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
2
Q
What is a relevant event?
A
An event that grants the contractor an extension of time.
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.
4
Q
What is an example of a relevant event?
A
- 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
5
Q
What is an example of a relevant matter?
A
Client instructed change, discovery of fossils/ antiques, civil disruption.
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
7
Q
Can you name a contractual mechanism in the JCT D&B contract?
A
Practical completion certificate, DOP, Interim Valuations
8
Q
What is a Contract administrator?
A
The contract administrator is used on traditional contracts but purely administers the contract.
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.
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.
It must be proportionate to the works.
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.
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
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
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.
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.
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.
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.
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.
19
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)
20
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
21
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
22
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
23
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.
24
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.
25
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.
26
What is required for a contract?
Offer
Acceptance
Consideration
Legality
Competence
Not under Duress
27
What happens upon practical completion?
PC Certificate is issued
Half retention is released
Defects liability period starts
28
How do you carry out valuations?
Receive Application, Visit Site, Assess application against works completed, Negotiate Value of works, Issue recommendation
29
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
30
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.
31
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.
32
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.
33
What is a specified peril?
Significant events that would cause very significant damage, such as fire, explosions, earthquakes, flooding and so on.
34
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.
35
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.
36
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.
37
What needs to be in place for LAD’s to be deducted?
A non completion certificate
A pay less notice.
38
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.
39
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
40
What 5 things happen at practical completion?
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
Whats the difference between latent and patent defects?
Latent = happens later down the line, can't be seen
Patent = Obvious/ visable defects
42
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
43
What is deferment of possession?
When the Contractor takes posession of different parts of the site at different times.
44
What are specified perils?
Specified perils tend to be significant events that would cause very significant damage, such as fire, explosions, earthquakes, flooding.
45
What is Subrogation?
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.
46
What is the Limitations Act?
The Limitation Act 1980 governs the time limits for bringing different types of legal claims.
Under Hand - As a Deed
47
What are common contract documents?
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
48
What is a pay less notice?
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.
49
What is acceleration?
Increasing the originally planned or current rate of progress of the works to complete the project ahead of programme.
50
Why might a contractor aim to accelerate the works?
- 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
51
Why might the employer aim to accelerate works?
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.
52
How is Acceleration dealth with under JCT?
Schedule 2
Acceleration Quotation Requested - 21days for contractor to respond
Quotation Recieved - 7days to agree
53
How can acceleration be achieved?
- 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
54
What factors must be considered when suggesting/ agreeing acceleration measures?
- 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?
55
What would you tell a client if they asked for your advice on insurance policies?
I would advise them that this sits outside of my PI cover and they should speak to an insurance specialist.
56
What happens if the contractor misses the application for payment date in D&B and what happens in traditional?
D&B - due date gets pushed back
Traditional - Chase contractor or undertake own valuation
57
What is the change control process under D&B contract?
1. Employers Instruction (EAI)
2. Contractor's Notice and Valuation (cost and or time)
3. Agreement on change (Valuation rules, EoT?)
4. Variations and Adjustment of Contract Sum
5. Payment and Final Account
58
What is the role of a quantity surveyor under D&B contract?
1. Pre-Contract Role:
- Feasibility Studies and Cost Estimating
- Cost Planning
- Procurement Advice
- Tender Documentation and Evaluation
2. Post-Contract Role:
- Valuation of Works and Interim Payments
- Change Control and Valuation of Variations
- Cost Reporting
- Risk Management
- Final Account
3. Advisory Role
- Value Engineering
- Cash Flow Management
- Dispute Resolution Support
4. Contract Compliance
The QS ensures that the project follows the JCT DB contract’s specific rules, especially in areas such as payment procedures, variations, and extensions of time.
59
What is included in a PCSA Contract?
1. Scope of Services
- Design Development Support
- Cost Estimation
- Programming
- Risk Identification
2. Costing and Payment
3. Collaborative Responsibilities
4. Risk and Liability
5. Termination and Transition to Main Contract
6. Design and Build Responsibility
60
What are the conditions of a JCT Contract?
These come after the ascentation and consist of the sections
- 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
61
What alternative is there to Collateral Warranties?
3rd Party Rights
62
What are the 3 main differences between SBC & D&B contract payments?
