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Omar Assoc RICS prep > Contract Practice > Flashcards

Contract Practice Flashcards

1
Q

What are the principles of Contract Law?

A
  • Offer
  • Acceptance
  • Consideration
  • Capacity
  • Intent
  • legality
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2
Q

What is meant by an offer?

A
  • A promise made by one party which matures into a Contract when accepted by the other party
  • An invitation to treat does not turn into a contract; it merely is a stage in negotiations, inviting the other party to make an offer
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3
Q

What is meant by acceptance?

A
  • where a party agrees to the terms of the offer presented by another party, creating a binding contract
  • Acceptance must be unconditional (e.g. a signature on a contract of employment)
  • Negotiations are counter-offers, not acceptance
  • Silence is not acceptance, unless it is clear acceptance was intended (as substantiated by that party’s conduct)
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4
Q

What is meant by consideration?

A
  • Parties must exchange something of value for a contract to be binding
  • For example, selling their house for £1 is valid consideration. Selling your house for nothing is not.
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5
Q

What is meant by capacity?

A
  • All parties must have the ability to understand the terms of and any obligations under the contract.
  • Consent to the contract must be freely given (force, fraud, misrepresentation, inebriation renders the contract void)
  • People under 18, under the influence of drugs or those suffering from mental health conditions generally lack the capacity to enter into contracts.
  • THE CLIENT/COMPANY MUST HAVE THE CAPACITY TO BE ABLE TO DELIVER THE WORK/PAY FOR THE WORK e.g. I do not have the capacity to enter into a Contract to deliver a £100m scheme because I am one person with £0 capital, no labour etc
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6
Q

What is meant by intent?

A
  • Not all agreements between parties are contracts. It must be clear the parties intended to enter into a legally binding contract
  • The person who wants the agreement to be a contract must prove the parties actually intended to enter into a legally binding contract
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7
Q

What is a letter of intent?

A
  • A letter from an employer to a Contractor indicating intention to enter into a formal written Contract for works described
  • LOI’s are used to begin work before formal contract is executed
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8
Q

What is the HGRCA 1996?

A
  • Housing Grants, Contruction and Regeneration Act 1996
  • Applies to all Contracts for “Construction Operations” (incl consultants)
  • Intended to ensure payments are made promptly throughout the supply chain and that disputes and resolved swiftly
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9
Q

What rights does the HGRCA give construction professionals?

A
  • Right to be paid in interim, periodic or stage payments
  • Right to be informed of the amount due, or any amounts to be withheld
  • Right to suspend performance for non-payment
  • The right to adjudication
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10
Q

What were the changes to the HGCRA in 2009?

A
  • LDEDCA 2009, local democracy, economic development and construction act saw changes to HGRCA
  • Includes all Contracts, including those not in writing
  • Withholding notice replaced with pay less notice, altering how the sum to be paid is built up.
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11
Q

List some the Forms of Contract in the JCT suite

A
  • JCT Design and Build 2016
  • JCT Standard Building Contract 2016
  • JCT Intermediate Building Contract 2016
  • JCT Minor Works Contract 2016
  • JCT Measured Contract 2016
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12
Q

What are some of the other forms of Contract aside from JCT?

A
  • NEC3 ECC
  • FIDIC Red Book (Conditions of Contract for Construction)
  • FIDIC Yellow Book (Conditions of contract for Plant & Design-Build)
  • FIDIC Silver Book (Conditions of Contract for EPC Turnkey Projects)
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13
Q

What is assignment?

A
  • The benefit of a contract is transferred from one party to another, but the burden of the contract remains with the original party
  • Contrast of Novation
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14
Q

What is novation?

A
  • The process whereby both the benefit and the burden of a Contract are transferred from one party to another.
  • Requires consent from all parties, usually parties enter into tripartite novation agreement.
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15
Q

What is a collateral warranty?

A

A way of forming a direct contractual link between two parties with otherwise wouldn’t have a link, such as between a sub-contractor and a client.

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16
Q

What is a performance bond?

A

A means of insuring the client against the Contractor failing to fulfil their contractual obligation

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17
Q

Why might you get a performance bond for a smaller Contractor?

A

They are more at risk of going insolvent. Less well established, probably are more dependent on credit and good cash flow.

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18
Q

How much is a typical performance bond worth?

A

10% of Contract Sum

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19
Q

Who issues performance bonds?

