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APC > Contract Practice > Flashcards

Contract Practice Flashcards

1
Q

What constitutes a contact?

A

”- Offer & Acceptance
- Consideration (both parties are to receive something of value)
- Intention
- Capacity
- Legality”

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2
Q

What is included in a set of Contract Documents?

A

”- Pricing Document
- Drawings & Specification
- Scope of Works
- Schedule
- Form of Agreement - such as an AIA contract.”

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3
Q

How is a contract executed?

A

”- Under hand – simple contract
- As a Deed – speciality contract”

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4
Q

What are the terms of a contract?

A

”- Express terms: ones that parties have set out in their agreement
- Implied terms: are ones that are not expressly set out in a contract, but which the parties must have intended to include”

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5
Q

How can a contract be brought to an end?

A

”- Expiration: contract ends due to fixed expiry date or because there is a right to terminate contained in the contract
- Termination: can be either through
o Breach – committed when a party without lawful excuse fails or refuses to perform what is due from him under the contract
o Anticipatory Breach – when before performance is due a party repudiates the contract or disables himself from performing it through repudiation or disablement
o Termination for breach – one party is released from his obligation to perform because of the other parties defective or non-performance
- Vitiation: parties have reached agreement but question arises over a fact that destroys the basis for which the agreement was reached.
o Misrepresentation - false statement of fact made by one party to another, which induces the other party to enter into the contract
o Mistake – contract will be void or voidable if a mistake has occurred, so no obligations will arise under it.
- Frustration: A contract may be discharged if after its formation an unforeseen event occurs which makes performance of the contract impossible, illegal or essentially different from what was contemplated.
- Damages / Remedies: damages compensate the injured party for the loss that they have suffered as a result of the breach of contract.”

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6
Q

What are the drawbacks of a Bespoke Contract?

A

“Costly
Time consuming to produce
Untested in court”

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7
Q

What are the benefits of a Bespoke Contract?

A

”- Contracts can be made simpler
- Contracts can be made easier to administer
- Contractor may have input
- Risk should have been allocated fairly between parties
- Contract can include incentives for contractor to reduce costs”

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8
Q

Name some standard forms of contract?

A

“JCT - Joint contracts tribunal
NEC - New Engineering Contract”

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9
Q

What are some known contracts in the US

A

American Institute of Architecture (AIA) contracts.

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10
Q

What are some AIA types of contract?

A

”- A101-2017 - where the basis of payment is a Stipulated Sum
- A102-2017 - large projects requiring a guaranteed maximum price, when the basis of payment to the contractor is the cost of the work plus a fee.
- A103-2017 - Large projects when the basis of payment to the contractor is the cost of the work plus a fee, and the cost is not fully known at the commencement of construction.
- A201-2017 - General Conditions of the Contract for Construction”

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11
Q

What is a Bond?

A

A tri-partite contract between the employer, contractor and a surety, guaranteeing payment in the event of default.

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12
Q

What types of bonds are there?

A
  • Payment bonds - guarantee the correct payment for services if the contractor goes bankrupt
  • Performance bonds - guarantee that protects the client should a contractor fail to fulfil his contractual obligations
  • Maintenance bond - secures a guarantee against any flawed materials or workmanship for a set time duration following a finished project.
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13
Q

What is an on demand bond?

A

Where the surety is obliged to make payment of the bond when requested to do so. No need for proof of loss.

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14
Q

What is a conditional bond?

A

Where the surety will only make payment if the beneficiary produces the required evidence

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15
Q

What is an advance payment bond?

A

If a client has agreed to advance payment to a contractor then a bond may be required to secure the payment made against any default by the contractor

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16
Q

What is retention bond?

A

“It is a substitute for the deduction of retention percentage. Must be executed before the date of possession & must be the total value of sum of retention that would be deducted

Bond can be increased or retention deducted in the normal way if the contract sum were to increase”

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17
Q

What is a materials off site bond?

A

They are provided by the contractor to protect the employer against the loss of offsite materials for which they have paid for.

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18
Q

How does a performance bond work?

A

”- An underwriter provides the bond to a contractor; the premium is usually added to the contract sum.
- If the contractor then defaults on his obligations then the employer can call on the bond”

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19
Q

What is the usual value of a bond

A

10% of the contract sum

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20
Q

Why may a contractor be reluctant to provide a bond?

A

The value of the bond is deducted from the contractor’s available credit for the duration of the project. Providing one may impact on their ability to finance another project.

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21
Q

How much would the bond fee be?

A

Typically between 1-5% of the contract sum

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22
Q

What are Collateral Warranties?