1. Payment Certificate vs Payment Notice
2. SBC the valuation date is the same each month but in D&B it's when the Contractor Issues their valuation.
3. EA vs CA
63
What is the Critical Path?
The key activities that if impacted can alter the programme.
64
What are some common ammendments to the JCT?
- 14 to 28 day payment period
- ER's take presidence
- Discrepencies in ER's
- Bespoke Attestation
65
What are the 4 Fluctuation Provisions?
A - Taxes & Levies
B - Materials & Price Inflation
C - Predetermined Formula
Note. We say none due to lack of cost certainty and sub-contractors will bake it into their costs anyway.
66
What is the design approval process in JCT?
- Submissions go to relevant body
- Status A, B, C, D - Rank them
A - Accepted
B - Works Commence - Include Comments
C - Revise and Re-issue - No Start
D - Rejected
Note. Time Implications - Review in due time
67
Who takes responsibility for L&E validation?
- EA/CA
- 28 days from Claim made (NOD)
- 14 days is added if insufficient information is provided
68
What is the difference between SBC and Minor works contract?
There are less provisions in a minor works contract
69
What is a loss and expense claim?
A formal request by the contractor to recover additional costs incurred due to delays or disruptions caused by the client, employer, or other factors beyond the contractor’s control.
70
What are the 4 heads of claim under loss & expense
- Prolongation
- Disruption
- Loss of Profit
- Interest Charges
71
Tell me some key features of NEC Contracts?
NEC 4 - Released in 2017
- No provisional sums
- Compensation Events
- More robust change control process
- Programme included
- PM is named
- Options A-F
A - Priced Contract with Activity Schedule
B - Priced Contract with Bill of Quantities
C - Target Contract with Activity Schedule
D - Target Contract with Bill of Quantities
E - Cost Reimbursable Contract
F - Management Contract
72
Other than a PB or PGC, what could be used?
Retention could be increased however this increases risk to contractors cashflow.
73
Why can there only be 2 parties in a Contract?
Privity of contract
74
What are 3rd party rights?
Third-party rights in construction contracts allow parties who are not directly part of the main contract (such as tenants, purchasers, or funders) to benefit from or enforce certain aspects of the contract.
This concept addresses the limitations of privity of contract by allowing these external parties certain rights without the need for collateral warranties.
75
At practical completion, what 5 things happen?
- Half Retention Released
- Defects Liability Period Starts
- PC Cert
- Insurance is passed back to the Client
- LD can't be claimed
76
What are latent defects?
Latent happens later, discovered down the line
77
What are patent defects?
Obvious defects present at time of PC
78
What is defferment in relation to construction contracts?
The postponement of the execution of a part of the contract, often concerning payment or the performance of certain obligations.
79
What are the key features of a minor works contract?
Suited to smaller, simpler projects without detailed proceedures or named sub-contractors
80
What are the main types of JCT contract?
- Standard
- Intermediate
- Minor Works
- Design and Build
81
What are the key differences between standard building contract and an intermediate building contract?
Standard: More detailed provisions for insurances, bonds, collaborative working and sustainability. Better suited for for more complexed projects.
Intermediate: No fluctuations provisions, can have named sub-contractors and detailed procedures but generally used for projects of simple nature where a MW contract isn't suitable.
82
What's the difference between a contract with quantities vs a contract without quantities?
WITH QUANTITIES:
- BoQ provided
- Cost Certainty
- Well defined design
WITHOUT QUANTITIES:
- No BoQ
- Measurement During Construction
- Flexibility in design however less cost certainty
- Quicker procurement process
- Used where design can not be defined
83
What needs to be included in a Contract is there is a schedule of ammendments
There needs to be a seperate article stating that the schdule of ammendments applies.
84
What happens if LADs are left blank?
Unliquidated damages can be claimed but need to be proven
85
What happens if LADs are set to NIL?
Nothing can be claimed
86
What is a Letter of Intent (LOI)?
A document issued by a client to a contractor indicating the client’s intention to enter into a formal contract in the future.
It is often used when there’s an urgent need to start work but the final contract terms are still being negotiated.
87
What is included in a Letter of Intent?
1) Scope of Work
2) Financial Cap
3) Time Limit
4) Conditions of Formal Contract
5) Termination Clause
88
What are the risks and considerations around a Letter of Intent?