A

Banks/Insurance Companies

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20
Q

What are the two variations of performance bonds?

A
  • Conditional: Client has to prove that Contractor has not performed
  • On Demand: No pre-conditions needed to be met. Not often used, seen as too harsh.
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21
Q

How long would you recommend a performance bond should stay in place?

A

Until the end of the Defects Liability Period.

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22
Q

Name some insurances that you may come across in a construction Contract.

A
  • Contract Works Insurance
  • Employer’s Liability Insurance
  • Public Liability Insurance
  • Professional Indemnity Insurance
  • Terrorism Insurance
  • Flood Insurance
  • Legal Indemnity Insurance
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23
Q

What is Contract Works Insurance?

A
  • non-standard insurance policy
  • coverage for property damage and third-party injury or damage claims, the two primary types of risks on construction projects
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24
Q

What is Employer’s Liability Insurance?

A

Covers compensation if employees are injured or become ill because of the work they do.

All firms that employ staff are legally required to hold Employers Liability Insurance.

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25
Q

What is public liability insurance?

A

Provides cover against personal injury or death, loss or damage to property of third parties e.g. the general public or sub-contractors

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26
Q

What is professional indemnity insurance?

A

Provides cover for negligence on part of service provider. Will ensure service provider will not be bankrupted by successful claim, and recompense to client to re-mediate consequences of negligence.

Essential for providers of professional services

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27
Q

What is legal indemnity insurance?

A

Provides recompense in the event that the policy holder incurs capital loss or expense dealing with a range of possible legal issues.

Examples can be unforeseen rights of way issues over land that has been purchased, incurring costs to rectify.

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28
Q

What is an advance payment?

A

When a Contract Sum is paid in advance of the exchange (prior to work being done/goods supplied)

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29
Q

Why may a contractor request advance payment?

A

If there are significant start up/procurement costs, e.g. expensive items with long lead times

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30
Q

How might the client protect themselves when paying a Contractor in advance?

A

Secure a payment bond from the Contractor

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31
Q

What are the implications for paying for goods that the sub-contractor has ordered but have not yet been delivered to site?

A

Puts the client at risk in the case that the supplier/sub-contractor goes insolvent, as they may never receive the materials.

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32
Q

Materials for the project have been sourced and delivered to site. Does the client pay for those materials?

A

Yes unless stated otherwise in the Contract. Payment is made regardless of whether Contractor has paid supplier.

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33
Q

What is “retention of ownership” in regards to materials?

A
  • This is a clause that allows the supplier to hold ownership of materials until payment.
  • Good for supplier as it encourages payment, improves cashflow
  • Bad for the client as if items are not affixed, as client may pay Main Contractor but Main Contractor may not pay supplier. Supplier could reclaim those items.
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34
Q

What is meant by “fluctuations”?

A
  • A mechanism to deal with inflation, particularly useful in long lasting projects.
  • Accounts for the inflation of labour costs, transport, materials (escalation), overheads.
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35
Q

How are fluctuations calculated?

A
  • Using nationally published price indices
  • Payment is based on cashflow projections of material, then quarterly percentage assessments of inflation are added to projection
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36
Q

Are all projects subject to fluctuations?

A

No, only projects whereby it is stated within the Contract that fluctuations will be accounted for.

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37
Q

What is retention?

A

Retention is a percentage (often 5%) of the amount certified as due to the contractor on an interim certificate, that is deducted from the amount due and retained by the client.

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38
Q

When does retention get released?

A

Half released at practical completion, half released upon certification of making good defects

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39
Q

Who keeps the interest on the retention money?

A

The client

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40
Q

What happens with the retention money the client keeps?

A

The Contract may state that the retention money is kept in a separate bank account.

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41
Q

What issues do sub-contractors have with regard to retention?

A
  • Causes cashflow problems
  • Release of retention can be delayed for reasons out of their control, e.g. defects liability period not ending due to other parties not remedying defects
  • construction supply chain payment charter proposed abolishing retention by 2025
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42
Q

What is a retention bond?

A
  • Instead of holding back money, client receives bond valued at the same amount as would otherwise be retained.
  • This allows contractor to keep money, helping cashflow, but also protects the client as they can cash in on the bond if required
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43
Q

What is a variation?

A

An alteration to the original scope of works in a construction contract.

This may be an omission, substitution or addition of works.

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44
Q

Why do variations occur?

