Contract Practice (Level 3) Flashcards
What are some of the key differences between JCT and NEC contracts?
PALM
Programme - included in NEC
Admin - compensation events
Language - JCT legal jargon
Money - JCT includes provisional sums
What is a relevant event?
An event that grants the contractor an extension of time.
What is a relevant matter?
A relevant matter is a matter for which the client is responsible that materially effects the progress of the works. This enables the contractor to claim direct loss and / or expense that has been incurred.
What is an example of a relevant event?
- Delayed possession
- Employers instructions
- Adverse weather
- Lock out
- Force Measure (Act of God)
- Discovery of Fossils
- Terrorism
- Specified Peril
- Supply of goods by the client
What is an example of a relevant matter?
Client instructed change, discovery of fossils/ antiques, civil disruption.
What is the payment timeline under JCT DB 2016?
Total payment cycle is 21 days: 7 days valuation, 14 days payment, 5 days payment cert, 5 days before end pay less notice
Can you name a contractual mechanism in the JCT D&B contract?
Practical completion certificate, DOP, Interim Valuations
What is a Contract administrator?
The contract administrator is used on traditional contracts but purely administers the contract.
What is an Employers Agent?
D&B - The EA is hired to be the agent of the Employer and represent their interests. The EA is effectively stepping into the shoes of the client and will have authority to take decisions which are assigned to the Employer under the contract.
What are liquidated damages?
A genuine pre estimate of loss the client will incur if the completion date is missed by the contractor written into the contract and agreed by both parties on a weekly rate.
It must be proportionate to the works.
What are unliquidated damages?
Unliquidated damages are damages that are payable for a breach, the exact amount of which has not been pre-agreed. The sum to be paid as compensation is said to be ‘at large’ and is determined after the breach occurs by a court.
What is an example of a contract ammendement?
Adjusting the valuation period from 14 to 28 days.
Defects Liability period 6 to 12 months.
Design responsibility shared with contractor.
Third Party Provisions
ER’s take presidence
What are the requirements for vesting?
Information about the two parties, Project Address and Material storage address, Insurance certificate against loss or damage, Schedule of quantity applied, cost of materials
What is novation?
Novation is a process by which contractual rights and obligations are transferred from one party to another. Common on D&B.
What is assignment?
A legal assignment is transferring an interest from one party, called the assignor, to another, the assignee. An assignment entitles the assignee to the performance of a particular contractual obligation conferring a benefit.
What are collateral warranties?
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.
What is a bond?
A contract bond is used to guarantee that the terms of a contract are fulfilled.
If the contracted party fails to fulfill its duties according to the agreed upon terms, the contract “owner” can claim against the bond to recover financial losses or a stated default provision.
What is a performance bond?
A performance bond is designed to ensure that the contractor performs the works in accordance with the building contract.
What are the types of all risk insurance?
Option A, B, C.
A - Contractors all risk
B - Client all risk
C - Joint names (renovations)
What is loss and expense?
Construction contracts will generally provide for the contractor to claim direct loss and/or expense as a result of the progress of the works being materially affected by relevant matters for which the client is responsible.
Relevent Matters
Positives of standard form contract?
It saves time
It minimizes transaction cost
It allocates risk in a fair and recognisable way
Industry wide input
Negatives of standard form contract?
If the client has lots of very particular clauses and ammendments to make - Diffuculty if bespoke legal frameworks are required for the project
Positives of bespoke contract?
Tailor risks and responsibilities to suit the Client’s needs
Simplify contracts
Easier to administer if made so
Faster dispute methods can be incorporated
Used when bespoke legal frameworks are required for specific projects.
Negatives of bespoke contract?
Legal costs for drafting
Time consuming to prepare and understand
Untested in court
Expert advice required to construct the contract
Confusion created by lack of familiarity can lead to disputes.
How would you recommend which contract to use?
Driven by procurement route
Client’s requirements and the size of the project JCT suite has specific contracts to suit various procurement routes but within that some options also exist to cater for the client’s attitude towards risk, cost /programme certainty and size of the project.
What is required for a contract?
Offer
Acceptance
Consideration
Legality
Competence
Not under Duress
What happens upon practical completion?
PC Certificate is issued
Half retention is released
Defects liability period starts
How do you carry out valuations?
Receive Application, Visit Site, Assess application against works completed, Negotiate Value of works, Issue recommendation
What is an addendum?
An addendum is a document that you use to add terms or make changes to an executed contract without invalidating the original.
Tender addendum
What is an advance payment bond?
A contractor may request an advance payment to help them meet significant start up or procurement costs that may have to be incurred before construction begins.
How do you deal with materials off site?
- As provided in the JCT forms of contract, the items should be listed in the contract
- Marked as belonging to the purchaser/ employer
- Proof given that they are vested in the contractor
- Read for incorperation into the build
- Covered by an insurance policy by the sub-contractor until they arrive at site.
Whats the difference between a named and nominated sub contractor?
NAMED sub-contractor is influenced by the client in a shortlist but the contractor takes the risk.
NOMINATED sub-contractor is selected by the client, can be before the main contractor is selected, not common in UK, client takes the risk.
What is a specified peril?
Significant events that would cause very significant damage, such as fire, explosions, earthquakes, flooding and so on.
What happens when time is at large?
This means the main contractor has not fulfilled their obligation to meet practical completion but a certificate of non completion has not been issued yet.
There is no set completion date.
The contractor has to complete the works in a reasonable time.
LD’s can’t be claimed.
Client would need to prove the contractor didn’t complete in reasonable time.
What is frustration?
Frustration occurs when an event outside the control of either party changes the contractual obligations or makes it impossible or illegal for them to fulfil their contractual obligations.
Contract automatically dismissed.
How is a contract under hand different from a deed?
A deed is signed by both parties and a witness and traditionally authenticated by a seal.
Under hand is just signed by the parties.
The limitation period of under hand is 6 years whereas as a deed is 12 years.
What needs to be in place for LAD’s to be deducted?
A non completion certificate
A pay less notice.
What is retention of title clause?
Where the sub contractor or supplier retains ownership of materials until they are paid for by the main contractor.
Highlights the need for vesting certificates.
What are the key components/ headings in a JCT contract?
Agreement:
- Recitals
- Articles
- Contract Particulars
- Attestation
Conditions:
- Section 1 - Definitions and Interpretation
- Section 2 - Carrying out the Works
- Section 3 - Control of the works
- Section 4 - Payment
- Section 5 - Injury, Damage and Insurance
- Section 6 - Termination
- Section 7 - Settlement of Disputes
Schedules
What 5 things happen at practical completion?
- The PC certificate is issued
- Half of the retention is released
- Defects liability period starts
- Building Insurance is passed back to the Client
- LD’s cannot be claimed.
Whats the difference between latent and patent defects?
Latent = happens later down the line, can’t be seen
Patent = Obvious/ visable defects
Whats the difference between partial possession and sectional completion?
Sectional completion is pre-agreed in the contract
Partial possession happens post contract and can come at an additional cost