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APC QS (Notes Based Q&As) > Contract Practice > Flashcards

Contract Practice Flashcards

1
Q

Types of a claim?

A

Ø Contractual claims – arising out of breach of expressed provisions of the Contract (Additional payment under Clause 53 in FIDIC 1987 or Clause 20 in FIDIC 1999)
Ø Claims at law – breach of implied terms of the Contract (Decennial liability)
Ø Quantum meruit claims (Ex: Work done based on LOI)
Ø Ex gratia claims – out of kindness to maintain relationships (Ex: Due to substantial pricing errors, Exceptional price fluctuations)

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2
Q

What are the contents of a Contract Documents?

A

Vol 1 – Contract Agreement, Form of Tender, Instructions to Tenderers, CoC, App to Tender
Vol 2 – Specification
Vol 3 – BOQ
Vol 4 – Drawings

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3
Q

What is the advantage of having a LAD provision in the contract?

A

Ensure Contractor’s performance, Contractor’s risks are limited

Emp gets automatic right for recovery of damages, No need for proving actual damage

As per the OCoC Clause 47 - Contractor shall pay to the Employer the sum stated in the appendix to the Tender as a penalty for such default every day or part of the day as which shall elapse.
Partial completion portion may deducted from any penalty as per 47 (2)

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4
Q

What grounds COntractor can terminate? (Default of employer)

A

Contractor can terminate, if the employer;

a. Fails to pay the contractor within 60 days after the engineer's certification (subject to other provisions)
b. Obstruct to issue such certificate or refuses any approvals which is fundamental for the execution of work
c. Give formal notice to the contractor that for unforeseen reasons due to economic dislocation, it is impossible for him to continue to meet his contractual obligations

○ Contractor is entitle to terminate the employment after giving 14 days prior written notice
Emp obliged to pay the damages

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5
Q

Final accounts as per your contract (OCoC 1987)

A

• Within 6 months after issuing Maintenance Certificate - The Contractor shall submit statement of Final Account with supporting documents
1. Value of work +
2. All other sums due to him under the contract
(+Variations/Claims carried out during DLP)

• Within two months (with required backups) the Engineer shall issue a final certificate stating:

○ The amount finally due under the contract
○ The balance due from Emp to the contractor or from Contractor to the Emp

If agreed, Final Statement + discharge letter

If dispute exists, Eng issue Interim Payment Certificate, dispute may be administrated under Clause 67

Final payment within 60 days of receipt of Final Certificate.

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6
Q

How do you pay Material on Site & Off site?

A

• Invoices and delivery orders (physically verify quantity)
• Protected against all kinds of damages to the Eng approvals
• Quantity not exceeding the requirement (works+spares) and intended to be used in the project and not prematurely procured
• Not exceeding 80% of their value in accordance with the contract.
(% of invoice value as stated in App to Tender (1987) or 80% of the Engineer’s determination of cost (1999)

Material off-­site (Oman Condition not allowed)
• The Contract should allow material off-­site payments
• Vesting certificate – undertaking materials are sole property of the Emp
• Insurance – as Contract insurance policies do not cover off-­site materials
• Clearly marked and separated from other materials
Factory inspection certificate

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7
Q

Why Extension of time?

A

Contractor to avoid liability for LD / Emp to avoid Time at Large situation

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8
Q

What is PI cover?

A

Professionals have a duty to exercise reasonable skill, care and diligence in the performance of his obligations.
Requirements to establish a claim under negligence -­ Duty of care owed, Breach of that duty occurred, Breach caused injured party to suffer loss.

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9
Q

What is Sectional completion and What is Partial possession

A

Sectional completion – completion of any Section for which separate Time for Completion is provided in the Contract

Partial possession – occupation or use of any substantial part of the Permanent Works by the Employer either before or after completion to the satisfaction of the Eng

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10
Q

What are other alternate dispute resolutions methods available

A

Negotiation, Mediation, Conciliation, Med-Ard, Expert Determination, Neutral Evalaution, Dispute Review Boards, Mini Trial

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11
Q

How to certify Advance Payment (pre requirements)

A
  • LOA issued or On Signing the Form of Agreement
  • Performance Bond
  • Advance Payment Guarantee (for AP amount)
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12
Q