A
  • Client changes mind (design development or Contract Documents not stipulating what the client originally wanted in sufficient detail)
  • Geological anomolies
  • Statutory changes
  • Technological advances (changing client requirements)
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45
Q

What are express terms in a Contract?

A

Express terms are those that have been explicitly agreed by both parties and can be oral or in writing.

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46
Q

Does a Contractor have to carry out variations?

A

If there are no express terms, Contractor does not legally have to carry out variation.

Contractor can continue to carry out works as per agreed at tender.

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47
Q

How are variations valued?

A
  • Contract rates
  • If Contract rates are not available (for example in a D&B Contract that was tendered with limited design info), the PQS and Contractor’s QS will negotiate to what is deemed reasonable and fair. Market tesing, BCIS data and in-house data can be used by the PQS to review Contractor submissions.
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48
Q

Why do variations cause conflict?

A
  • Conflict over the value of the change
  • Over whether the change is a client cost or Contractor risk
  • Often conflict occurs where there are gaps in the specification. Contractor may argue it is therefore a change, but Client is not bound to pay for things that a reasonable contractor must have understood to be done

Example: specification may not state every screw used to fix a radiator to the wall, but within the spec for a radiator, pattressing etc, a Contractor would reasonably be expected to assume the inclusion of the screws.

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49
Q

What is an extension of time?

A

Where the Client allows the Construction Period to be extended due to delays that are not the fault of the Contractor.

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50
Q

How does the Contractor acquire an extention of time (EoT)?

A
  • Gives CA/EA written notice identifying the relevant event that caused the delay
  • Proposes adjusted completion date
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51
Q

What counts as a relevant event that can result in an EOT?

A
  • Variations
  • Weather
  • Terrorism
  • Force Majeure
  • Strikes
  • Nominated sub-contractor delays
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52
Q

If the Contractor can foresee a delay caused by a relevant event, what should they do?

A

They are required to prevent or mitigate the delay even if it is not their fault.

If they cannot avoid the delay, they can request an EoT.

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53
Q

How should a Contractor prepare for a claim of EoT?

A
  • Provide good quality information
  • Demonstrate link between breach and delay
  • Demonstrate delay against progress of the works, not programme
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54
Q

What are liquidated damages?

A

Pre-determined damages set at the time the Contract is entered in to, based on the actual loss the client is likely to incur if the Contractor fails to meet the completion date.

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55
Q

What are claims of loss and expense?

A

The Contractor can claim for direct loss and/or expense as a result of relevant matter the client is responsible for.

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56
Q

Give some examples of when a Contractor may be entitled to Loss and Expense?

A
  • Failure to give Contractor site possession/access
  • Delays in instruction
  • Discrepancies in Contract Documents
  • Failure to supply goods/materials
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57
Q

What costs can be claimed under Loss and Expense?

A

Varies between contracts, for example overheads may be excluded.

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58
Q

What are the various methods of dispute resolution?

A
  • Mediation
  • Adjudication
  • Arbitration
  • Litigation
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59
Q

What are the alternative dispute resolution (ADR) methods generally found in Contracts?

A
  • Mediation
  • Adjudication
  • Arbitration
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60
Q

What is adjudication?

A
  • Contractual or statutory procedure for swift interim dispute resolution
  • Provided by a third party adjudicator selected by parties in dispute
  • Purely based on documentary submissions
  • Decisions are binding unless and until revised by arbitration or litigation post-completion
  • No power to award costs
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61
Q

What are the timelines for adjudication?

A
  • Notice of intention to adjudicate must be submitted by one party to the other
  • Adjudicator appointed within 7 days of notice
  • Decision made within 28 days of appointment (can be extended to 42)
  • Adjudication is confidential and a statutory right
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62
Q

What is arbitration?

A
  • A procedure in which both sides agree to let an impartial third party decide the case
  • May be a lawyer or expert in the field of dispute, or in some cases an arbitration panel
  • Arbitrators “award” is legally binding and can be enforced through the courts. (Can award costs)
  • No appeal except under special circumstances
  • Arbitrators have powers to ascertain facts as opposed to just review submissions
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63
Q

What is mediation?

A
  • Where a third party mediator is appointed to assist in the negotiation of a resolution to a dispute
  • Different types of mediation, e.g. evaluative, facilitative, settlement
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64
Q

What is litigation?

