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RICS APC Technical > Contract Practice > Flashcards

Contract Practice Flashcards

1
Q

What is a contract?

A

A legal agreement between two parties.

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2
Q

Why are Contracts required / relevant for the construction industry?

A

Provides protection for both the employer and the contractors. It also prevents disputes.

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3
Q

What are the different ways in which a contract can be made?

A

Verbally and written

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4
Q

What are the key requirements for a contract to be made binding?

A
  • Offer
  • Acceptance
  • Consideration
  • Intention to create legal relation
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5
Q

What are common main contract documents in JCT Design and Build.

A

Form of contract, employers requirements, contractors proposals, CSA, programme and clarifications.

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6
Q

What are common main contract documents in JCT Intermediate.

A

Contract Drawings, specifications, bill of quantities.

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7
Q

What standard forms of JCT contracts are you aware of?

A

Intermediate, Design and Build, Intermediate, Major, and Minor.

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8
Q

Under what procurement route would you consider using a JCT Minor Works Building Contract.

A

Traditional procurement route.

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9
Q

When might a JCT Minor Works Building Contract be appropriate?

A

Small, low value, basic construction projects where the work involved is simple in character.

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10
Q

Under what procurement route would you consider using a JCT Intermediate Building Contract?

A

Traditional procurement route.

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11
Q

What is retention?

A

An amount of money owed to the contractor held by the employer, to ensure the contractor is completing the works in accordance with the contract, until the end of the rectification period.

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12
Q

How is retention released?

A

Typically 1/2 s released on practical completion and 1/2 released at the end of the rectification period. This may vary depending on what is agreed at contract negotiation.

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13
Q

What is a Notice of Completion of Making Good?

A

A certificate confirming that the contractor has made good any defects during the rectification period.

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14
Q

What are the advantages for standard contracts?

A
  • Standardised contracts backed up by case law
  • Known across the industry
  • Reduced legal costs
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15
Q

What are the advantages for bespoke contracts?

A
  • Contracts can be customised to address project specific needs
  • Greater control over the agreed dispute resolution and payment methods.
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16
Q

What are the disadvantages for standard contracts?

A
  • Can be overly complicated for smaller projects
  • Limited flexibility to address specific project needs
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17
Q

What are the disadvantages for bespoke contracts?

A
  • Increased legal costs to draft a bespoke contract
  • Time consuming
  • Lack of case law or precedent can make it difficult to resolve disputes
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18
Q

What is a relevant event?

A

An occurrence, such as delays caused by the client or external factors, that entitles the contractor to an extension of time for project completion.

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19
Q

What is a relevant matter?

A

An occurrence, such as changes in design or unforeseen site conditions, that affects the contractor’s ability to perform the work as originally agreed and may justify a claim for additional costs or time.

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20
Q

What are some examples of relevant events?

A

In JCT D&B
- Extreme weather
- Force Majeure
- Delay of possession of site
- Civil Commosion

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21
Q

What is a letter of intent?

A

A document that outlines the intentions of parties involved in a construction project before a formal contract is signed.

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22
Q

What are the benefits of a letter of intent?

A
  • Alleviates time-constraints
  • Allows more time for negotiations on the contract details
  • Provides clarity of scope of works
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23
Q

Is a letter of intent legally binding?

A

Not necessarily. However, some elements include legally binding provisions. So it’s important that the client consults a solicitor to understand their obligations as it can sometimes be seen as legally binding.

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24
Q

What are the disadvantages of a letter of intent?

A
  • Not necessarily legally binding, but can unintentionally become legally binding.
  • Ambiguity on the project outcome
  • May create a delay to create an official document
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25
Q

What is a performance bond?

A
  • insures client against the contractor failing to fulfil contractual obligations
  • typically 10% of the contract value
26
Q

What is an advance payment bond?

A
  • if it has been agreed that the contractor will receive an advanced payment.
  • the bond is an insurance in favour of the client to call on if the contractor fails to meet its obligations or becomes insolvent
  • typically they are on-demand bonds
27
Q

What is an off-site materials bond?

A
  • used to pay for materials that remain off site.
  • protects the client against failure of the contractor
  • typically the bond is the value of the off-site materials and reduces as deliveries to site are made
  • typically an on-demand bond
28
Q

What is a bid bond?

A
  • rare in the UK
  • typically on-demand
  • used to secure the tenderer’s commitment to commence the contract.
29
Q

What is a retention bond?

A
  • an insurance taken out for the full value of the retention in lieu of deducting retention from interim payments
  • the client can call upon the bond if the contractor fails to address issues during the rectification period as they would with retention.
  • to pay for direct loss or damage suffered by a third party as a result of a breach of contract.
  • typically a small percentage (0.4 - 2%) of the retention value
30
Q

What is a defects liability bond?

A
  • used to ensure the contractor continues to provide services that become apparent after PC
  • typically on-demand
  • used on jobs where there are no outstanding costs
31
Q

What bonds are you aware of?

A
  • Performance bond
  • Bid bond- Retention bond
  • Defects liability bond
  • Advance payment bond
32
Q

What is a primary obligation?

A

‘the main duty a party has to fulfil’

  • simple or on-demand bonds
33
Q

What is a secondary obligation?

