Contract Practice Flashcards
1
Q
What are the different types of contract typically used in the construction industry?
A
- JCT (Joint Contracts Tribunal)
- NEC (New Engineering Contract)
- FIDIC (International Federation of Consulting Engineers)
- ACA (Association of Consultant Architects)
- ICE (Institution of Civil Engineers)
- ECC (Engineering and Construction Contract)
2
Q
What are lump sum contracts?
A
Where the contract sum is determined before construction work is started.
3
Q
What are measurement contracts?
A
Where the contract sum is not finalised until after completion but is assessed on remeasurement to a previously agreed basis.
4
Q
What are cost reimbursement contracts?
A
Where the sum is arrived at on the basis of prime (actual) costs of labour, plant and materials, to which there is added an amount to cover overheads and profit.
5
Q
What matters may influence the selection of a particular procurement method and type of contract?
A
- The nature of the project – new-build, refurbishment, extension, reinstatement/repair etc.
- The scope of works – anything unusual about the size, complexity or location. Basic or skilled trades required. Specialist design content required etc.
- Measure of control by the client – client control over design, materials and workmanship, selection of sub-contractors etc.
- Accountability – single point responsibility, intention to appoint project manager.
- Appointment of a contractor – Negotiation or competitive tender process? Is the contractor to undertake work only or provide designs?
- Certainty of final cost – is a lump sum preferred? Will fluctuations apply? Do the circumstances dictate remeasurement? Are tenders to be on a competitive basis?
- Start and completion times – is there time to produce designs prior to tender? Is a quick start required?
- Restrictions – site restriction i.e. working hours, noise and access restrictions? Is the building occupied? Is the project to be phased?
- Changes during construction – likelihood of design changes, can the contract easily accommodate variations? To what extent may approximate quantities or provisional sums be required?
- Assessment of risks – what are the priorities with regard to apportioning risk of cost, time, and quality or performance? Is the contract to reduce the client risk as much as possible?
- Building relationships with the supply chain - is a long term relationship with a supplier or the supply chain required so as to provide continuous improvement?
6
Q
What are the different procurement methods used for construction projects?
A
- Traditional Procurement (lump sum) – Full documentation is provided by the employer prior to tendering of the works. The employer provides the design and specifications and the contractor prices against and builds in accordance with the designs/specifications.
- Design and Build Procurement (lump sum) – The contractor is responsible for the design and construction. The employer may provide some outline designs and the contractor completes the designs, with the employer’s design team novated.
- Management Procurement – Client is responsible for the design. Contractor manages various works packages.
7
Q
What are the different parts of JCT contracts?
A
- Agreement – Details of Employer and Contractor
- Recitals – Description of works, site address, Contractor’s Design Portion, and details of drawings/specifications and other contract docs
- Articles – Identifies the primary obligations of the parties under a contract. Names the CA, QS, PD, PC and also deals with adjudication, arbitration, litigation.
- Contract Particulars – Contains the project specific information referred to in the recitals, articles and conditions.
- Attestation – Refers to the execution of the contract (underhand or as a deed).
- Conditions
8
Q
What is the difference between a Relevant Event and a Relevant Matter?
A
- Relevant Event – an event which causes a delay to the completion date - entitles a contractor to an extension of time.
- Relevant Matter – a matter which the client is responsible for which materially affects the progress of the works - entitles a contractor to loss and expense.
9
Q
Can you outline the relevant events?
A
There are 13 relevant events set out in JCT forms including:
* Variations.
- Instructions.
- Execution of an approx. quantity that is not a reasonably accurate forecast.
- Deferment of possession of the site.
- Suspension by the contractor for non-payment.
- The carrying out of work by statutory authorities.
- Impediment, prevention or default by the employer.
- Loss or damages occasioned by the Specified Perils.
- Exceptionally adverse weather conditions.
- Strike or lock out.
- Civil commotion or terrorism.
- The exercise of any statutory power after the base date by the UK gov.
- Force majeure.
10
Q
Can you provide some examples of Relevant Matters?
A
- Failure to give the contractor possession of the site.
- Failure to give the contractor access to and from the site.
- Delays in receiving instructions.
- Opening up works or testing works that then prove to have been carried out in accordance with the contract.
- Discrepancies in the contract documents.
- Disruption caused by works being carried out by the client.
- Failure by the client to supply goods or materials.
- Instructions relating to variations and expenditure of provisional sums.
- Inaccurate forecasting of works described by approximate quantities.
- Issues relating to CDM.
11
Q
What are some of the adjustments typically made to JCT contracts?
A
- Payment timescales – adjusted from 21 days to 28 (21 days from due date).
- Defects rectification period.
12
Q
Can you outline the changes and features implemented within the upcoming 2024 suite of JCT contracts?
A
- Modernising and streamlining - Including adoption of gender-neutral language, and increased flexibility around the use of electronic notices.
- Extensions of Time - New relevant events will be introduced to include epidemics and the exercise of ‘statutory powers’. The time available to the Employer to assess interim extensions of time will be reduced from 12 weeks to 8 weeks from receipt of the Contractor’s Particulars.
- Loss and Expense - New relevant events and relevant matters will be introduced including new provisions dealing with unexploded ordnance, contaminated materials and asbestos.
- Liquidated Damages - Where works are not complete at termination, LADs can be levied up to termination and subsequently general damages following the Supreme Court’s decision on Triple Point Technology Inc -v- PTT Public Company Ltd.
- Payment due date after termination - Addition of a payment due date after termination which will reduce uncertainty.