A 
The process of engaging in or contesting legal action in court as means of resolving a dispute.
Pros
- Highest quality 
- Judges can compel parties to comply
- Defined rights of appeal in cases where errors of fact or law are made
Cons
- Expensive
- Longer time period to obtain judgement
- Public
65
Q

What are the three main types of sub-contractor?

A
  • Domestic sub-contractor
  • Nominated sub-contractor
  • Named sub-contractor
66
Q

What is a domestic sub-contractor?

A

A sub-contractor selected and appointed by the Main Contractor

67
Q

What is a nominated sub-contractor?

A

A sub-contractor selected by the client to carry out an element of works

68
Q

How is a nominated sub-contractor appointed?

A
  • The client negotiates a price with the nominated sub-contractor, then instructs the main contractor to appoint them for those works
  • The Contractor will include the sub-contractors price as a PC Sum (prime cost sum) in the Contract Sum for the main contract, to which they add OH&P & attendance
69
Q

Why would the client nominate a sub-contractor?

A
  • If the works involves long delivery times
  • If specialist design input is required for the package
  • Where the client orders a preferred item (perhaps that they wish to have complete design control over) such as specialist plant/equipment
70
Q

What is a named sub-contractor?

A

A named sub-contractor is a sub-contractor that has been short-listed by the client as an acceptable sub-contractor in the tender documents for the main construction contract.

In the Contract Sum, a provisional allowance is made for the subcontract package in question. After the Contract is awarded, the package is tendered to the list of named sub-contractors and the PSUM is replaced by the actual cost + on costs.

71
Q

What are the advantages of naming sub-contractors?

A
  • allows the client to influence the sub-contractor selection whilst leaving responsibility for their performance to the main Contractor
  • Alternative to nominated sub-contractors, which are not included as a provision in JCT contracts
72
Q

What is sectional completion?

A

When a project has different completion dates for different sections of the works.

This is common in large projects.

73
Q

What considerations should you make when incorporating sectional completion into a contract?

A
  • Liquidated damages must be specific to each section
  • Retention/retention release must be specific to each section
  • EoT clarifications required, i.e. if EoT is required on section 2 will it impact section 3?
  • Sectional completion must be specified in EXPRESSED TERMS in the Contract
74
Q

What happens with regards to commissioning and O&M manuals at the end of a sectional completion?

A

These items may be left outstanding until practical completion of the whole site.

75
Q

What are the key considerations for sectional completion?

A
  • Logistics
  • Protection of completion sections
  • Insurance for all sections at all times
  • H&S measures dealing with the risk of construction adjacent to occupied areas
76
Q

What is partial possession?

A

Handing over part of the site before official completion.

77
Q

Why would partial possession of the site be given?

A
  • If the client wishes to occupy part of the site
  • When there is no sectional completion in the Contract
  • When part of the site is deemed to have achieved practical completion
78
Q

What are the implications for retention, LDs and DLP when partial possession of the site is given?

A
  • Half retention for that section of works is released
  • The Defects Liability Period (DLP) begins for that part of the site
  • Liquidated Damages are reduced proportionally.
79
Q

What’s the difference between partial possession and sectional completion?

A

This differs from sectional completion as it is not planned, and therefore no provisions for sectional completion are in the Contract.

80
Q

Why might the Contractor not wish to allow partial possession?

A
  • If it disrupts the works
  • If it disrupts access routes
  • If it incurs additional costs

The contractor is not obliged to allow partial possession.

81
Q

What is meant by Contractor’s Design Portion?

A
  • Associated with JCT Contracts
  • It is an agreement for the Contractor to design specific parts of the works
  • The Contractor may in-turn sub-contract this portion out
82
Q

What is the difference between Design & Build and a Standard Building Contract with CDP?

A

In D&B the Contractor is appointed to design the whole works, whereas CDP relates to a specific part of the works.

83
Q

How is CDP incorporated into the Contract?

A
  • There is a provision for CDP in the JCT SBC.
  • A separate sub-contractor design agreement is available for when the main contractor wishes to allocate part of all of the CDP to a sub-contractor.
  • In JCT Intermediate Building Contract has separate Contractor’s Design Agreement as well as Sub-Contractor Design Agreement.
84
Q

If the Main Contractor sub-contracts out the CDP, what responsibilities remain with the MC?

A
  • Coordinating design and construction between the specialist sub-contractor and the main works
  • Ensuring sub-contractor design complies with building regulations
85
Q

How are the requirements for the CDP communicated to the Contractor?