A

‘A penalty that applies if the party breaches their primary obligation’

  • conditional bonds
  • parent company guarantees
34
Q

What is the difference between bonds and guarantees

A

A guarantee is linked to non-performance of the underlying contract. A bond is different in that it can be paid on demand, regardless of the underlying contract.

35
Q

What are some examples of relevant matters?

A
  • Instructions related to variations
  • Epidemics (new in JCT 2024)
  • Unexploded ordnance
36
Q

On Silbury House, you helped with the production of a schedule of derogations. Can you tell me what particular derogation you advised your client on getting legal advice on?

A
37
Q

Can you give me a couple more derogations you found or would anticipate in the schedule

A
38
Q

On York road, you advised your client they weren’t liable for an additional weeks claim in relation to ground conditions. Can you set out how you went about advising this against the contract?

A
39
Q

On Devonshire square, you make sure to follow the JCT valuation rules. When does the valuation process begin under this contract?

A
40
Q

Can you give me some differences between JCT Intermediate contract and JCT Design and Build contract?

A
  • JCT Intermediate used when the client and their team designs the project and the contractor builds it, used under a traditional procurement route.
  • JCT D&B used when the contractor is to take design responsibility and used for a various range of project sizes under a D&B procurement route.
41
Q

What are the different contracts in the JCT suite?

A
  • JCT Standard Building Contract
  • Minor Works Building Contract
  • Major Works Building Contract
  • JCT Intermediate Building Contract
  • JCT Design and Build
  • JCT Management Building Contract
  • JCT Construction Management Contract
42
Q

When is a JCT Standard Building Contract appropriate?

A
  • Large projects requiring detailed contract provision
  • Traditional procurement
43
Q

When is a Minor Works Building Contract appropriate?

A
  • Smaller projects with simple scope of works
  • Traditional procurement
44
Q

When is a Major Works Building Contract appropriate?

A
  • Large projects involving major works
  • Design and Build Procurement
45
Q

When is a JCT Intermediate Building Contract appropriate?

A
  • When the contractor is responsible for the design and construction work
  • Design and Build Procurement
46
Q

When is a JCT Management Building Contract appropriate?

A
  • When a management contractor is used to manage the works
  • Management Contracting procurement route
47
Q

When is a JCT Construction Management Contract appropriate?

A
  • Construction Management Procurement
48
Q

What is the process for termination by an employer under a JCT Design and Build Contract?

A
  1. Employer issues an initial notice of termination, specifying the grounds for termination.
  2. If the default continues for 14 days after notice 1, then the party has 21 days to terminate.

Termination is immediate if the reason is insolvency or bribery.

49
Q

Under JCT D&B Contract, under what conditions can a Contractor terminate a contract?

A
  • Default by the Employer
  • Insolvency of the Employer
50
Q

Under JCT D&B Contract, under what conditions can a Employer terminate a contract?

A
  • Default by Contractor
  • Insolvency of the Contractor
  • Contractor is found to have committed an offence under the Bribery Act 2010
51
Q

Can a JCT Contract be terminated after practical completion?

A

No, the notice can only be given before practical completion.

52
Q

What are the JCT valuation rules?

A
  • Use contract rates
  • Use contract rates as a basis for producing a new rate
  • obtain new rates incl. quotes.
53
Q

What notices are there under a JCT account?

A
  • Possession notice
  • Payment notices
  • Pay less notice
  • ## Termination notice
54
Q

What are the standard dates for payment process under JCT?

A
  • Final date for payment, 14 days from due date
  • Pay less notice, 5 days before final date for payment
55
Q

What are the relevant events in JCT?

A
  • Exceptionally adverse weather
  • Force majeure
  • Changes to the scope of works as instructed
  • Riots, or civil commotion
  • Delays in giving the contractor possession of site
56
Q

What are the different types of JCT standard contract?

A
  • With quantities
  • Without quantities
  • Approximate quantities
57
Q

What are some key differences between JCT and NEC contracts?

A
  • JCT used for building and NEC used for engineering
  • JCT use mediation, adjudication, and arbitration and NEC use collaborative approach with dispute resolution boards
  • NEC focus on collaboration and JCT tend to be more adversarial
  • JCT contracts are more detailed and NEC are written in plain English with a more straightforward structure.
58
Q

What’s the process of levying LAD’s?

A
  • Certificate of non completion
  • Give notice before the due date for final payment the they might levy liquidated damages.
  • Pay less notice
59
Q

What are some risks of letter of intent?

A
  • Less robust
  • Reduces the negotiation power of the client
  • Less incentive to get the contract signed
60
Q

What should be included on a letter of intent?

A
  • Key milestone dates
  • Payment schedule
  • Payment number
  • When the letter of intent expires
  • LADs
  • Terms and provisions for cancelling the letter
61
Q

What are updates to the JCT 2024 contract?

A
  1. Supplemental provisions have been made mandatory;
    1.1 Collaboration
    1.2 Notification and negotiation of disputes, old provision 10
  2. Changes following the Building Safety Act 2022
    2.1 Principal Contractor and Designer now need to be identified in Article 7
  3. Modernisation
    3.1 Gender neutral language
    3.2 Allowance to administer the contract electronically
  4. Updates to relevant events, e.g. epidemics

RICS APC Technical (10 decks)

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