Contract Practise Flashcards
1
Q
What does JCT stand for?
A
Joint Contracts Tribunal
2
Q
What are some of the contracts in the JCT family?
A
1) Standard building contracts
2) Minor works building contract
3) Design & build contract
4) Construction management contract
5) Repairs & maintenance contract
3
Q
What are the key characteristics that influence what contract is used?
A
1) Size & value of the project
2) Appetite for risk
3) Experience of the client
4) Project priorities (time, quality, cost)
4
Q
What are relevant events?
A
A set of events which would cause a delay to the contractor through no fault of their own, entitling the contractor to an extension of time thus moving the contract completion date.
5
Q
Can you provide three examples of a relevant event?
A
1) Exceptionally adverse weather
2) Force Majeure
3) Impediment/prevention/default by the employer
6
Q
What is force majeure?
A
1) An act of god which is out of the contractors control such as natural disasters
7
Q
Can you give three examples of a force majeure event?
A
1) Act or threats of terrorism
2) Riots/strikes
3) War
8
Q
What happens when a relevant event occurs?
A
1) Contractor notifies the employer with a notice of delay
2) Contractor identifies the material circumstances of the delay and the relevant event related
3) He provides an assessment of the time impact where possible
4) The contractor reviews the notice of delay and responds as soon as reasonably possible
5) He either concludes his rejection of the notice of delay or acceptance including the extension of time granted.
9
Q
If a relevant event is accepted does this entitle the contractor to automatic loss and expense?
A
Not always, the event must also be a relevant matter to warrant recovery of loss and expense.
10
Q
What are relevant matters?
A
A relevant matter is a matter which materially impacts the progress of works. If a relevant occurs it may entitle the contractor to recover any loss and expense as a result of any impediment or prevention, bringing them back to the commercial position they would have been in had the matter not occurred.
11
Q
Give three examples of a relevant matter?
A
1) Prevented access to part of the site
2) Delays to design information or instructions
3) Disruption caused by works carried out by the employer
12
Q
What is the difference between a relevant event and a relevant matter?
A
A relevant event entitles the contractor to additional time, whereas a relevant matter entitles the contractor to additional costs.
13
Q
What is a loss & expense claim?
A
An attempt by the contractor to recover costs ascertained as a direct impact of any failure caused by employer, usually delays.
14
Q
Name three common heads of claim for loss and expense?
A
1) Prolongation
2) Productivity loss
3) Additional storage costs
15
Q
Can the contractor refuse to give partial possession to the employer?
A
Yes, the contractor must consent to giving partial possession but it cannot be unreasonably withheld. The Contractor may withhold if giving partial possession may hinder their ability to complete the remainder of his work.
16
Q
Name three implications of partial possession?
A
1) Contractor no longer liable for LAD’s relevant to that area of works
2) half of the retention to be released for that area of works
3) Contractor is no longer responsible for any damage to that area of works
4) The employer is responsible for the insurance of that element of works
17
Q
What is the difference between sectional and partial completion of the works?
A
Sectional completion is preplanned and agreed in the contract before the works commence, whereas partial completion is requested during the construction phase of the works.
18
Q
What are the main options for insuring the works under a JCT contract?
A
Option A - Contractor take out joint names all risk insurance for the works
Option B - Employer takes out joint names all risk insurance for the works
Option C - Employer takes out all risk insurance for the works and insures against specified perils for the existing structure
19
Q
What is a Contractors ‘All Risk’ insurance?
A
1) Insurance that covers physical loss or damage to the works being undertaken
2) Sometimes referred to as ‘Car Insurance’
3) The policy cover will pay for the repair or replacement of the damaged works
20
Q
What is a specified Peril?
A
Significant events which may occur on site causing significant damage to the works
Includes things like:
1) Flood through burst water pipes
2) Fires
3) Earthquakes
21
Q
What is a subrogation?
A
A concept whereby an insurer who has paid out on loss, can step into the shoes of the claimant in order to sue the guilty party for the loss caused.
22
Q
What is joint names insurance policy?