A

It creates a contractual link between two parties that are not linked by the main contract

You may have a collateral warranty between a sub-contractor and the client, or between a tenant and the contractor”

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23
Q

Is a collateral warranty transferable?

A

A collateral warranty can be assigned twice without the contractor’s permission. But review is still applicable.

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24
Q

What are some common causes of Collateral Warranties

A

”- Levels of insurance
- Non-waivers
- Limitation to liability after 12 years”

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25
Q

What is a non-waiver

A

helps to prevent the parties from inadvertently waiving their contractual rights through their action

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26
Q

What are Liquidated Damages?

A

“A contract clause which stipulates a specific sum to be payable if a party breaches a specified term.
This is usually used for completion date however in engineering works it is sometimes used where the works are to meet specified performance criteria.”

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27
Q

What are 3rd Party Rights?

A

They allow a 3rd party to enforce specified term(s) of a contract in the same way as a collateral warranty, without the need for a separate contract.

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28
Q

What is retention?

A

The amount of money held back until the project is complete. Retainage is usually a percentage of the total project cost. It typically sits at 5% or 10%

29
Q

What is a master service agreement also known as a Framework Agreement?

A

“Contract outlining the scope of the relationship between two parties, including terms and conditions for current and future activities and responsibilities.

They establish basic terms between vendors and clients at the beginning of a business relationship. This initial agreement helps to speed up the negotiation process for future contracts and facilities the project management process.”

30
Q

“What does retention apply to?

A

”- Measured works
- General Conditions / General Requirements
- Change Orders
- Materials on and off site”

31
Q

What is a letter of intent?

A

An informal agreement between a construction contractor and a client that outlines the services the contractor will complete on a project. This is a placeholder until the final legal agreement is drafted.

32
Q

What are the benefits of a MSA?

A

”- Encourages transparency
- Negotiations conducted by both parties allowing for more control.
- Protection from potential disputes.
- Saves time / money in negotiation reduction.”

33
Q

What are the risks of a MSA?

A

”- Failing to accurately predict the work required for the project.
- May not include provisions for cost overruns or scope changes.
- Rarely provide for dispute resolution or litigation procedures.”

34
Q

What should be included in a MSA?

A

”- Payment terms/conditions,
- Confidentiality clauses
- Intellectual property rights

Legal council to confirm. I am not an expert.”

35
Q

What are Employer’s Requirements?

A

A document that sets out the client’s requirements, enabling the contractor to provide a suitable design / tender return

36
Q

What is the Main Contractor’s obligation?

A

Paramount obligation is to ‘carry out and complete the Works in a proper and workmanlike manner and in accordance with the construction phase plan.

37
Q

What are Contractor’s Proposals?

A

The contractor’s response to the Employer’s Requirements

38
Q

What is the difference between a Contract Administrator and an Employer’s Agent?

A

”- Similar as they both hold an administrative role
- EA can represent a client legally, takes direct responsibility for correctly discharging the client’s responsibilities
- CA ensures that the client and contractor fulfil their obligations, is not able to act on behalf of the client from a legal stance.”

39
Q

What is assignment?

A

”- Assignment is the transfer of rights under a construction contract from one party to another.
- Not the transfer of obligations
- Parties to a contract do not change”

40
Q

What is novation?

A

”- Novation is where the contract between the two original parties ends, and a new contract on identical terms between one of the original parties and a third party is created.
- It is the transfer of rights and obligations under a construction contract.
- In a D&B contract it is common for the Employer to novate their design team to the Contractor in order to complete the design on behalf of the Contractor.”

41
Q

When should a Letter of intent be used?

A

”- Should only be used when there is good intention to start works before the conclusion of the formal contract. Normally due to commercial urgency.
- They should just be used as a safeguard of legal rights while the contract documents are being finalised.”

42
Q

What is a Lien Waiver?

A

A receipt that payment has been made for work or materials on a job. These documents are exchanged at the time of payment, and commonly attached to subcontractor pay applications or vendor invoices.

43
Q

What should a letter of intent include?

A

”- Client authorisation for the CA / EA to act on their behalf
- Place a limit on expenditure (Employer’s maximum liability under the LoI)
- Specify an instruction to proceed on a certain date
- Specify an ‘Expiry date’
- Specify the contract that they will be entering into
- Payment terms
- Dispute resolution procedures”

44
Q

“What does indemnity mean?

A

”- It means to protect.
- One party accepts the responsibility to pay for any loss or damage that may have been caused by the other”

45
Q

What are some of the dangers of a Letter of intent?

