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APC Project Management Revision Pack > Contract Practice > Flashcards

Contract Practice Flashcards

1
Q

What is the difference between a warranty and a bond?

A
  • Bonds are a means of protection against the non-performance of the contractor.
  • Collateral warranties are 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. (Such as the Client and a Sub-Contractor)
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2
Q

Can the Client / Contractor terminate a contract if either party becomes insolvent?

A

Yes

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3
Q

What is change control?

A

A process that ensures potential changes to the deliverables of a project or the sequence of work in a project, are recorded, evaluated, authorised and managed

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4
Q

What is a variation?

A

Alterations or modifications to the design, quality or quantity of the contract works, to the site access or working conditions

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5
Q

Why might a Variation arise?

A
  • change to spec etc
  • discrepancy between contract documents
  • discrepancy with statutory requirements
  • errors and omissions
  • deficiency in employer’s requirements
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6
Q

Can the contractor object to a variation?

A

In accordance with clause 13.1(a) of the Hong Kong Standard Building Contract yes.

  • Site Access
  • Use of the site
  • Limitation of working space or working hours
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7
Q

How soon does a contractor have to comply with an instruction?

A

Forthwith

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8
Q

What can the Architect (PM) do if they don’t?

A
  • He can issue a compliance notice
  • If there is still no action by the contractor within 7 days, others can be employed to carry out that work and the additional cost charged to the contractor
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9
Q

What are the valuation rules in the HKSBC?

A

There are three rules for measurable work:

  • Additional or substituted work which can be properly valued by measurement
  • Works which are subject to provisional quantities or sums
  • Works involved in the expenditure of provision sums
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10
Q

What is quantum meruit?

A

Translates to ‘the amount deserved’. It is used to refer to a claim for a reasonable sum, such as when a contractor seeks payment for work which has not been determined by a contract.

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11
Q

Who can instruct change?

A

Depending on the form of contract. Standard form of contract it is typically the Architect, in my experience this role has been transferred to the Project Manager on behalf of the Client.

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12
Q

How do you price change?

A

I will work with my QS team using the rates agreed in the SOR

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13
Q

What is an Extension of Time (EOT)?

A

Adjustment to the completion date and relieves the contractor’s liability to pay liquidated damages for the period of the extension (Listed Events)

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14
Q

What clause within the HKSBC is the EOT Clause?

A

Clause 25

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15
Q

Does an EOT always give rise to additional money to the Contractor?

A

No

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16
Q

Why does an EOT not always qualify for additional money?

A

As the delay cause could be at no fault to either party (Force Majeure - Covid-19)

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17
Q

What is loss and Expense (L&E)?

A

Reimburses the contractor for direct loss and/or expense incurred in carrying out additional work or from an employer’s breach of contract (Qualifying Events)

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18
Q

What clause within the HKSBC is the L&E Clause?

A

Clause 27

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19
Q

What would qualify the contractor to be entitled to a L&E in the HKSBC?

A

The contract stipulates a list of Qualifying Events which the contractor is able to make a claim in respect of

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20
Q

What are the procedures for claiming loss and expense under the HKSBC?

A

The Contractor shall in writing and within 28 days of becoming apparent of an event may give rise to claim or within 7 days of receiving a claim from a NSC issue formal notice.

The Contractor should also as soon as practicable / within 60 days of giving the first notice submit the following:

  • Particulars giving rise to the claim
  • the amount of the claim
  • detailed build
  • Copy of the records kept

If Contractor cannot provide this within the 60 day period a notice should be issued to the Architect (PM) to that effect and issue interim particulars

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21
Q

What are the procedures for claiming EOT under the HKSBC?

A

The contractor must first give a notice of delays in writing within 28 days of the commencement of likely delay that could cause delay to the completion date becoming apparent.

First Notice:

  • state the lowlihood and estimated length of delay
  • state material circumstance including the cause of delay
  • State if they consider they may become entitled to an EOT and if so by which Listed Event.

Second Notice:

  • As soon as practicable but within 28 days of the first notice, provide substantiation that “the listed” event is the cause of delay
  • Particulars of the cause and effect and length of delay.
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22
Q

How do you fix a new completion date?

A

After receipt of the contractors second notice, within 60 days of receipt providing the listed event is valid.

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23
Q

What are the basic requirements of Contractors All Risk Insurance?