- Disputes - A new requirement for parties to notify potential disputes to senior executives to seek a negotiated settlement but this will not cut across either party’s right to refer a dispute to adjudication at any time. In place of a shortlist, parties can now choose their own adjudication nominating body.
- Fluctuation - Incorporation of the new JCT Fluctuations Hub launched in 2023, a resource to help the construction sector respond to growing economic uncertainty and volatility in the market and how to correctly apply the options available under the JCT suite. The fluctuation provisions will also be moved to an online document.
- Legislative changes - Major updates in relation to the Building Safety Act; Termination accounting and payment provisions reflecting the Construction Act; and new insolvency grounds reflecting the Corporate Insolvency and Governance Act 2020.
- Future Proofing - Reflecting the objectives of the Construction Playbook, and incorporating existing optional supplemental provisions relating to Collaborative Working, and Sustainable Development and Environmental Considerations.
- New form of contract - The introduction of a new contract family, JCT Target Cost Contract (TCC), comprising main contract, sub-contract, and guide, which will likely be an alternative to the NEC Option C ECC form of contract.
13
Q
What are the key differences between JCT Minor Works, Intermediate and D&B Contracts?
A
- Minor works only has 7 sections of conditions instead of 9.
- Variations are included within the Control of the Works section and there is no ‘assignment and collateral warranties provision’.
- There is no mention of the QS in minor works and D&B however there is in the Intermediate Form.
- In Minor Works there is no provision for named sub-contractors, no provision for bonds and collateral warranties and no advance payment provision.
- Minor works also has no provision for sectional completion.
- In Minor Works there are no relevant events listed for extension of time, instead it is referred to as ‘anything outside the contractor’s control’.
- The standard rectification period is 3 months for Minor Works and 6 months for D&B and Intermediate.
- The standard retention is 5% for Minor Works and Intermediate and 3% for D&B and SBC.
- D&B is administered by an Employer’s Agent rather than a Contract Administrator.
- In Minor Works and Intermediate, the Contractor may be responsible for completing discrete part of the design (CDP) whereas in D&B, he is responsible for completing the overall design.
- In D&B, the EA may request a quotation prior to instructing a change.
- There is no fluctuation mechanism for labour and materials costs in Minor Works and Intermediate Forms.
- Payments are made at regular intervals in Minor Works and Intermediate Forms whereas D&B gives the option of stage payments.
- In Minor Works, there is no option for the employer to take out a joint name all risk policy, only options A and C.
- There is no provision for third party rights in Minor Works or Intermediate Forms.
14
Q
What would you consider when selecting what type of contract to use?
A
- Complexity of the project.
- Any design input required from contractor.
- Method of procurement (traditional / D&B).
- Requirement for phasing of the works (sectional completion).
- Use of retention bonds.
- Third party rights (collateral warranties etc.).
15
Q
When would you use JCT Minor Works?
A
- Projects that are short in duration, small and simple.
- Guidance is for a value up to £150,000.
- It is a short, easy to follow contract.
- It is a lump sum form; design should be completed prior to execution.
- Not as comprehensive as others – limited claims provisions, no fluctuations.
16
Q
When would you use JCT Intermediate Contract?
A
- Recommended for project that do not exceed one year’s duration or up to £750,000.
- For projects that are simple in content, require only basic skills and trades and where services are not complex and where the works are already designed.
17
Q
When would you use JCT DB?
A
- When the contractor is responsible for design and construction.
- Similar in complexity to the standard building contracts.
- The contactor’s proposals form the basis of the contract.
- There is no mention of an architect or QS.
18
Q
When would you use JCT Major Project?
A
- Projects that are significant in both size and quantity.
- Generally for clients that have their own in-house contractual procedures.
19
Q
What are the advantages of using standard forms of contract?
A
- Written by legal experts.
- Case law is built up over time and provides a good source of knowledge and clarity of the terms.
- Widely used and understood within the construction industry.
- Rights and obligations of each party are clearly set out to the required level of detail.
- Saves time in drafting a new bespoke contract for every job.
20
Q
What would you find in contract documents?
A
- Contract.
- Preliminaries.
- Preambles.
- Design information (SoW, drawings, specification).
- Pre-construction information.
- Information release schedule.
- Bills of quantities.
21
Q
Can you explain what preambles are?
A
- Preambles are there to provide an explanation of how a document is to be used in order to help with its interpretation.
- describe the client’s expectations about the standard and quality of the work instructed.
Preambles do not form part of the cost of the project and may include:-
o A description of the parties to the contract.
o A description of the competence of the parties.
o A background of the project.
o Summaries of any negotiations that have taken place.
o The tendering procedure that has been adopted.
22
Q
What are preliminaries?
A
- Preliminaries provide a description of a project that allows a contractor to assess costs.
- Their purpose is to describe the works as a whole and to specify general conditions and requirements for their execution.
- They include the following:-
o The site (description, access and parking).
o The works.
o Contract conditions (rectification, payments, insurance and collateral warranties).
o Management of the works (working hours and supervision requirements).
o Security, health and safety.
o Site setup and welfare requirements.
23
Q
Can you please explain what a collateral warranty is and the type that was used for IPL Plastics, Rotherham?
A
- Collateral warranties are used as a supporting document to a primary contract where an agreement needs to be put in place with a third party outside of the primary contract.
- CW’s provide a contractual link to third parties who are not named within the contract (the landlord in the case of IPL).
- Contractor Collateral Warranty for a Funder (CWa/F).
24
Q
What is the legislation relevant to collateral warranties / third party rights?
A
The Contracts (Rights of Third Parties) Act 1999 enables third party rights to be created by a contract. This is seen by some to offer an alternative to collateral warranties.