A

”- May act as disincentive to sign final contract
- Far less robust than a main contract”

46
Q

What categories of insurance are there?

A

”- Liability insurance
- Loss insurance”

47
Q

“What is insurance?

A

Insurance is a risk spreading mechanism that spreads losses and liabilities of the few amongst the many

48
Q

What is the Liability of Employer’s Insurance?

A

”- This covers the Employer against any damage to neighbouring properties in association with the works
- Optional but expected to take out, must be stated in ERs
- Amount of indemnity stated in Contract Particulars
- Cost added to Contract Sum
- Policy taken out in Joint Names”

49
Q

What is Contractor’s Public Liability Insurance?

A

”- Covers any injury or loss that may occur on site
- Covered in clause 6.1 and 6.2
- This makes the employer liable for losses or claims due to injury or death of persons, damage to neighbouring properties which is caused by the contractor’s negligence.
- Indemnity protects the employer so that if a party brings action against the employer, the contractor will bear the consequences.”

50
Q

What is insurance of the Works?

A

This is the insurance for the works carried out and the building that houses the works. Maintained up till the date of Practical Completion

51
Q

“When does the joint fire code apply?

A

Generally it applies to contracts with a value of more than £2.5m but it can be applied to lower value contracts in cases that are considered high risk or form part of a larger contract.

52
Q

What is the Joint Fire Code?

A

This is a document produced by the Fire Protection Association for fire prevention on construction sites

53
Q

What is Builders risk insurance?

A

Property insurance that protects buildings while they are under construction, either during a remodel or new construction.

54
Q

What is General liability insurance

A

Protects against “general” claims by third parties. These claims typically involve bodily injuries and property damage that result from a contractor’s products, services, operations, but they can include advertising claims involving defamation.

55
Q

What is Subcontractor default insurance?

A

Subcontractor default insurance (SDI) protects a contractor in the event one of their subcontractors fails to perform according to their agreement. Contractors may purchase it as an alternative to a performance bond, or provide additional protection beyond what a surety bond covers.

56
Q

What is Wrap insurance (OCIP/CCIP)?

A

“Wrap insurance (also known as a “wrap-up”) provides liability coverage for an entire construction project or multiple jobs. Because it covers everyone on the job, contractors and subs may not need to provide their own general liability coverage. The policy can be written to include both general liability and workers compensation coverage (known as “bi-line”), though GL-only policies are becoming increasingly common.

A wrap policy is typically purchased as an OCIP or CCIP. An OCIP is purchased by the owner, while a CCIP is purchased by the general contractor. Regardless of who purchases the policy, both generally provide the same coverage. “

57
Q

What is Workers’ compensation insurance?

A

Workers’ compensation insurance protects contractors against losses caused by work-related accidents or illnesses. It also provides the employee with benefits to compensate for lost work and wages

58
Q

What is meant by the ‘date of possession?’

A

Date that the contractor is given clear possession of the site

59
Q

Can the date of possession be deferred?

A

Yes, a deferment period can be stated in the contract particulars, the default maximum is 6 weeks.

60
Q

On what basis are interim valuations conducted?

A

Typically monthly.

61
Q

How would you go about undertaking an interim valuation?

A

“I would review the contractor’s application when it is received, and arrange to visit site if this is avilable. I would ask the contractor to be present at this time to review the works completed to date.
I would then discuss any concerns I had with the application and ask for any further information required.
I would coordinate with the Design team and the Project Manager.
I would then provide my own valuation of the works complete and amend the application if required. I would then process the necessary paperwork.”

62
Q

What is a Pay Less Notice?

A

It is a notice from the Employer to the Contractor. Used when they feel that they should withhold some monies from the recommended sum and set out the basis for this calculation. This could be used for works not in accordance with the contract.

63
Q

What paperwork would you need for materials off site?

A

”- Vesting certificate
- Proof that they are insured against specified perils
- Proof they are clearly marked as owned by the client and stored in an appropriate way”

64
Q

What is a vesting certificate?

A

Certificate that proves the contractor has good title to the materials and that ownership of these shall pass to the Employer upon payment.

65
Q

Who issues the vesting certificate?

A

The contractor.

66
Q

What is a letter agreement?

A

A legally binding document that outlines the terms of a working agreement between two or more parties.

67
Q

What are the disadvantages of a LoA?

A

”- Not as specific as a formal contract.
- Missing clarity.
- Payment terms may not be clear leading to disputes.

67
Q

What are the advantages of a LoA?

A

”- formal communication that ensures no misunderstanding.
- Legal protection.
- If there is a breach, there is legal recourse.”

APC (17 decks)

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