A
  • Costs and Expenses in respect of propping up or opening up works etc.
  • Extra costs for express freight / air freight
  • overtime labour costs
  • Damage to works / plant
  • Stolen goods / inventory without being traceable
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24
Q

Can you list out the contents page of the HKSBC

A
  • Articles of Agreement
  • Attestation
  • General Conditions
  • Interpretation and Definitions
  • Contractors Obligations
  • Master Programme
  • Architect Instructions
    etc.
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25
Q

What documents form the Contract Documents?

A
  • Articles of Agreement
  • Form of Tender (with employers letter and acceptance)
  • Special Conditions
  • The Conditions
  • Contract Drawings
  • Specifications
  • Schedule of Rates
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26
Q

Can the Architect (PM) dismiss an individual?

A

Yes, due to incompetence, misconduct or other similar reasons.

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27
Q

What is the key thing to remember when assessing loss and expense claims?

A

It should be the ACTUAL loss incurred by the contractor

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28
Q

What are the common heads of claim in loss and expense applications?

A
  • Prolongation (extra site overheads i.e. preliminaries)
  • Thickening of preliminaries (e.g. extra supervision required due to variations)
  • Disruption (causing plant / labour to be underemployed – hard to prove) Increases in labour / material costs during the period of delay
  • Head office overheads
  • Loss of profit (commonly combined with head office overheads)
  • Finance charges (i.e. interest)
  • Acceleration costs
  • Claim preparation costs
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29
Q

How are head office overheads and loss of profit often calculated?

A

By the use of a formula – Hudson, Emdem or Eichlaey

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30
Q

Once loss and expense is ascertained how is it added to the contract sum?

A

Should be added to the contract sum immediately and paid in the next interim certificate

It is NOT subject to retention

31
Q

What are Liquidated Damages?

A
  • A genuine pre-estimate of the likely loss incurred by the employer should the completion date not be met
32
Q

What if the client tells you the LDs are to be £100,000 per week?

A
  • Check that they do believe that they are a genuine pre-estimate of likely loss
  • Explain the dangers that they might be construed to be a penalty
33
Q

What if the liquidated damages are construed to be a penalty?

A
  • They will not be enforceable

- The employer will have to sue for any actual direct loss that can be proved

34
Q

What are the benefits of liquidated damages to the contractor?

A

The contractor knows the consequences of delay from the outset

35
Q

What are the benefits of being able to grant an extension of time?

A
  • It relieves the contractor’s liability for liquidated damages for a delay that they did not cause
  • It enables another completion date to be set, which maintains the employer’s ability to take liquidated damages if another delay occurs
36
Q

What happens when ‘time is at large’?

A
  • There is no set completion date
  • The contractor only has the obligation to complete the works in a ‘reasonable time’
  • Liquidated damages cannot be claimed (no date to take them from)
  • The employer would have to try and prove that the contractor had not completed in a reasonable time
37
Q

What is retention?

A

It is a percentage of each interim certificate deducted and retained by the employer from each interim payment to the contractor

38
Q

What is the purpose of retention?

A

It provides an incentive for the contractor to complete the works promptly

39
Q

What is acceleration?

A

Either describes the completion of the works in a shorter time than that anticipated at tender or the act of recovery by the contractor if they are in delay

40
Q

What options may be considered for acceleration?

A
  • Re-sequencing the works – making sequential activities parallel
  • Increasing the working time – working longer hours
  • Increasing the resources employed – employer bigger / more gangs
  • Changing the working methods e.g. using a dehumidifier to dry out the works faster
  • Increasing incentives – e.g. bonuses
41
Q

What is the date for completion?

A

The date fixed and stated in the contract particulars

42
Q

What is the difference between date for completion and the completion date?

A

This is the date for completion or any other date that is subsequently fixed (i.e. after an EOT)

43
Q

What is Substantial Completion?

A

When the employer takes back possession of the works

44
Q

What is sectional completion?

A

The completion and handover of the works to the employer in agreed stages

45
Q

What is the recourse if the contractor disagrees with the architect that the works are not completed?

A

Adjudication

46
Q

What are the consequences of substantial / sectional completion?

A
  • Half of the retention is released
  • The Rectification Period begins
  • The contractor’s responsibility for insuring the works (if applicable) ends
  • The contractor’s liability for liquidated damages ends
  • The employer is now responsible for any damages to the works
47
Q

What is partial possession?

A

Where the employer requests and the contractor consents to the employer taking possession of the works / part of the works before the date for practical / sectional completion?

48
Q

What is the difference between partial possession and sectional completion?

A

Sectional completion is a contractual obligation to hand over the section at the stated date, partial possession relies on the contractor’s consent

49
Q

What part of the standard building contract deals with substantial completion and partial possession?