A
  • Requirements will be set out in the ERs (Employers Requirements) in the Tender Documents
  • Contractor will respond in the CPs (Contractor Proposals)
  • Design consultants will judge how far design is taken before handing it over to the Contractor (level of detail in ERs for CDP)
86
Q

What is determination?

A

Determination relates to ending a Contractor’s employment under the Contract. The Contract remains in place, as do the rights of both parties.

87
Q

Why do Contracts provide for determination of the Contractor’s obligations?

A

For the eventuality that there is a breach of Contract by the Contractor or Client. For example:

  • The Contractor may no longer be performing diligently and regularly with the works
88
Q

What is termination of a Contract?

A

Ending of a Contract.

This occurs when there is a repudiatory breach (fundamental breach of Contract) such as the Contractor indicating they no longer intend to accept their obligations under the Contract.

The Contract is terminated and the innocent party can sue for damages.

89
Q

What is a Final Account?

A

The final account is the conclusion of the contract sum
(including all necessary adjustments) and signifies the
agreed amount that the employer will pay the contractor.

90
Q

When is the final payment made?

A

Generally after DLP, subject to all defects being made good.

91
Q

What certificate is issued at the end of the DLP, if all defects are made good in the JCT 2016 Contract suite?

A

Certificate of Making Good Defects

92
Q

What certificate is issued at practical completion in the JCT 2016 Contract suite?

A

Certificate of Practical Completion

93
Q

What happens after the Certificate of Making Good is issued?

A

Final Certificate issued. The client pays the remainder of the retention money minus any kept back for defects that were not rectified.

In some cases, the Contractor may owe the Client money.

94
Q

In the JCT D&B 2016 Contract, which clause refers to Final Account procedures?

A

Clause 4.24 Final Statement and Final Payment

Clause 4.8 Relevant statement and Final Payment Notice

Clause 4.9 Interim and final payments - final date and amount

95
Q

Why may the Final Account be different to that agreed in the Contract Sum?

A
  • Variations
  • Fluctuations
  • PSUMs
  • Prime cost sums
  • LADs
  • Loss and Expense claims
  • Contra claims
96
Q

The Final Account is often an adversarial procedure. What can be done to mitigate this?

A
  • Agree adjustments as project progresses
97
Q

What happens after the PQS and Contractor agree the Final Account?

A

Final Account is paid minus the necessary retention amount.

After DLP, final certificate/statement is issued by EA/CA, and remaining retention is released

98
Q

What happens if after completion of contract, latent defects emerge?

A

Client may claim for damages for breach of contract or negligence

99
Q

What happens on practical completion?

A
  • CA/EA certifies PC when all works have been completed
  • Half retention is released
  • End of Contractor’s liability for LDs
  • DLP begins
  • Various documents may be released to client such as O&M manual, H&S file.
  • Client takes possession
100
Q

When is practical completion?

A

No absolute definition of practical completion in JCT but generally a project is deemed PC when works are complete and there are no outstanding defects (aside from snagging or minor items) so the building can be used.

101
Q

When does the Contractor’s obligation to insure the works come to an end?

A

At PC

102
Q

What is a rolling Final Account?

A

Rolling final accounts will ensure that all instructions and cost effects to a project are agreed and up-to-date at the point of the latest financial report

103
Q

In the JCT 2016 D&B Contract, what are the provisions set for interim payments?

A

Clause 4.7

1 - Interim Payments made by Employer to Contractor as per section 4 and [payment method]
2 - Due date will be 7 days after relevant Interim Valuation Date
3 - If the Interim Payment Application is received after the Interim Valuation date, the Due Date shall we 7 days from whenever the Application is received
4 - Interim Payment Application shall be accompanied by further info as may be specified in ERs
5 - No later than 5 Days after the Due Date the Employer shall give Payment Notice to Contractor

Clause 4.9

1 - Final Date for Payment 14 days from due date
2 - Employer must pay sum on Payment Notice on or before Final Date for Payment
3 - If Payment Notice is not given, Employer must pay what Contractor has stated in interim application
4 - In case of final payment, the Employer shall pay the sum stated as due in Final Payment Notice. If FPN not given, balance stated in relevant statement on of before final date of payment is paid.
5 - No later than 5 days before Final Date for Payment shall Pay Less Notice be given to Contractor

104
Q

What are LADs?

