Contract Practice Shortfalls

Question 1

What are express terms?

Answer 1

Terns if the agreement which are expressly agreed between both parties. Should be written but could be oral.

Question 2

What are implied terms?

Answer 2

Those which have not been openly agreed but implied either by law or statute.

Question 3

What are the key provisions under the LDEDC Act 2009

Answer 3

1. Contracts - can be written or oral
2. Payment - Introduced the payment terms (5 days before and after etc)., if a contractor doesn’t get a notice etc.
3. Pay less notice - parties have to issue a pay-less in accordance with time scales or they are entitled to full amount applied.
4. Suspension of performance for non-payment - act clarifies contractor’s right to suspend works for non-payment.

Question 4

What are the different types of letter of intent?

Answer 4

1. Comfort letter
2. Instruction to proceed, consent to spend
3. Recognition of contract

Question 5

What are the dis-advantages of third-party rights?

Answer 5

Lack of flexibility - once the schedule has been agreed to, there is limited room for negotiation.

Needs careful drafting - recent case law has shown this.

Question 6

what are the advantages of third-party rights?

Answer 6

Time and cost - no separate document - already in contract.
Certainty - once agreed, there is limited room to revisit.
Sub-contractors - it can be extended on to sub-contractors.

Question 7

What is assignment?

Answer 7

The benefit of a contract is transferred from one party to another.

Question 8

What is an example of assignment?

Answer 8

Banks/funders take an assignment of the benefit as additional security.

Question 9

What is the typical cost of a performance bond?

Answer 9

largely depends on a company’s financial stability as a bank provides this security.

Question 10

What is novation?

Answer 10

Where the design team are novated/transferred to the contractor.

Question 11

What are the advantages of novation?

Answer 11

Reduced learning curve and reduced contractual risk for the employer because the design risk has been passed on to the Contractor.

Question 12

What are the dis-advantages of novation?

Answer 12

• Collateral warranties will need to be put in place
• Client may need to employ a shadow team
• Chere may be a conflict of interest.

Question 13

How are CDP elements executed?

Answer 13

Contractor provides a design based on specifications and scope at tender and this is then sent to the employer for acceptance.