number of bespoke contract strategies due to the various options available whereas JCT has a standard set of clauses.
NEC is administration heavy
NEC refers to change as compensation event
NEC doesn’t have separate provisions for EOT & Loss and expense
What are the specialities with NEC?
No contract Administrator required, replaced by a Project Manager
Compensation Events as opposed to variations, extensions of time, loss and expense etc.
What is a compensation event?
Events that occur during the course of the works that cause the completion date to be changed, or additional cost to the contractor as a result to the client
What might a Compensation Event include?
Variations
Instructions to changes contracted services
Failure to provide access
Late issue of information from client
Conditions that can’t have been reasonably foreseen
Exceptionally adverse weather
Acts of God
What is the Project Managers role under NEC contracts?
Manage programme
- Operate early warning mechanism
- Issue instructions
- Issue outcomes for compensation events
- Determine when practical completion has been achieved
- Assess defects