Advantages & Disadvantages of arbitration vs litigation;

A

Advantages;
○ Arbitrators are experts on this field
○ Confidentiality (private hearing)
○ Speed – 6 months under UAE law
○ Flexibility in procedure (place, date and time) Party autonomy
○ International enforceability – New York convention – 1959 (UAE joined in 2006)
Continuity of the same arbitrator(s)

DisAdvatages;
Cost
Power of arbitrators (Calling witnesses / disclosure of documents)

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13
Q

FIDIC Modified according to the client requirements (making it bespoke contract)

A 
Payment terms
Advance payment 
Price escalation disallowed
Notice periods /Condition precedent
EOT requirements
Arbitration rules
No Interest for late payments
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14
Q

Advance Payment, It’s purpose, value, validity and recovery?

A

Why AP – generally there is a negative cash flow for most part of the project at the beginning, reduce finance cost to Contractor and reduce tender price.

Generally, against a bond -­ Contractor has to submit approved wording, contract copy and cash flow forecast to obtain AP Bond from bank.

Advance Payment Amount = 10% x Contract Value - Contingencies

Recovery : 10% of the estimated value of Permanent Works executed during the period to which the interim certificate applies

APB Validity Period : 12 months or until the full recovery of the advance payment whichever is the later.

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15
Q

Emp obligations towards Nominated SC

A

○ Selection and appointment of a suitable SC on time
○ Nominate another SC if Main Contractor raise reasonable objection – Clause 59.2
○ Making direct payments to NSC in case of MC’s failure – OCoC Clause 59.5
○ Appoint another SC if the NSC fails to perform

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16
Q

What is a contract?

A

A contract is a legally binding agreement with specific terms made between two or more parties in which there is a promise to do something in return for a valuable benefit known as consideration.

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17
Q

What is meant by Cross liability ?

A

When insurance under both contractor and employer, damages to both parties are covered as if they are separately insured

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18
Q

Interim Payment Certificate

A

Clause 60.4 – within 28 days of receipt of statement, Eng shall issue an Interim Payment Certificate to Emp subject to;;
² Retention -­ 5% of Contract Sum
² Partial recovery of any advance payment
² Any sums which are due & payable to the Emp
Previous payment made by the Emp

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19
Q

Headings of a loss and expense claim?

A
  1. Delay cost due to each delay event derived from contemporary records (idling resources, demobilizing and remobilizing costs etc)
  2. Loss of productivity / disruption costs (measured mile approach)
  3. Prolonged site overheads (staff, office, utilities, plant, transport, insurance, bonds)
  4. Under-­recovery of head office overheads (formula – Hudson, Emden, Eichleay etc)
  5. Additional finance charges due to longer duration
  6. Finance charges due to late release of retentions
  7. Subcontractor’s claims
  8. Escalation claims (Late procurement)
  9. Loss of profit
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20
Q

Final accounts procedure as per the FIDIC 87?

A

The contractor statement of final account to be included following;

  1. Value of work done accodance with contract
  2. Any further sum contractor consider due under the contract

Upon receipt of the draft final account statement, I will check and agreed with the contractor. Further, request the discharge letter from contractor assuring that agreed amount is final amount no any future claim as well. The dicharge letter will be activated, when the final payment certificate issued and release the performance bond as well.

When a contractor is not agreed to part of the final account, the interim payment to be issue to contractor and disputed part need to refer to the Engineer’s decision.

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21
Q

Oman Court Structure, Oman Legal System, Important Law Provisions in Oman

A

Court Structure

1. Primary Court  - Court of First Instance 
2. Court of Appeal (within 30 days)
3. Court of Cassation (Supreme Court)

Oman Legal System
• Common law system (Written +Judge made law + Judicial Precedent)
• Civil law system (Written only, codified law)

Important Law Provisions in Oman
• Oman Arbitration Law (Royal Decree 47/1997 as amended)
• Contracts (Muqawala) - Civil Code (Royal Decree 29/2013)
Labour Law - (Royal Decree 35/2003)

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22
Q

Requirements for issuing TOC/CC?

A

○ Permanent Works should be substantially completed Satisfactorily
○ Passed any Tests on Completion
○Written undertaking from the Contractor to finish any outstanding work during DLP

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23
Q

What are the types of programmes in a project?