A
1) A type of joint insurance (2 or more parties)
2) Under a joint names policy the insurer has no right to subrogate against any of the insured parties
23
Q
What does NEC stand for?
A
New Engineering Contracts
24
Q
What does ECC stand for?
A
Engineering and construction contract
25
Please give an overview of NEC ECC contract?
1) Can be used for any business sector, but better suited for large/long lasting projects where collaboration is key to the project success.
2) No reference to the QS in the contract
3) PM assumes full responsibility on behalf of employer
4) Consider to be more administrative due to EWN, NCE program obligations
5) Contract requirement to issue periodic program for acceptance
6) Risk management tools in place to avoid high costs associate with change
26
From your personal experience, can you give 3 advantages of using an NEC ECC contractor over the JCT?
1) The requirement to issue monthly programs makes it more clearer who is at fault for delays, avoiding long drawn out disputes at final account stage.
2) The proactive use of early warning helps avoid or mitigate risks before they occur which saves cost and time.
3) It is written in plain English and includes time scales for actions to both parties which forces both parties to act quickly and agree change programs swiftly.
27
What are the 6 main options of NEC contracts?
Option A - Fixed price activity schedule
Option B - Fixed price bill of quantities
Option C - Target cost with activity schedules
Option D - Target cost with bill of quantities
Option E - Cost reimbursable
Option F - Management contract
28
Can you give an overview of an NEC option A contract please?
Fixed price activity schedule
1) Contractor prices project at a point in time at a fixed price with the contractor taking on full risk of the construction activities
2) Contract value can only be amended through implemented compensation events
3) Payments is only made against completed activities within the activity schedule
4) Suitable for more simple traditional or design and build contracts
29
Can you give an overview of an NEC option B contract please?
Fixed price bill of quantities
1) Contractor fixes their price carrying all construction risks.
2) Contractor can claim based on the % of works complete for each bill of quantities item.
30
Can you give an overview of an NEC option C contract please?
Target cost with an activity schedule
1) The target cost is agreed based on the defined costs + fee, but the outturn financial risk are shared between the Employer and Contractor.
2) The target cost may increase or decrease based on implemented compensation events
3) The employer may disallow costs that are not in accordance with the schedule of cost components
4) Should the final cost exceed the agreed target cost, the employer will share the pain based on the agreed split
5) Should the final cost fall below the agreed target cost, the employer will share the gain based on the agreed split
31
Can you give an overview of an NEC option D contract please?
Target cost with bill of quantities
Same as option C but with bill of quantities instead.
32
Can you give an overview of an NEC option E contract please?
Cost reimbursable contract
1) Often referred to as cost plus
2) Employer takes on financial risk as the Contractor is paid for all cost incurred + an agreed fee to cover overheads and profit
3) Often used when the nature of works are difficult to define from the outset such as urgent alteration or repair works
33
Can you give an overview of an NEC option F contract please?
Management Contracts
1) Contractors defined costs are reimbursed with a fee paid
2) Works are designed/constructed by multiple subcontractors who are managed by the management contractor
34
What are the secondary options under NEC3 ECC?
1) Dispute resolutions
2) X Clauses
3) National legislation
4) Z clauses
35
Can you name 5 X clauses within an NEC contract?
1) Price adjustment for Inflation
2) Parent company guarantees
3) Sectional completion
4) Delay damages
5) Retention
6) Performance bond
7) KPI's
8) Changes in the law
9) Partnering
10) Advanced payment to contractor
36
What are the default dispute resolution procedures within an NEC contract?
1) Adjudication
2) Litigation/Arbitration
37
What two forms of national legislations are referred to in the NEC additional clauses?
1) Housing and Grants, construction and regeneration act 1996
2) The contracts right of third parties act 1999
38
Can you give an overview of the Housing and grants, construction and regeneration act 1996?
Otherwise known as the construction act, brought in to regulate payment and streamline the dispute procedure. It introduced:
1) Right to regular payments
2) Right to a detailed payment notice for works complete
3) Right to suspend works for non payment
4) Right to adjudicate
5) Disallowed pay when paid clauses
39
Can you give an overview of the contracts right of third parties act?