A

Liquidated and Ascertained Damages are pre-determined damages set at the time that a contract is entered into, based on a calculation of the actual loss the client is likely to incur if the contractor fails to meet the completion date.

They are generally calculated weekly or daily, and are NOT A PENALTY. They must be based on actual loss from things such as rent, income.

105
Q

What are unliquidated damages?

A

Unliquidated damages are damages, the exact amount of which has not been pre-agreed, and are typically determined by the courts.

A client can claim for unliquidated damages even if LADs are specified in the Contract, if the actual loss incurred is much more than originally expected.

106
Q

How long does the Defects Liability Period?

A

Generally lasts 6 - 12 months from PC.

107
Q

Who manages the DLP?

A

The CA acts as the bridge between the Client and Contractor.

Client reports to the CA who decides whether the issue is a defect or maintenance issue.

If it is seen to be a defect, the CA will instruct the Contractor

108
Q

Who’s responsibility is it to identify and rectify defects?

A

The Contractor

109
Q

What happens at the end of the DLP with regards to the outstanding defects?

A

The CA prepares a schedule of defects not rectified, and agreed a date with the Contractor by which they will be rectified. If the Contractor does not rectify them, the cost to rectify them shall be taken out of the retention.

110
Q

What clauses relate to Defects in JCT DB 2016?

A

Clause 2.35 Schedules of defects and instructions

Clause 2.36 Notice of Completion of Making Good

111
Q

What are Alternative A and Alternative B in JCT 2016?

A

Different methods of calculating sums due

Alternative A - staged payments: Stages + Changes - Listed Items * any fluctuations

Alternative B - periodic payments: work executed to date + site materials (if they are protected) - Listed Items

112
Q

What are different methods of calculating sums due at payment?

A
  • Staged payments
  • Milestone payments
  • Payments following an activity schedule
  • Periodic payments (Work done to date)
113
Q

What are recitals in a Contract?

A
  • Introductory statements at the begining of a contract
  • First Recital - name of project + address
  • Scene setting, explanatory in nature
114
Q

What are articles in a Contract?

A
  • Set out what is agreed between the parties
  • Contractor’s obligations (1) and Contract Sum (2)
  • Identifies CA/EA
  • Identifies QS
  • Identifies principal designer
  • Identifies Contractor
  • Reference to adjudication/arbitration in event of dispute
115
Q

What are Contract Particulars in a Contract?

A
  • Sets out aspects of Contract that are particular to the project, fills in the blanks
    e. g. where the ERs/CPs/CSA can be found, drawing references, key dates, sections, payment method, insurance option.
  • It is a schedule of variables for the agreement and conditions
116
Q

What is Attestation in a Contract?

A

The attestation is the process of confirming that something is correct or genuine or that a particular requirement has been met. It may be completed:

  • Under seal (signed by both parties, witnessed & made clear it is executed as a deed)
  • Under hand (just signed by both parties)
117
Q

What purpose do the schedule of amendments serve?

A

They amend the conditions set out in the standard form of Contract.

For example, in a JCT DB 2011 Contract you may wish to amend the date the Contractor submits his/her interim application to 7 days prior to the due date. Their are no provisions in JCT DB 2011 contract for a QS to review/value the works, so this amendment gives the QS 7 days to do so.

118
Q

What situation would result in LADs

A

Liquidated and ascertained damages would be due if there was a delay to the completion date caused by the contractor

119
Q

What is a relevant event?

A
  • A delay that was not the contractors fault
  • The fault may be from the client or neither party (e.g. extreme weather)
  • Definitions of relevent events will be found in the contract e.g. delay in site possession, variations, weather, terrorism, civil unrest, changes to statutory requirements

Contractor may be entitled to EoT or claim to loss and expense

120
Q

What must the contractor do if they forsee a relevant event?

A
  • Notify the CA immediately

- Attempt to mitigate the issue

121
Q

What is legality?

A

Conditions in the contract that has been offered/accepted cannot be illegal/unlawful

122
Q

What insurance option would you choose for a new build project under a JCT contract?

A

Option A - requires contractor to take out and maintain joint names all risk insurance of the works

Or

Option B - requires employer to take out and maintain joint names all risk insurance of the works

123
Q

What insurance option would you chose for on an existing building project under a JCT contract?

A

Option C – Requires the employer to take out and maintain joint names specified perils insurance in respect of the existing structures and contents and all risks insurance of the works.