- Legal Ambiguity due to lack of contract can lead to disputes over scope and payment
- Unclear Obligations
- Limited claims for damages
- Not legally binding
89
What does a vesting certificate do?
It protects the Client and puts in writing that upon payment for materials stored offsite, they become property of the Client.
90
What is the difference between a conditional and on demand bond?
A conditional bond can only be drawied down upon under certain conditions (when the contractor becomes insolvent)
An on demand bond can be drawn down upon at any time and is much more expensive.
91
What is insolvency?
When a business is unable to pay its debts or meet its financial obligations.
92
What are the 2024 updates to JCT?
- Gender Neutral Language
- Epidemics
- Building Safety Act 2022
- Electronic Communications (notices)
- Contractors Design Liability - new clause
93
What do listed items in a contract look like?
In the contract section 4.15 of D&B
The items, values, when they'll be drawn down.
94
What is a deed of variation?
A legal document that modifies a contract, such as a construction contract, to address changes in circumstances or to correct errors.
95
What is the difference between collateral warranties and 3rd party rights?
Collateral Warranties are a seperate contract that extends a duty of care
3rd Party Rights are step in rights so the contract still exists but a 3rd party will take on the role.
96
What happens if the Client misses an interim payment?
Contractor issues notice of non payment
If the Client still hasn't paid after 28 days, the contractor can...
- Give 7 days notice to down tools
- Terminate the contract
- Recover payment plus interest
- Get extra time
97
On what grounds can a contract be terminated?
- Insolvency
- Missed Payment
- Gross Negligance/ Breach
98
What is the baseline for adjudication in contract disputes?
The Construction Act
99
What is the importance of the base date in a contract?
- BCI is measured against it
- Any changes in legislation can be tracked
- Fluctuations provisions
100
What are the different insurance provisions under JCT?
In the aggregate - Total spread across all claims
Each and Every - Each claim can total the amount (more costly)
101
What is the base terrorism cover under JCT?
POOl recover - pool of money that central London developers pay into
Came from IRA bombings
Optional
102
What is the joint fire code?
A publication that provides guidance on fire prevention for construction sites and buildings undergoing renovation.
Applies to contracts over £2.5million
Condition of Insurance contracts
103
What is an example of assignment in a Contract?
An employer can assign a collateral warranty granted to them by a contractor to the purchaser of a building.
104
What happens at the completion date?
EA/CA determines if PC has been achived
If Yes - PC certificate issued
If No - Non completion certificate issued, LADs can be claimed
105
What does all risk insurance cover?
Covers the value of the works destroyed
106
What are the timescales of a loss an expense claim under JCT?
Under a JCT contract, a contractor must notify the Contract Administrator as soon as it becomes reasonably apparent that a Relevant Matter may cause loss and expense.
They must then provide detailed and updated information to support the claim. The Contract Administrator must assess the claim as soon as reasonably practicable.
While there are no fixed deadlines, prompt notification and detailed evidence are essential—failure to do so may weaken or invalidate the claim.
107
What are the different insurance provisions under a JCT contract?
Insurance of the Works - Options A,B,C
Public Liability Insurance - Contractor - Injury/damage to third parties/property
Employer’s Liability - Contractor - Injury to employees
Professional Indemnity (if applicable) - Contractor (or consultant) - Design liability (not always required under standard JCT)
Joint Names Policy - Required under all options - Prevents insurer from suing one party (typically the Contractor) for insured damage.
108
What is the design approval process under JCT?
Under D&B, the contractor will submit a design and the design team will give it a status ABCD
A - Approved
B - Approved in priciple but needs tweaking
C - Rejected
D - Nothing provided
109
What is the difference between an Instruction and a variation?
Variations are a branch of instructions
The 5 types of instruction are as follows:
- Variations
- Postponed works
- Opening up works
- Testing
- Exclude / Ban someone from site
110
What happens to the contract when someone steps into the shoes of a contractor?
A meeting is set up where specific terms are agreed, not necessarily the full contract
111
How would you interprate a clients brief for the contract?
112
What is a Contract?
A contract is a legally binding agreement between two or more parties that creates mutual obligations, enforceable by law, outlining terms and conditions for a transaction or exchange.