A

Substantial Completion - Clause 17

Partial Possession - Clause 18

50
Q

What is DLP?

A

The contractor has an obligation to make good any defects, shrinkages or other faults that arise during this period of time

51
Q

How long do DLP it last for?

A

The default position is 6 months. BUT it is common to amend this to 12 months – so the building is observed in all seasons

52
Q

What does the defects rectification certificate do?

A

Issued by the architect to certify that all of the defects that have been required to be made good by the contractor have been so the remaining retention is released

53
Q

What are collateral warranties?

A

Create contractual relationships between parties where there would otherwise not have been any. They are alongside another agreement (Client and Sub-Contractor)

54
Q

What are the main sources of guarantee that can be sought in construction?

A

Bond

Parent company guarantee

55
Q

What is a bond?

A

An arrangement where a contractual duty owed by one party to another is backed up by a third party

56
Q

What form must a bond be in?

A

It must be in writing, it is common for it to be a deed. It will contain a duration and a financial limit

57
Q

Who normally provides a bond?

A

A financial institution e.g. a bank for a premium

58
Q

What is a parent company guarantee?

A

An arrangement where the contractual performance of one company in a corporate group is underwritten by the other members of that corporate group

59
Q

What are the different types of bond that may be provided?

A 
Performance bond 
	Retention bond 
	Materials off site bond 
	Advance payment bond 
	Tender bond 
	Payment bond
60
Q

Which is the most common type of bond in the construction industry?

A

Performance bond

61
Q

What does a Performance bond do?

A

Guarantees the satisfactory performance of one party’s contractual obligations

62
Q

What is a final account?

A

Detailed statement of all the adjustments to the contract sum and therefore the total amount that the employer is liable to pay, together with the basis on which it was calculated

63
Q

Who prepares the Final Account?

A

In accordance with the Hong Kong Standard Building Contract this is to be the Quantity Surveyor. Unless otherwise stated this is within 12 months of Substantial Completion.

64
Q

The Final Account Meeting - What should be taken into account?

A

The following should be taken out of the Contract Sum:

  • Prime costs for works carried out by NSC
  • Materials or goods supplied by NSC
  • All provisional Sums
  • Total Number of Valuations

Any points of disagreement should be discussed and negotiated. Both parties should sign the summary to show their agreement

65
Q

What is the final certificate conclusive evidence of?

A
  • That all adjustments of the contract sum have been properly dealt with
  • That all extensions of time have been properly given and dealt with
  • That all direct loss and/or expense claims have been settled
66
Q

What is a contract?

A

A legal agreement signed between two parties for the exchange of good or services for a fee

67
Q

What is required for a contract to be binding?

A
  • Offer by one party
  • Acceptance by the other party
  • Consideration of the offer
  • Intent to form a contract
  • Legality of contract
  • Capacity to make agreement
68
Q

Can you name some other forms of Contract?

A
  • NEC 3
  • NEC 4
  • Hong Kong Standard Buildings Contract with Quantities
  • Hong Kong Standard Building Contract Without Quantities
69
Q

Do you know of any guidance for contract selection?

A

RICS guidance note : Appropriate contract selection

70
Q

What is the RICS black book?

A

The ‘Black Book’ is a suite of guidance notes that define good technical standards for quantity surveying and construction professionals. These standards are essential development tools for younger professionals working through their APC and useful guides to best practice for more experienced professionals

71
Q

How do you determine what contract to use on a building project?

A

There are various factors to consider;

  • Type of procurement route used
  • Size of project
  • Type of client (preferences by lawyers, used it before etc)
  • Type of works
72
Q

How is a contract executed?

A
  • Under hand, signed by both parties, 6 year limitation period. Means that a party must bring about any claim for breach of contract within 6 years of the breach taking place. Any later and the claim will be time-barred.
  • Under Seal (as a deed), signed and witnessed, 12 year limitation period. Valuable consideration not required,
73
Q

What are common contract documents?

A
  • The Contract (with any amendments)
  • Preliminaries
  • Contract sum analysis/Pricing Schedule
  • Drawings
  • Specification
  • Planning conditions/agreements
  • Contractors Proposals
74
Q

What is the Main Contractor responsible for?

A

The construction of the project, through either direct labour or sub-contracted labour

Health and safety,

  • Construction phase plan
  • Prepare, develop and implement written site plans
  • Provide welfare facilities
  • Ensure all workers have site inductions
  • Provide all relevant information required for H&S plan to the Principle Designer

APC Project Management Revision Pack (20 decks)

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