Contract Practice L1

Question 1

What contracts are you aware of?

Answer 1

• JCT Suite of Contracts
• New Engineering Contract (NEC) use option 4.
• FIDIC Contract

Question 2

What do you know of NEC Contracts available?

Answer 2

NEC4 provides option clauses which shifts the risk between parties. It has options A-F
A: Lump Sum with activity schedule
B: Lump Sum with Bill of Quantities
C: Target Contract with Activity Schedule
D: Target Contract with Bill of Quantities
E: Cost reimbursable
F: Management Contract

Question 3

What is Target Cost?

Answer 3

Shares the cost of the project, if over the budget split pain between parties, if under share gain. Cost based on base cost, OH&P, risk allowance.

Allows works to occur quicker and contingency allocation of risk by contractor less.

Question 4

What warranties have you issued? What is the purpose?

Answer 4

Warranties may be used to provide assurance from one party to another that goods and/or services will meet certain expectations, e.g. fit for purpose, being free from defects, complying with statutory and other regulations and specifications.

Question 5

What collateral warranties have you issued? What is the purpose?

Answer 5

Collateral warranties create direct contractual relationships between parties that would not otherwise exist.

Question 6

What Novation’s have you issued? What is the purpose?

Answer 6

A three-way contract which extinguishes a contract and replaces it with another contract in which a third party takes up the rights and obligations which duplicate those of one of the original parties to the agreement.

Question 7

What is a sub-consultant agreement?

Answer 7

Given the increasing complexity of many construction projects it is becoming more common that a consultant appointed on a project, will in turn themselves appoint consultants to undertake some or all of the work for which they have been engaged.

Question 8

What are the differences between procurement routes?

Answer 8

Management = employer wants contractor to employ sub contractors
Traditional = Primary bits of work completed by contractor
Design and Build Contract = Design of works completed by Contractor

Question 9

What is the purpose of having a standard form of contract?

Answer 9

• Avoid disputes
• Industry standard
• Defines fee and payment
• Establishes risk
• Clarity, comfort and protection as used before
• Aligned with current legislation.

Question 10

What would you do if a contractor went into administration?

Answer 10

• Be informed asap in writing
• Terminate contract between parties.
• Obligations of works and payment suspended.
• Secure site