A

Baseline Programme
Revised programmes
As-­built programme

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24
Q

What is variation?

A

Variation is any changes made to the original scope

○ Increase or decrease of the quantity of any work
○ Omit any such work
○ Change the character or quality or kind
○ Change the levels, lines, positions, dimensions
○ Execute additional works
○ Change the specified sequence or timing of the work

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25
Q

What is the claim procedure / how to you assess a claim?

A

Clause 53.1 – notice Oman Condition of Contract Clause 52.5

Ø Within 28 days after the event (In OCoC Monthly statements with particulars) Notify at the earliest
Ø Pursuant to the Contract or otherwise (under law – extra-­contractual, exgratia, quantum merit)

Ø Contractor to keep contemporary records (Eng shall inspect and instruct the Contractor to keep any additional records)

Ø Detailed particulars of amount claimed -­ Within 28 days or as agreed with the Eng

Ø Interim account -­ when the event has continuing effect
Ø Further interim accounts – accumulated amount of claim at intervals as agreed with Eng
Ø Final account -­ within 28 days of the end of effects

failure of Contractor to comply
Ø Entitlement will be limited to the amount that can be verified from the contemporary records

Clause 53.5
Ø Contractor is entitled to be paid under interim PC
If particulars insufficient to substantiate whole claim, then such part substantiated

26
Q

What is Novation?

A

Mechanism to transfer all rights and liabilities by one party to a third party who will replace the original party in the contract. Requires the agreement of all three parties involved.

27
Q

What is Contract Administration?

A

CA is all about;
1. Timely and proper discharge of obligations to protect interest of the employer,
2. Securing of rights, and
Avoiding liabilities, under the contract or otherwise

28
Q

How to administrate an insurance claim?

A 
Inform insurance company
Take police reports + photos
Prepare incident report
Loss adjusters visit
Submit claim with substantiations (quotations etc)
29
Q

What is time at large?

A

Time at large happens when there is no completion date in the contract or no provision to extend time for completion when Emp delays the project and time runs beyond

30
Q

What grounds Emplyer can terminate? (Default of the Contractor)

A

a. Becomes bankrupt
b. Has a receiving order against him
c. Presents his petition in bankruptcy
d. Makes arrangements in favor of creditors
e. Agrees to carry out the contract under a committee of inspection of creditor
f. Goes into liquidation other than voluntary liquidation for amalgamation
g. Assigns works without reasonable grounds
h. Abandons the contract
i. Fails to commence works without reasonable grounds
j. Suspends progress for 28 days after remaining notice to proceed
k. Unsatisfactory manner of execution
l. Persistently neglects to carry out obligations by the engineer
m. Fails to remove materials or work rejected by the engineer
n. Delays in performance indicative of inability to stick to time schedule when the time is the essence
o. Sublet any party of work which result in bad workmanship
The emp has the power to enter into site and expel the contractor and sell plants/term wks, materials that have been deemed to be his property.

31
Q

Performance Bond It’s purpose, value, validity?

A

Oman white book : Clause 10 - issued within 28 days upon receipt of LOA,

Should valid until the end of the Maintenance Period

Purpose: For the Emp to recover losses in the event of a breach of contract by the Contractor .

32
Q

Hot to Challenge an Arbitration Award ? CAn we?

A

Challenging an Arbitration Award –

  1. Jurisdictional challenge (if no arbitration agreement, matters are not arbitral like those against public policy)
  2. Procedural errors (witness oath, dispute not properly established) Equal opportunity (statement of case, statement of defence)
  3. Bias (Conflict of Interest)
33
Q

Grounds for EOT

A
  1. amount or nature of extra or additional works
  2. any cause of delay referred to in these conditions (delay in drawings – 6.4 / unforeseeable obstructions – 12.2 / suspension – 40.2)
  3. exceptionally adverse climatic conditions (frequency / intensity / duration – should not be reasonably foreseeable for an experienced contractor)
  4. any delay, impediment or prevention by the Emp (delay in nomination – 59)
  5. other special circumstances (George Bush visit)
34
Q

What is a Concurrent delay?

A

Delays – Contractor, Employer and Neutral

Two or more types of delay events (occurring either simultaneously or sequentially) overlap in their consequences – not addressed in FIDIC.