124
Q

What are the main types of contract for traditional procurement?

A
  • lump sum contracts (with or without quantities)
  • remeasurement contracts
  • cost reimbursement contracts
125
Q

What are the main contract suites available?

A
  • JCT
  • FIDIC
  • NEC
  • ICE
  • ACA
126
Q

How many forms of NEC contract are there?

A

7, listed A - G

127
Q

What are options A and B in the NEC contract?

A

Option A - Priced contract with activity schedule

Option B - Priced contract with bill of quantities

128
Q

What are the three main types of contract for design and build?

A
  • package deal or turnkey
  • design and build contracts
  • contractors design for specific elements only (strictly these are traditional contracts with limited design provisions for specific portions of work)
129
Q

What is a package deal or turnkey project?

A

Where the client settles on a complete package, usually to some standard specification from a commercial firm.

Such arrangements sometimes result in a specially drafted contract, but they will usually be based on the provider’s standard terms.

130
Q

What factors may influence choice of contract?

A
  • nature of project is new build, refurb, reinstatement, extension
  • scope of works I.e. complexity, location, size of works, requirements for sophisticated design
  • clients desire for control over design
  • accountability; single point of responsibility?
  • appointment of contractor; works only, design, management role?
  • certainty of final cost
  • start/completion times
  • restrictions; noise, working hours, phasing
  • likelihood of post contract change
  • client view on risk
  • is building a relationship with supply chain important?
131
Q

What is the first step in procuring a building for a client?

A

Devising a project strategy, which entails:

  • Reviewing benefits
  • Reviewing risks
  • Reviewing financial constraints
  • Reviewing clients approach to time/cost/quality
132
Q

How is the contractor usually appointed in a traditional form of procurement?

A

Competitive tender, not often negotiated.

133
Q

What is the cost certainty like in traditional procurement?

A

Reasonable cost certainty as contract sum is known at the outset of construction, though may vary dependent on the number of post-contract changes

134
Q

When are design decisons made in traditional procurement?

A

During the design stage.

Post contract design changes can be accommodated usually at a price in terms of direct and related costs and extra time.

135
Q

Where does risk sit in traditional procurement ?

A

In lump sum traditional - low risk in clients favour. Cost known at outset and quality in control of client as client appoints design team. Time is generally longer due to sequential phasing.

In remeasurement - still balanced, though cost not known until end of the project.

136
Q

How is design and build often tendered?

A

Two stage tender

137
Q

What types of contract fall under the traditional procurement route?

A
  • lump sum contracts
  • measurement contracts
  • cost reimbursable
138
Q

What types of contract fall under the design and build procurement route?

A
  • Package deal/turnkey contracts
  • Design and build contracts
  • Contractor’s design for specific elements only
139
Q

What types of contract fall under the management procurement routes?

A
  • Management contracts
  • Construction management
  • Design - Manage - Construct
140
Q

What is a Design - Manage - Construct contract?

A

This and other variants of management procurement exist but such contracts are invariably on the basis of
specially drafted forms to suit the particular situations

141
Q

What may influence a client’s choice in procurement / contract?

A
  • Nature of project (new build, extension, serial works)
  • Scope of works (size, complexity)
  • Measure of control by client
  • Accountability (does client want single point of responsibility?)
  • Appointment of a contractor (does client want negotiated or competitive? Does client want contractor to take on design?)
  • Certainty of final cost
  • Start/completion times (fast track?)
  • Restrictions (e.g. sectional completion, occupation of building etc)
  • Likelihood of post contract changes
  • Risk; what are the priorities re the apportionment of risk concerning cost/time/quality, how much risk does client wish to take on
  • Building relationships w. supply chains (will there be future work? If so supply chain relationship important, maybe serial tendering)
142
Q

What will the choice in procurement route & contract influence?

A
  • Composition of team (who takes on what roles, where risk lies)
  • Compatibility of documents (what is required of professional consultants in building contract must be reflected in the schedule of professional services).
  • Documents for tendering purposes??????? JCT
  • The contract sum (/Q /XQ)
143
Q

How are design obligations passed on to contractor in JCT suite?

A
  • Having Contractor’s Design Portion in Intermediate Contracts or SBC
  • Major Project Construction Contract or Design and Build Contracts
  • Optional integrated provisions in JCT SBC
  • Using integrated named sub-contractor/employer agreement
144
Q

What is a package deal or turnkey project?

