Contract Practice Flashcards
What are the differences between JCT and NEC?
Programme – contractual document under NEC, dates only (such as commencement/PC) in JCT
Practical Completion – Subjective in JCT, well defined in NEC
Provisional Sums – none in NEC, unknown items valued as compensation events, client’s risk
Early Warnings – large part of NEC, incentive for contractor as affects cost/time award down the line
Collaboration – less adversarial approach, focus on early warnings, risk registers, risk sharing etc.
Claims – EoT for time and loss of expense for cost under JCT; both are compensation events NEC
Do you know of other forms of contract?
ACA (Association of Consultant Architects)
CIB (Chartered Institute of Building)
FIDIC
What is a collateral warranty?
An agreement where a contractual link between two parties is extended to a third party.
How does a collateral warranty work?
For example, an Employer may wish to enter into a collateral warranty with the M&E subcontractor (if the M&E subcontractor is undertaking design works) should any defects arise or if the Contractor becomes insolvent.
Collateral Warranties may include “step-in” rights to allow the beneficiary to step into the role of the Client.
What are Third Party Rights?
The Contracts (Rights of Third Parties) Act 1999 – created in part to reduce time and cost associated with CWs.
Provides that a third party may enforce a term of the contract if the contract expressly provides that they may.
Only applicable if stated in the contract (usually excluded).
What is the difference between CWs and Third Party Rights
They do largely the same thing, but CWs have been around longer than TPRs.
CWs are separate documents which are time consuming to produce but Client’s prefer a separate document.
TPRs don’t directly deal with step-in rights or assignment.
Tell me about a time you’ve prepared contract documentation? What did you incorporate?
Volume 1 - Contract Conditions
Contract Amendments
Particulars
PCG / PB
CW
Deed of Novation
Volume 2 – Employers Requirements
Drawings & Specification
Surveys
Planning Permissions
Pre-Construction H&S Information
BREEAM Info (If any)
Client Policies
Derogation Schedule
Volume 3 – Contractors Proposals
Volume 4 – Contract Sum Analysis
How do you value variations?
The JCT Valuation Rules
If the work is of similar character under similar conditions, use CSA rates
If work is of similar character but not under similar conditions, use CSA rates as basis and then amend quants or rates as required to make a fair valuation
If work is not similar in character or condition to CSA, a fair and reasonable assessment is to be made.
If the work cannot be assessed by any of these methods, dayworks sheets may be used.
What is the difference between an EA and CA?
EA acts on behalf of the Client – usually found in D&B contracts
CA – doesn’t act on behalf of any party – simply administers contractual mechanisms
What are the required valuation timescales for a JCT D&B 2016?
Found in Section 4 of Contract
Interim Valuation Date – as stated in the Contract (usually last business day of the month)
Due Date = 7 days after the valuation date
Payment Notice to be issued 5 days after the due date
Final date for payment = 14 days after the due date (usually amended to 21 days to aid Client cashflow)
Payless notice = 5 days prior to final date for payment
What are the timescales for agreeing a final account?
Under a typical JCT contract, the final account should be agreed no later than 3 months after the receipt of all information from the Contractor by the CA, which should not arrive later than 6 months after the PC certificate.
What is the advantage of splitting out enabling works and main works?
It allows the enabling works to progress on site whilst the design for the main works is finalised.
However, you will be paying costs for mobilisation and demobilisation of a contractor in two instances. Also, if separate contractors complete the enabling and main works there could be issues around responsibility of defective work.
What contractual mechanisms are not in place on a Minor Works that are available on an IBC/SBC/D&B
Mechanisms for sectional completion
Sub-letting to named subcontractors
Detailed rules for valuation of variations
Mechanism for payment of off-site materials
refer to the “Deciding on the appropriate JCT contract 2016” practice note.
What makes up the contract particulars and preliminaries?
Contract Particulars – sets out the specifics of the contract relating to the project. Sets out the contract conditions without altering the intention of the clauses. They include:
Contract Sum
Retention Percentage
Interim Payment Period
Contract Base Date
Contract Completion Date
Contract Preliminaries – provide a description of the project and any general conditions to allow a contractor to price their prelims. They include:
Pre-construction information
Description of planning conditions
Quality management procedures
Samples required
Requirements for performance bonds, warranties and guarantees
On 5 St Philip’s Place, what were the types of Relevant Events and Relevant Matters the Contractor put forward?