35
Q

How do you check an EOT Claim?

A
  • I will discuss with Engineer and Planning Engineer, determine that numbers of days to be awarded to contrator as a EOT. As contractor was full fill the notice provision I will check financial section of the claim.
    Check the prolongation cost in following headings
    1. Contractors project manamgement cost for prolongatoiin period.
    2. Cost for extend a bond and insurance
    3. Running cost cotractor’s engs adn emp facilities
    4. Running cost for plant and scaffolding
    5. Running cost for generrator, water and fuel
    6. HO over head cost, cost for extend a warranty, cost late release of retention
36
Q

What is Subrogation?

A

Right of the insurance company to sue whoever is responsible for causing loss to the insured

37
Q

What are the Key areas that a Contract should address?

A

○ Responsibilities of each party
○ Contract management procedures
○ Scope of work, standards, spec, quality
○ Time frame, EOT provisions
○ Payment mechanism (interim & final)
○ Dispute resolution mechanism
○ Mechanism for dealing with changes
Mechanism for handling default and termination

38
Q

What does the Substantial completion means

A

The Emp can take beneficial use of the project for its intended purpose – Contractor still liable to complete the project in its entirety but entitled to receive TOC

39
Q

Completion and issuing Certificate of Completion?

A

Completion – As per Clause 48 Oman Conditions of Contract when the works substantially completed

Contractor may give written notice to the Eng to issue the Completion Certificate subject to the followings;

1. Passed any final test that may be prescribed by the Contract.
2. Undertaking to finish any outstanding work during the period of maintenance.

Eng shall issue a Certificate of Completion within 21 days with a copy to the Emp

40
Q

What types of insurances required ?

A

Works Insurance
Third party liability
Workmen compensation
Contractor’s Plants & Equipment

41
Q

Terms of a Contract, What are Express, Incorporated, Implied Terms?

A
  1. Express Terms -­ terms that the parties have specifically agreed upon
  2. Incorporated Terms (By notice or by course of dealing) [notice -­ where contract refers to terms in another document, course of dealings -­ LC payments, charges by applicant]
  3. Implied Terms -­ terms assumed by law to exist in a contract [Ex: Decennial liability]
42
Q

What is LAD? What is a Paneity?

A
  1. Liquidated - A value is stated in the contract and referred to as liquidated or liquidated and ascertained damages (LAD). Predefined sum to be payable in the event of delay beyond the
    completion date.
43
Q

What is Assignment ?

A

Assignment – Mechanism to transfer rights by one party to a third party (Liabilities / burdens cannot be assigned). Generally, does not require the consent of other party Construction contracts usually require consent for assignment

44
Q

FIDIC RAINBOW SUIT 2017

A
  1. RED BOOK - Condition of Contract
  2. PINK BOOK - Multilateral Development Bank (MBDS)
  3. YELLOW BOOK - Condition of Contract PLAN, Design & Build
  4. SILVER BOOK - Condition of Contract for EPC/Turnkey
  5. ORANGE BOOK - Condition for Design - Build Turnkey
  6. GOLD BOOK - Contracts for Design-Build ad Operate DBO (Maintenance)
  7. GREEN BOOK - Conditions of Short Form of Contract
  8. BLUE BOOK - Conditions of Contract for Dredging Work
  9. WHITE BOOK - Point Consultants
45
Q

Key differences between Tender and Contract

A

Contract Agreement,
Letter of Acceptance,
Tender Addenda,
Post Tender Clarifications are added in Contract

46
Q

What are Un-liquidated damages?

A

Unliquidated - based on the actual loss of the employer (need to be proven at the time of the loss.
According to the principles of the law of contract, to succeed in a claim the claimant would need to demonstrate:
§ the breach of contract caused losses in the amount claimed
§ the loss was not too remote at the time of formation of the contract; and they took reasonable steps to mitigate the loss.

47
Q

Why use of Std forms is recommended?

A

Familiarity
Tested documents
Risk Balance document (best person to handle it)

48
Q

Delay analysis methods?

A

As planed impacted -­ adds an identified excusable delay event (or events), either as a separate activity (or activities), or onto the duration of an existing activity (or activities), into the As-­planned programme.

As planed as built -­ compares the duration of an As-­planned activity (or the duration of all As-­planned activities) on the original programme with the As-­built duration for that same activity (or those same activities) on the As-­built programme.
	
