Contract Practice Flashcards
What are extensions of time?
Extensions of time adjust the completion date and relieves the contractor’s liability to pay liquidated damages for the period of the extension.
What if the client tells you the LADs are to be £100,000 per week?
I would check that the LAD figure is based on a genuine pre-estimate of financial loss and explain that in the event LAD’s are to be applied, they would need to substantiate this figure.
I would also explain that if the figure inserted into the contract is shown to be punitive and not based on genuine financial loss it is not likely to be enforceable.
What are liquidated damages?
A genuine pre-estimate of the likely loss incurred by the employer should the completion date not be met.
What must be in place before LDs can be deducted?
A non-completion certificate.
A withholding notice.
What constitutes a contract?
Offer
Acceptance
Consideration
Intention
Capacity
Legality
What are the NEC main options?
There are 6 main options;
A) Priced contract with an activity schedule
B) Priced contract with a bill of quantities
C) Target cost contract with an activity schedule
D) Target cost contract with a bill of quantities
E) Cost reimbursable contract
F) Management contract
What are the clause headings in a JCT Contract?
Agreement
Recitals
Articles
Contract Particulars
Attestation
Conditions
What is included in a set of Contract Documents?
Preliminaries
Schedule of Amendments
Contract Sum Analysis
Scope of Works
Specifications
Drawings
Pre-Construction Information
What are the JCT Payment Provisions?
7 days prior to due date, contractor to submit application for payment.
5 days from due date contract administrator shall issue their interim certificate.
14 days from due date is the final date for payment.
5 days prior to final date for payment employer may issue a pay less notice.
Tell me the differences between JCT and NEC contracts?
The NEC uses 6 main options whereas the JCT uses a suite of separate contracts.
The NEC is written in layman terms whereas the JCT used legal wording.
The NEC does not mention a QS, only a project manager.
The NEC uses Compensation Events whereas the JCT used Variations.
The programme is a contract document in NEC. 25% of monies due can be withheld if a compliant programme is not submitted.
JCT allows for provisional sums, NEC does not.
What other types of Contract are you aware of?
ICE - Published on behalf of the Institution of Civil Engineers
FIDIC - International Federation of Consulting Engineers
What happens at Practical Completion?
Once the Contract Administrator issues the certificate of Practical Completion:-
Liquidated Damages cease to be levied.
The Defects Rectification Period begins (usually 12 months).
Possession of the site passes to the employer.
Insurance of the works passes to the employer (if not already in their name).
Half retention is released (the remaining half is release once the Certificate of Making Good is issued/defect rectification period ends).
What is a Relevant Event?
An event on or off site that causes delay to the completion date of the works.
It would entitle the contractor to apply for an Extension of Time
Examples include:-
Variations and instructions
Exceptionally adverse weather
Force Majeure
Deferment of possession of the site by the employer
Civil commotion or terrorism
What is Loss and Expense?
Works that are materially affected by the relevant matter(s) for which the client is responsible.
What is a Relevant Matter?
A matter for which the employer is responsible, that materially effects the progress of the works.
This entitles the contractor to claim for direct loss and expense that has been occurred.
Examples include:-
Deferment of possession of the site by the employer
Disruption caused by works carried out by the employer
Failure to give the contractor access to site
Instructions for new work
What is the purpose of a Loss and Expense claim?
A claim for Loss and Expense should put a contract back into the position they would have been in, should the Relevant Matter not have occurred.
What are the Heads of Claim for Loss and Expense?
Prolongation
Thickening of preliminaries (extra site supervision)
Disruption (plant and labour to be underutilised)
Loss of Profit
Increase in material/labour costs during period of delay
Finance charges (interest)
How is a Loss and Expense claim paid for?
Contractor must give written notice of a claim as soon as it becomes reasonably apparent.
Once the total loss and expense has been ascertained, is should be added to the contract sum and paid on the next interim certificate.
Loss and expense claims are NOT subject to retention.
What are prolongation costs?
Type of financial claim made by contractors in respect of late running projects.
Typically include time related resources such as site management, site accommodation and key items of plant and machinery.
What are the payment options on a JCT Design & Build Contract?
Alternative A - Stage Payments
Alternative B - Periodic Payments
How does payment option Alternative A in the JCT Design & Build Contract work?
Alternative A is to use stage payments.
Stages are clearly identified in the Contract Particulars.
Payment for that stage is released upon completion.
This is a simplified payment option that an Architect could manage.
It can incentivise the contractor to complete stages promptly.
What is a Specified Peril?
Specified perils tend to be significant events that would cause very significant damage, such as fire, explosions, earthquakes, flooding and so on.
How do you price a Variation?
Variation is a modification to the design, quantity or quality of the work.
1) Use a contract rate - if there is a bill item of a similar nature.
2) Use a star rate - this is based on experience of what is fair and reasonable.
3) Use dayworks - Prime cost + labour + materials + plant + % additions
What is the key thing to remember when assessing loss and expense claims?
It should be actual cost incurred by the contractor.