Contract Practice Flashcards
What is the difference between reasonable endeavours and best endeavour’s in contract terms?
Where the obligation is to use reasonable endeavours the party with the burden must pursue one of these courses of action until it is exhausted (unlikely to involve commercial sacrifice);
whereas if the obligation is to use best endeavours each course of action must be considered and exhausted.
What is a collateral warranty? When would it be used? Who do they apply to? What are the disadvantages?
Collateral warranties are agreements that 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.
Disadvantages - difficult to complete, exposure to risk
What would you expect to see in a Letter of Intent?
Details of proposed agreement, key obligations, conditions, schedules of documents, dates, insurances, works scopes, costs.
Used as a method of instructing contractor to proceed with the Works before the contract has been formally executed.
What is a PCSA and when is it used?
Pre Construction Services Agreement
The preferred contractor joins the design team on a consultancy basis using a pre-construction services agreement (PCSA), whilst design is developed to Stage 4 and construction starts.
What are the implications for the client using an NEC contract?
NEC aims to look after the client’s interests (client appoints a PM) while still protecting contractors operations. NEC helps clients achieve more certainty about the outcome of a project and makes sure contractors are paid fairly and promptly.
What is the definition of Partial Possession? What implications does it have under the JCT contract?
Where the employer takes possession of part(s) of the works before practical completion of the whole project/section. Practical completion must be deemed as achieved.
Implications:
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
What is a performance bond?
A financial guarantee commonly used in the construction industry as a means of insuring an employer against the risk of a contractor defaulting on any of its obligations through insolvency or otherwise.
What insurance options are available under the JCT suite of contracts?
Option A - New Buildings All Risks Insurance of the Works by the Contractor
Option B - New Buildings All Risks Insurance of the Works by the Employer
Option C - Joint Names Insurances by the Employer of Existing Structures and Works in or Extensions to them
What are the typical elements of a project that need to be considered which building contract would be most appropriate?
Refer to RICS Practice Information on Appropriate Contract Selection
Time, cost, quality, design responsibility, attitude to risk, procurement route
What elements of a project might be relevant when considering which building contract would be most appropriate?
Refer to RICS Practice Information on Appropriate Contract Selection
- Size, value and complexity of the project
- Employer and their level of sophistication and familiarity with construction
- Balance of risk
- Design responsibility
What are the types of building contracts
Traditional lump-sum, design & build, construction management, management contracting, partnering/alliancing, cost plus, target cost, term contracts, framework agreements
How is a contract formed
Offer, acceptance, and consideration.
Does a contract need to be in writing
Construction contracts do not have to be in writing.
However, beginning work without a formal written agreement increases the risk of dispute and contractors and sub contractors increases the risk of not getting paid.
Given the large number of variations on the BT One Braham project, how did this impact the requirement for an EOT?
Contractor takes a view on the number of CAI’s in a period and how this impacts the overall programme
On the BT project, do you know why there was a requirement for cost and programme estimates to be provided within 5 working days of an instruction?
London HQ was one part of a Workplace Transformation Programme (portfolio of works) so it was important for the Client to quickly understand the impacts of change events.