Collapse as built -­ removing from the As-­built programme identified excusable delays to show what the Completion Date would have been if those delay events had not occurred. (This is also called ‘but for analysis’ -­ but for the delays what would be the completion date)

Time slice analysis -­ Time impact analysis can be considered under two heads, i.e. Window Analysis (also known as Time Slice analysis) and Snapshot analysis. Window analysis is based on the analysis of the effects of delay events over the entire length of a project by looking at the events which have affected progress within ‘windows’ of the contract period sequentially.

49
Q

How a contract can come to an end ?

A
  • Discharged by performance (Ex: DLC)
    • Terminated by mutual agreement
      • Terminated by Court Order (Ex: bankruptcy)
50
Q

What are Collateral warranties ?

A

Agreements which are associated with another ‘primary’ contract. They provide for a duty of care to be extended by one of the contracting parties to a third party who is not party to the original contract.

51
Q

Dispute avoidance and resolution in your contract ?

A

Settlement of disputes as per Oman Conditions of Contract (Clause 67)

Ø Any dispute should refer to the engineer
Ø Within 90 days, Eng shall give written notice to the Emp& Contractor
Ø If there is no claim to arbitration (dissatisfaction Eng’s decision) within 90 days Eng’s decision shall remain final and binding.
Ø Arbitration shall proceed on two grounds
1. If Eng fail to give his decision within 90days
2. One party is dissatisfied
Both Parties can appoint an arbitrator of their choice or failing such agreement on application on either party by the Chairman of the Committee for the settlement of Commercial Disputes of the Sultanate of Oman who shall appoint an professional arbitrator .

52
Q

Parts of a claim?

A

Ø Facts – Contemporary records, witness statement, other evidence (news articles etc)
Ø Legal basis – Contractual and legal provisions
Ø Liability – Emp liability to provide relief
Quantum – Amount of EOT and/or additional payment

53
Q

What are the Elements/Principles of a contract?

A

1) Offer
2) Acceptance
3) Consideration
4) Intention to create legal relations
5) Legal capacity
6) Legality

54
Q

What is Determination/ Termination

A

Determination – a valid and enforceable contract comes to an end prematurely before it has been discharged by performance

55
Q

What is a claim?

A

a legitimate request for additional compensation of time or costs on account of a change or breach of the terms of Contract.

56
Q

Named / Type Nominated subcontractors?

A

Domestic – Appointed by MC as per his own requirements subject to approval of Eng
Named – Appointed by MC from the list provided by the Employer
Nominated – Appointed by the Emp but contract with MC

57
Q

How do you evaluate a veriation?

A

a. At the rates and prices set out in the Contract (applicable rates)
b. Rate & prices in the Contract used as the basis (L+M adjustment with O/H & P
c. Suitable rates and prices agreed between Engineer and the Contractor (Actual cost) First principles
d. Engineer shall fix appropriate rates & prices

Engineer shall determine provisional rates or prices to enable on-account payments to be included in certificate.

58
Q

Consequences of after issuing CC/TOC;

A

² The client takes possession and control of the building
² Cessation of any further liability for delay damages, whether liquidated or unliquidated
² Commencement of a defects liability
² Milestone payment or release of retention monies

The Contract shall not be considered as completed until DLC or Performance Certificate is issued by the Eng

59
Q

How do we avoid Disputes?

A

• Choose correct procurement path
• Ensure proper coordination between different tender documents and provide timely and proper answers to tender queries and distribute to all
• Use standard forms as much as possible
• Allow sufficient time to finalize contracts
Appoint qualified professionals to prepare and administrate contracts

60
Q

Change management procedure?

A

○ Engineer should get the clients approval for NOV first with accepted TIME & COST impact.
○ Client then either approve to issue instruction or reject or modify.
○ Upon receiving the approval only Engineer shall issue the instruction to change the scope of work.

61
Q

How do you do Interim valuations?

A

at the end of each month submit monthly statement in respect of;;
○ Value of Permanent Works executed
○ List of materials delivered to the Site
○ Any other sum (claims under Clause 52.5)
Amounts payable to Sub-Contractors listed separately.

APC QS (Notes Based Q&As) (5 decks)

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