Contract Practice - Level 1

Question 1

How do variation requests work?

Answer 1

Variation Request means any written request made by the Project Manager to the Contractor to change the Works, including without limitation, the scope, nature, quality or duration of the Works.
Change is defined as follows:

(i) the alteration or modification of the design, quantity, or quality of the Works

(ii) the imposition by the Employer of any [additional] obligations or restrictions, or the addition to or alteration or omission of any obligations or restrictions. These obligations or restrictions refer specifically to access to the site, or specific parts of the site, limitations on working space or working hours, and carrying out of work in a specified order, and create changes in condition and/or character of the work.

Question 2

What are the JCT suite of contract options?

Answer 2

o Minor Works Building Contract
o Intermediate Building Contract
o Standard JCT Building Contract
o Major Works Building Contract
o Traditional/Conventional
o Design and Build
o Management
o Integrated team/Partnering

Question 3

• NEC alternatives?

Answer 3

o Engineering and Construction Contract (ECC)
o The Engineering and Construction Subcontract (ECS)
o The Engineering and Construction Short Contract (ECSC)
o The Engineering and Construction Short Subcontract (ECSS)
o The Professional Services Contract (PSC)
o Framework Contract (FC)
o Term Service Contract (TSC)
o Supply Contract/Short Supply Contract (SC/SSC)
o Dispute Resolution Service Contract
o Design, Build and Operate (DBO)
o Alliance Contract (AC)

Question 4

How do the two suites of contracts differ?

Answer 4

Generally, NEC contracts are aimed at engineering projects but are easily adapted to building works. JCT contracts are aimed at building works rather than engineering projects but again can be adapted for both.

Question 5

How does a standardised form benefit a project?

Answer 5

The JCT Standard Building Contract is designed for large or complex construction projects where detailed contract provisions are needed. Standard Building Contracts are suitable for projects procured via the traditional or conventional method.

Question 6

What typical amendments have you encountered?

Answer 6

I have encountered amendments such as limits to LD’s, limits to PI Insurance required and limits to retention.

Question 7

Do you agree with them?

Answer 7

I do where the risk is minimal, for example a logistics contractor limits to retention does not pose any risk as they are not undertaking any work related to construction of the building.

Question 8

What if you were asked to provide advice?

Answer 8

If I was asked to provide advice I would seek advice from the ISG legal department.

Question 9

What are the parties’ responsibilities and duties under a contract?

Answer 9

A contractual obligation (or duty) is something that parties agree to do or become responsible for when they sign a contract. These obligations can vary wildly between contracts, but they will usually fall into two broad categories: A promise to do something. A promise not to do something.

Question 10

What is the significance of the Local Democracy, Economic Development and Construction Act 2009?

Answer 10

The Local Democracy Economic Development Act 2009 was introduced in 2011 and amended the Housing Grants Construction and Regeneration Act 1996 (the Construction Act). The Act changed the way construction contracts are entered into and in particular, introduced an amended regime for payment and adjudication.

Question 11

What changes did it bring to the construction industry?

Answer 11

It enabled parties to go to adjudication even if they have not had their contract formalised in writing.
Any provision in a construction contract which provides that the due date for payment commences or depends on the giving of a payment notice by the payer is ineffective.

Question 12

How is it recognised in standard forms of construction contracts?

Answer 12

It is recognized within the payment provisions of the contract.

Question 13

What are the essential components of a valid contract?

Answer 13

A valid contract must have all of the following essential elements: offer and acceptance, consideration, intention to create legal relations, capacity, and legality.

Question 14

By way of examples can you tell me how these requirements find their way into an JCT construction contract?

Answer 14

It defines all the essential terms and conditions these parties must adhere to, including the:
o Obligations of each party
o Project’s specifics; and
o Costs involved

Question 15

What is the principal difference between a parent company guarantee and a performance bond?

Answer 15

o Parent Company Guarantees are intended to ensure that contracts are fully performed, i.e. that the necessary resources will be provided and the whole enterprise is committed to ensuring such full performance
o Performance bond means of providing financial recompense, in the event of a failure by a contractor or supplier, so that the client may recover some or all of his loss and/or may make and pay for alternative arrangements to complete the work in question.

Question 16

Can you name 2 types of performance bond?

Answer 16

o ‘On demand’ bonds can be called at any time by the beneficiary and the surety or guarantor is obliged to pay on demand on receipt of a simple demand notice from the beneficiary This means that calling an on demand bond is effectively not linked to the contractor’s default under the building contract.
o Conditional bonds (such as the Association of British Insurers (ABI) model form of bond) oblige the surety or guarantor to reimburse the employer provided that certain conditions have been met.