Relevant Event:
Delay in receipt of statutory body approval
Variations
Exceptionally Adverse Weather disrupting works
Relevant Matter:
Delays in receiving instructions (Prolongation works)
How did you advise on the loss and expense claim on 5 St Philip’s Place?
I ensured that the preliminary costs put forward for the prolongation RM was for that only, and not for the other variations. I checked the prelim costs put forward to ensure they were in line with the contract rates.
What are Relevant Events and Relevant Matters?
Relevant Event – An event on or off site that causes delay to the completion of the works
Relevant Matter – A matter for which the Employer is responsible that materially affects the progress of the works
What made the Minor Works contract suitable for the enabling works on Mill Studios?
The works were straight forward and of low value and I didn’t anticipate significant changes, so I believe this to be the most reasonable contract.
Why was a D&B advised on the main works instead of an IBC with CDP for example?
We wanted the Contractor to take on the full responsibility of the design as opposed to specific design portions.
What are LDs?
A reasonable pre-estimate of loss to the employer for late completion of the works.
What can you advise on around LDs?
We can advise what sort of expenses are to be included such as:
Loss of rent
Additional professional fees
Abortive Costs
What level of LDs were implemented into the Mill Studios contract?
£2000.00 a week
What are the major changes between JCT 16 and JCT 24?
- Incorporation of the Building Safety Act 2022 – New Article 7 setting out the Principal Designer and Principal Contractor roles under Part 2A of Building Regs 2010. A separate Article 6 for roles under CDM.
- Relevant Event now includes:
- Discovery of asbestos / contaminated material / unexploded ordnance
- Dealing with an epidemic
- Passing of new laws or publishing of new guidance by statutory powers
Epidemic and passing of laws are also optional relevant matters depending on how the contract particulars are completed.
- Time for an Employer to make a decision over an extension of time claim has reduced from 12 weeks to 8 weeks.
- Gender neutral language and allowance for notification provisions to be sent by email.
How does a performance bond work?
Provides security if a contractor defaults under the contract. A bank or insurance company will pay the Employer.
Usually 10% of contract sum.
How does a retention bond work?
Bank pays Employer should the contractor not remedy defects after completion.
How does vesting work within the JCT D&B 16?
Items to be vested should be Listed as off-site materials and annexed to the contract.
Vesting certificate required from the contractor confirming goods are identified, stored and insured.
What is Novation & Assignment?
Novation involves the transfer of contractual benefits and obligations to a new party.
Assignment involves the transfer of benefits only.
What are the two types of Performance Bond?
Conditional - the Client must produce evidence that the contractor has not met the contract terms
On Demand - surety provider will pay bond amount regardless of contractual position. Much less common.
What are typical heads of claim for loss and expense
Prolongation
General Disruption
Finance Charges
Loss of Profits
Loss of Overheads
What are typical prolongation heads of claim
Staff
Labour
Plant
Site Welfare
When would you use a SBC?
- For larger works designed/detailed on behalf of client, where detailed contract provisions are necessary and
- Client is to provide contractor with drawings, with BoQ to define quantity/quality of work
- Where architect/CA and QS are to administer conditions
- Price based on lump sum with monthly interim payments unless otherwise stated
- Contract also includes provisions relating to BIM, collaborative working and sustainability
When would you use an IBC?
- Appropriate for simple works/basic trades without complex MEP etc.
- Works designed on behalf of client, drawings provided to contractor with BoQ
- More detailed than MW but less than SBC
- If contractor design required use MW with Contractor’s Design
When would you use a MWC?
- Work is simple and designed by client/their team
- No BoQ, specifications and work schedules provided to define quantity and quality of work
- If contractor design required use MW with Contractor’s Design
When would you use a D&B?
- Appropriate where detailed contract provisions required and ERs have been given to contractor
- Contractor is not only to carry out and complete works but design them too
- Employer employs EA to administer conditions
- If contractor is only to design small part of works then consider traditional route with CDP
- Time and care needed to compile ERs, if they conflict with CPs then CPs take precedent however this is often
- Amended in favour of ERs
- Adequate time needed to check CPs when evaluating tenders, contract specifies that client accepts CPs