Gives right to a person who is not not party to a contract to enforce rights under the contract where the contract confers a benefit to them.
40
What are Z clauses in an NEC ECC contract?
A z clause is a set of amendments to the standard NEC contract, this can be through the form of amendment, omission or addition of new clauses.
41
What are the three types of Programme float?
1) Total float
2) Terminal float
3) Time risk allowances
42
Can you explain what total float is?
1) The time an activity can be delayed from its early start date without delaying planned completion.
2) Available to either the employer or contractor on a first come first serve basis
43
Can you explain what time risk allowance is?
1) The amount of risk allowed by the contractor for not completing the activity in the minimum time possible due to unforeseen circumstances
2) It is owned by the contractor and cannot be used to mitigate the effect of a CE
44
Can you explain what terminal float is?
1) The duration between planned completion and contract completion
2) It is owned by the contractor and cannot be used to mitigate the effect of a CE
3) If planned completion comes forward to unused TRA, the early completion can be banked as terminal float
45
How can a contract completion date be changed in an NEC or JCT contract?
NEC - ICE or acceleration
JCT - EOT or acceleration
46
How can the planned completion date change?
1) Anything can change it
2) For example variations, not reaching productivity output, delay of materials.
47
how does programme differ in NEC and JCT contracts?
1) Programme is not a contract document in JCT unlike NEC
2) In NEC contracts, programme is used to assess and agree compensation events.
48
In an NEC contract, can you give three key responsibilities of the project manager?
1) Change the works information
2) Issue contract documents such as instructions, communications and payment notices.
3) Monitor the execution of the project and ensure all parties adhere to the contract
49
In an NEC contract, can you give three key responsibilities of the supervisor?
1) Responsible for ensuring the contractor is compliant with the works information
2) Raises defect notices & is authorised to instruct the inspection of a defect
50
In an NEC contract, can you give three key responsibilities of the employer?
1) Give site access to the contractor
2) Take out necessary insurance provisions
3) Make payments in accordance with the contract
51
What is the works information in an NEC contract?
1) Specifies and describes the contractors works
2) Sets out any constraints
3) It should be clear and concise to mitigate the risk of any misinterpretation which would cause conflict
52
Name 3 things you'd find in the employers works information in an NEC contract?
1) Specification and drawings
2) Technical information
3) Requirement and constraints
53
What is a compensation event?
An event which are not usually the fault of the contractor, if they occur it
would impact the contract price or programme.
54
Where in the NEC ECC contract would you find compensation events and can you give three examples of on?
Clause 60.1 of the NEC3 contract
1) Change to the works information
2) The inspection of a potential defect
3) Acceleration of the works
55
In NEC ECC contracts, what is the period a contractor has to notify a compensation event, and what is the consequence if they issue later?
1) 8 weeks
2) The contract would be time barred and it would not be deemed a compensation event in the court of law
3) The only exception is where the PM or supervisor issues and instruction or certificate, changes and earlier decision or corrects an assumption
56
Will a PMI always result in an compensation event?
No, the PM may instruct the contractor to issue a revised programme or remove someone from site.
57
What is an early warning notice?
A notification from either party making the other aware of a potential risk event which if materialises could impact the costs or impact progress.
58
What clause refers to early warning notices in NEC contracts and what does it state?
Clause 16.1
The contractor and project manager give an early warning by notifying the other as soon as either becomes aware of any matter which could increase costs, delay completion, delay meeting a key date or impair performance.
59
What are the key updates from NEC3 to NEC4?
1) Gender neutral, he replaced with they
2) Risk register now called early warning register
3) Term employer has become client
4) Term works information has become scope
5) Now only one fee rather than subcontract, design, direct etc.
60
What are they key differences between NEC and JCT contracts? Please name 3
1) NEC is focused on collaboration as per clause 10.1 "both parties must act mutual trust "
2) NEC is more proactive at managing risks through the use of early warnings.
3) NEC deals with time and cost changes differently through RE & RM whereas NEC deals with the two jointly through compensations events
4) NEC is more Programme driven as the programme is a contract document with penalties in place if one is not issued.
