Contract Practice Flashcards
What constitutes a contact?
”- Offer & Acceptance
- Consideration (both parties are to receive something of value)
- Intention
- Capacity
- Legality”
What is included in a set of Contract Documents?
”- Pricing Document
- Drawings & Specification
- Scope of Works
- Schedule
- Form of Agreement - such as an AIA contract.”
How is a contract executed?
”- Under hand – simple contract
- As a Deed – speciality contract”
What are the terms of a contract?
”- 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”
How can a contract be brought to an end?
”- 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.”
What are the drawbacks of a Bespoke Contract?
“Costly
Time consuming to produce
Untested in court”
What are the benefits of a Bespoke Contract?
”- 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”
Name some standard forms of contract?
“JCT - Joint contracts tribunal
NEC - New Engineering Contract”
What are some known contracts in the US
American Institute of Architecture (AIA) contracts.
What are some AIA types of contract?
”- 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”
What is a Bond?
A tri-partite contract between the employer, contractor and a surety, guaranteeing payment in the event of default.
What types of bonds are there?
- 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.
What is an on demand bond?
Where the surety is obliged to make payment of the bond when requested to do so. No need for proof of loss.
What is a conditional bond?
Where the surety will only make payment if the beneficiary produces the required evidence
What is an advance payment bond?
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
What is retention bond?
“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”
What is a materials off site bond?
They are provided by the contractor to protect the employer against the loss of offsite materials for which they have paid for.
How does a performance bond work?
”- 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”
What is the usual value of a bond
10% of the contract sum
Why may a contractor be reluctant to provide a bond?
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.
How much would the bond fee be?
Typically between 1-5% of the contract sum
What are Collateral Warranties?
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”
Is a collateral warranty transferable?
A collateral warranty can be assigned twice without the contractor’s permission. But review is still applicable.
What are some common causes of Collateral Warranties
”- Levels of insurance
- Non-waivers
- Limitation to liability after 12 years”
What is a non-waiver
helps to prevent the parties from inadvertently waiving their contractual rights through their action
What are Liquidated Damages?
“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.”
