Contract Practice - NEC only Flashcards
Name NEC contracts?
- ECC, Engineering Construction Contracts
- PSC, Professional Services Contract
- ESC, Engineering & Sub contracts
Option A: Priced contract with activity schedule.
Option B: Priced contract with bill of quantities.
Option C: Target contract with activity schedule.
Option D: Target contract with bill of quantities.
Option E: Cost reimbursable contract.
Option F: Management contract.
Option G: Term contract (for the appointment of a consultant based on a priced schedule of tasks).
What sections are within the contract (NEC)?
Volume 1
- Contract Agreement
- Contract Data
- Activity Schedule
Volume 2
- Works Info
Volume 3
- Site Info
Name the difference between the main forms of contract?
- Option A: Priced contract with activity schedule.
- Option B: Priced contract with bill of quantities.
- Option C: Target contract with activity schedule.
- Option D: Target contract with bill of quantities.
- Option E: Cost reimbursable contract.
- Option F: Management contract.
- Option G: Term contract (for the appointment of a consultant based on a priced schedule of tasks).
Roles & Responsibilities under the NEC?
- Employer
- PM
- Supervisor
Adds quality assurance - Principal Designer
- Principal Contractor
What are LoI?
When the parties have not agreed to the construction contract but want to commence works. A LoI can be issues however, there is no standard form and doesn’t have the same onerous T&Cs as the main contract.
Can expose the client to additional risk and liabilities.
LoI example?
Ampleforth Abbey Trust vs T&T
Kept renewing the LoI, when a dispute arose. T&T were negligible for not entering into contract on behalf of the client.
What is a Performance Bond?
A performance bond is commonly used as a means of insuring a client against the risk of a contractor failing to fulfil contractual obligations to the client, although they can also be required from other parties.
Performance bonds are typically set at 10% of the contract value. This compensation can enable the client to overcome difficulties that have been caused by non-performance of the contractor, such as, finding a new contractor to complete the works.
For more information, see Performance bond.
What is Tender bond (bid bond)?
Bid bonds are rare in the UK, but can be a requirement of an international tender process.
They are usually on-demand bonds submitted with a tender to secure the tenderer’s commitment to commence the contract. The bond is partially or fully forfeited if the winning tenderer fails to execute the contract or meet other specified conditions.
Bid bonds can be open to abuse by the client and may prevent smaller companies from tendering.
What is an advance payment Bond?
If the client agrees to make an advance payment to the contractor, (for example where the contractor incurs significant start-up and procurement costs before construction begins), a bond may be required to secure the payment against default by the contractor. This will normally be an on-demand bond.
What is a Retention Bond?
Retention is a percentage (often 5%) of the amount certified as due to the contractor on an interim certificate that is retained by the client. The purpose of retention is to ensure the contractor properly completes the activities required of them under the contract. Half of the amount retained is released on certification of practical completion and the remainder is released upon certification of making good defects.
An alternative to retention is a retention bond, where the client agrees to pay the amounts which would otherwise have been held as retention, but instead a bond is provided to secure the amount that would have been retained. As with retention, the value of the bond will usually reduce after practical completion has been certified.
What is a PCG?
A parent company is a company that controls another ‘subsidiary’ company. Subsidiaries can be created by acquisition, or by spin-off from the parent company.
A parent company guarantee (PCG) is a form of security that may be required by clients to protect them in the event of default on a contract by a contractor that is controlled by a parent company (or holding company). Typically, such a default might be caused by the insolvency of the contractor.
Bonds vs PCG?
Bonds are back by insurers.
PCGs - financials are not always transparent.
Parent Company could also go bust.
What is a Collateral Warranty?
A Collateral Warranty is a contract under which a consultant, a building contractor or a sub- contractor warrants to a third party that is has fulfilled its obligations under its professional appointment, building contract or sub-contract.
What are Step in Rights?
A collateral warranty or schedule of third party rights from a sub-contractor in favour of an employer may also include step-in rights, primarily to give the employer a contractual right to step in to the sub-contract, if the main contractor was to become insolvent.
What is Net Contribution Clause?
Limits the liability to the consultant or contractor apportionately.
A net contribution clause states that where two or more parties involved in a construction project are each jointly liable for the same loss or damage, the liability of each party will be limited to the amount which would be apportioned to that party by a court.
