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APC Revision > Contract Practice (Level 3) > Flashcards

Contract Practice (Level 3) Flashcards

1
Q

What are some of the key differences between JCT and NEC contracts?

A

PALM
Programme - included in NEC
Admin - compensation events
Language - JCT legal jargon
Money - JCT includes provisional sums

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2
Q

What is a relevant event?

A

An event that grants the contractor an extension of time.

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3
Q

What is a relevant matter?

A

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.

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4
Q

What is an example of a relevant event?

A

Delayed possession, Employers instructions, adverse weather

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5
Q

What is an example of a relevant matter?

A

Client instructed change, discovery of fossils/ antiques, civil disruption.

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6
Q

What is the payment timeline under JCT DB 2016?

A

Total payment cycle is 21 days: 7 days valuation, 14 days payment, 5 days payment cert, 5 days before end pay less notice

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7
Q

Can you name a contractual mechanism in the JCT D&B contract?

A

Practical completion certificate, DOP, Interim Valuations

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8
Q

What is a Contract administrator?

A

The contract administrator is used on traditional contracts but purely administers the contract.

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9
Q

What is an Employers Agent?

A

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.

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10
Q

What are liquidated damages?

A

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.

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11
Q

What are unliquidated damages?

A

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.

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12
Q

What is an example of a contract ammendement?

A

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

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13
Q

What are the requirements for vesting?

A

Information about the two parties, Project Address and Material storage address, Insurance certificate against loss or damage, Schedule of quantity applied, cost of materials

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14
Q

What is novation?

A

Novation is a process by which contractual rights and obligations are transferred from one party to another. Common on D&B.

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15
Q

What is assignment?

A

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.

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16
Q

What are collateral warranties?

A

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.

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17
Q

What is a bond?

A

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.

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18
Q

What is a performance bond?

A

A performance bond is designed to ensure that the contractor performs the works in accordance with the building contract.

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19
Q

What is an advance payment bond?

A

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.

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20
Q

What are the types of all risk insurance?

A

Option A, B, C.

A - Contractors all risk
B - Client all risk
C - Joint names (renovations)

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21
Q

What is loss and expense?

A

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

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22
Q

Positives of standard form contract?

A

It saves time
It minimizes transaction cost
It allocates risk in a fair and recognisable way
Industry wide input

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23
Q

Negatives of standard form contract?

A

If the client has lots of very particular clauses and ammendments to make - Diffuculty if bespoke legal frameworks are required for the project

24
Q

Positives of bespoke contract?

A

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.

25
Q

Negatives of bespoke contract?

A

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.

26
Q

How would you recommend which contract to use?

A

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.

27
Q

What is required for a contract?

A

offer, acceptance, consideration, legal agreement and competence

28
Q

What happens upon practical completion?

A

PC Certificate is issued
Half retention is released
Defects liability period starts

29
Q

How do you carry out valuations?

A

Receive Application, Visit Site, Assess application against works completed, Negotiate Value of works, Issue recommendation

30
Q

What is an addendum?

A

An addendum is a document that you use to add terms or make changes to an executed contract without invalidating the original.

Tender addendum

31
Q

How do you deal with materials off site?

A

As provided in the JCT forms of contract, the items should be listed in the contract, marked as belonging to the purchaser/ employer and proof given that they are vested in the contractor and covered by an insurance policy until they arrive at site.

32
Q

Whats the difference between a named and nominated sub contractor?

A

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.

33
Q

What is a specified peril?

A

Significant events that would cause very significant damage, such as fire, explosions, earthquakes, flooding and so on.

34
Q

What happens when time is at large?

A

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.

35
Q

What is frustration?

A

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.

36
Q

How is a contract under hand different from a deed?

A

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.

37
Q

What needs to be in place for LD’s to be deducted?

A

A non completion certificate

A pay less notice.

38
Q

What is retention of title clause?

A

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.

39
Q

What are the key components/ headings in a JCT contract?

A

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

40
Q

What 5 things happen at practical completion?

A
  1. The PC certificate is issued
  2. Half of the retention is released
  3. Defects liability period starts
  4. Building Insurance is passed back to the Client
  5. LD’s cannot be claimed.
41
Q

Whats the difference between latent and patent defects?

A

Latent = happens later down the line, can’t be seen
Patent = Obvious/ visable defects

42
Q

Whats the difference between partial possession and sectional completion?

A

Sectional completion is pre-agreed in the contract

Partial possession happens post contract and can come at an additional cost

43
Q

What is deferment of possession?

A

When the Contractor takes posession of different parts of the site at different times.

44
Q

What are the 4 heads of claim under loss & expense

A
  • Prolongation
  • Disruption
  • Loss of Profit
  • Interest Charges
45
Q

What are specified perils?

A

Specified perils tend to be significant events that would cause very significant damage, such as fire, explosions, earthquakes, flooding.

46
Q

What is Subrogation?

A

Subrogation commonly arises in construction in relation to insurance policies, where the insurer will often need the right to step into the shoes of the insured in order to pursue a claim against a third party with a contractual obligation to the insured.

47
Q

What is the Limitations Act?

A

The Limitation Act 1980 governs the time limits for bringing different types of legal claims.

Under Hand - As a Deed

48
Q

What are common contract documents?

A

Volume 1 - Terms & Conditions
- Prelimaries
- Contract
- Schedule of Ammendments

Volume 2 - Specifications and Drawings
- Employers Requirements
- Contractors Proposals
- Additional info

Volume 3 - Contract Sum Analysis

49
Q

What is a pay less notice?

A

A Pay Less Notice is a formal declaration indicating the clients intention to pay less than the amount claimed by the contractor.

The PLN must set out the sum that the employer considers to be due to the contractor on the date it is served and must further include the basis on which the sum is calculated.

50
Q

What is acceleration?

A

Increasing the originally planned or current rate of progress of the works to complete the project ahead of programme.

51
Q

Why might a contractor aim to accelerate the works?

A
  • To reduce site running costs
  • To free up key staff to work elsewhere
  • To ensure completion date is met to avoid liability for LD’s
52
Q

Why might the employer aim to accelerate works?

A

Compensating the contractor for any additional costs incurred in accelerating the works may be the better option than facing the cost consequences of the building not being ready when required and also a claim from the contractor for loss and expense in the form of prolongation costs.

53
Q

How is Acceleration dealth with under JCT?

A

Schedule 2

Acceleration Quotation Requested - 21days for contractor to respond
Quotation Recieved - 7days to agree

54
Q

How can acceleration be achieved?

A
  • Extended working hours
  • Increased resources
  • Alterations to the programme
  • Introduction of temporary works
  • Working methods (generators, floodlighting, dehumidifiers)
  • Specification changes
  • Design changes
  • Work scope changes
55
Q

What factors must be considered when suggesting/ agreeing acceleration measures?

A
  • Is the activity on the critical path?
  • Are the extended hours achievable/ efficient?
  • Are resources increased across the board (labour, plant,materials, facilities)
  • Are any temporary works sufficient?
  • How are specification changes going to impact the final product, is the cost worth it?
  • Does the contract allow for acceleration
  • What costs will be saved by achieving an earlier completion date
  • Who takes risk, is the contractor going to warrant completion by earlier date
  • What happens if the earlier date isn’t met?
56
Q

What would you tell a client if they asked for your advice on insurance policies?

A

I would advise them that this sits outside of my PI cover and they should speak to an insurance specialist.

57
Q

What happens if the contractor misses the application for payment date in D&B and what happens in traditional?

A

D&B - due date gets pushed back
Traditional - Chase contractor or undertake own valuation

APC Revision (20 decks)

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