A

Where the client settles on a complete package, usually to some standard specification from a commercial firm.

145
Q

What are JCT’s view on amendments?

A
  • Contract should not be amended unless absolutely necessary
  • When necessary must only be done following appropriate professional advice
  • JCT contracts are generally accepted to be fair and evenly balanced for parties to which the project is designed
146
Q

When is a D&B contract appropriate?

A
  • Where detailed contract provisions are necessary
  • Where ER’s have been prepared and provided to the Contractor
  • Where the Contractor is to carry out design not just construction
  • Where the employer appoints an Agent to administer the conditions (may be external consultant)

Can be used:

  • When work is sectioned
  • By private and local authority employers
147
Q

What is price based on in JCT DB 2016?

A
  • Lump Sum with stage payments or periodic payments as stated
148
Q

What are third party rights?

A

The Contracts (Third Party Rights) Act 1999 enabled third party rights to be created by a contract.

Alternative to collateral warranties

The right is created to enforce a term in a contract, e.g. contractor is required to carry out works to be fit for purpose.

Must expressly state that a third party has specific rights (often excluded)

149
Q

What are third party rights?

A

The right created is to enforce a term of acontract, not the wholecontractitself. For example, if abuilding contractcontains a term that thecontractoris required to usematerialsof goodquality, then that term might be the subject of athird partyenforcement right.

Alternative to collateral warranties

The Contracts (Third Party Rights) Act 1999 enabled third party rights to be created by a contract.

Must expressly state that a third party has specific rights (often excluded)

150
Q

What are the differences between collateral warranties and third party rights?

A
  • Collateral Warranties can be laborious to compile, sometimes expensive
  • CW’s seen as more effective as they mirror building contract
151
Q

Why would you use a JCT ICD over JCT MWD contract?

A

ICD includes provisions for:

  • QS
  • Site sections
  • Partial possessions
  • EoT and full (not restricted) list of events
  • Loss and expense expressly
  • Detailed rules of valuations
  • Testing and inspecting
  • Advance payment bond
  • Bond for off site materials
  • Insurance for new buildings by employer
  • Collateral warranties
152
Q

Why would you use JCT SBC 16 over IC or MW?

A

JCT SBC includes provisions for:

  • Quotation provision for variations (changes)
  • Code of Practice covering testing of other work
  • Retention Bond
  • Third party rights
153
Q

What are the key different provisions between JCT DB 2016 and JCT SBC?

A

Unlike a SBC, a DB:

  • Doesn’t require QS, CA, Clerk of Works
  • Requires an Employers Agent
  • Contractor is responsible for design
  • Silent on ground condition risk (Contractor takes no risk in SBC)
154
Q

What are the conditions of contract and how to they relate to the contract particulars?

A

These are the rules in the contract.

The contract particulars “fill in the blanks” and confirm which clauses are relevant by stating the particulars for this contract, for example which payment method is used.

155
Q

List the key sections to a JCT DB contract.

A
  • Agreement
  • Recitals
  • Articles
  • Contract Particulars
  • Attestation
  • Conditions
156
Q

In JCT DB 2016, what are the headings under Conditions?

A 
Section 1. Definitions
Section 2. Carrying out the works 
Section 3. Control of the works 
Section 4. Payment 
Section 5. Changes
Section 6. Injury, damage and insurance 
Section 7. Assignment, performance bonds and guarantees, third party rights and collateral warranties 
Section 8. Termination 
Section 9. Settlement of disputes
157
Q

In JCT DB 2016, what are the headings under Schedules?

A 
Schedule 1. Design submission procedure 
Schedule 2. Supplementary provisions 
Schedule 3. Insurance options 
Schedule 4. Code of practice 
Schedule 5. Third party rights
Schedule 6. Form of bonds 
Schedule 7. JCT fluctuations option A
158
Q

What’s the difference between a final certificate and final statement?

A

Both certify the final amount to be paid to the contractor.

Final certificate is from a CA in SBC
Final statement is from EA in DB

159
Q

List relevant matters.

A

Anything that has had a cost impact on the contractor causing them to lose out, e.g.

  • Site access delay
  • Delay in instruction
  • Client interference that has meant they’ve had to suspend work temporarily, resulting in longer hire of cranes, scaffolding etc.

Omar Assoc RICS prep (11 decks)

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