5) JCT uses provisional sums whereas NEC does not.
6) NEC is written in plain English whereas JCT is not.
61
What is a contract?
A legally binding promise signed by 2 or more parties which sets out the rights and obligations of both parties.
62
What four elements must a contract contain in order to be deemed a valid contract?
1) Offer
2) Acceptance
3) Consideration
4) Intention to create legal relations
63
Please can you define express terms?
Terms that are expressly agreed between the two parties
64
Please can you define implied terms?
Terms that are not expressively agreed within the contract but are implied by common law or statute
65
What is tort?
1) A civil wrong
2) Part of the civil law
3) Concerned with loss or harm
66
What is the local democracy, economic development and construction act 2009?
1) Came into force in England and Wales
2) Amended the construction act 1996
3) Change the way contracts were entered into and amended the existing payment and adjudication regime
67
Can you name three things the LDEDC act changed?
1) Construction contracts no longer need to be in writing to adjudicate against
2) Contractors write to suspend works for non payment
3) Entitlement for the payee to issue a default payment notice in the absence of an actual payment
68
What is a letter of intent?
A formal letter from an employer to a contractor setting out the key contract conditions and the intent to enter into a contract at a later date.
69
Name 5 key things you'd find in a letter of intent?
1) Scope of works
2) Main contract terms
3) Time and value limit of letter of intent
4) Possession date
5) Expiry date of letter
70
What are the different types of letter of intent?
1) Comfort letter - provides assurance of obligations being met
2) Instruction to proceed with consent to spend - "IF" contracts instructs to proceed and consents spend to x amount
3) Recognition of contract - Issued when contract has been substantially agreed
71
Can you name any case law relating to letters of intent? Can you briefly explain the outcome?
Abbey Trust v Turner & Townsend
The works finished late and a contract was never entered in to, the trust was unable to claim liquidated damages. The courts PM was negligent in not finalising the building contract.
72
What is a parent company guarantee?
A form of security put into place by the employer to ensure that in the event of the contractor going into default, the contractors parent company will take on the obligations of the contract.
73
What is a breach of contract?
When one party in a binding agreement fails to deliver according to the terms and agreements.
74
Can you give three examples of a contractor being in breach of contract?
1) Failure to follow an instruction
2) Failure to follow the specification
3) Failure to take out the correct insurances
75
Can you give three examples of a employer being in breach of contract?
1) Failure to provide access in accordance with the contract
2) Failure to issue a payment notice
3) Failure to pay on time
76
What are the consequences of a breach of contract?
1) Damages
2) Damaged relationships
3) Additional costs
4) Disputes
77
Why is it important to issue a notice to commence in JCT contracts?
1) It is a contract requirement in most contracts
2) It is important to establish a fixed start date to calculate the contract completion date
3) It gives the contractor enough notice to resource
78
What is the significance of a notice of completion (CL 30.2) in NEC contracts?
1) Defects liability commences
2) Damages cannot be applied for lateness
3) 1/2 retention is released
79
When would an employer issue a notice of completion?
At the end of a project, when the employer is satisfied that the contractor has completed their works and associated snags in accordance with the conditions of the contract.
80
What is a final account?
A conclusion of the contract sum including variations which is agreed between the contractor and employer
81
Can you name 5 components of a final account?
1) Variations / compensations events
2) Provisional sums
3) Delay damages
4) Loss and expense / prelim extensions
5) Retention release
82
What would you include in a final account certificate?
1) Total measured works
2) Total variation value
3) Retention
4) Previous amount paid
5) Contractors details
6) Signature from both party
83
What is a site instruction and when would one be issued?
A written form from the employer given to:
1) Vary the works
2) Resequence the works
3) Remedy workmanship
4) Open up works for inspection
5) Carry out testing
6) Remove from site
84
When issuing the site instruction to the drylining subcontractor for additional FCU units, what approach did you take?
1) Read and understood what was being asked
2) Marked up the wall changes between the old drawings and new drawings
3) Checked which walls had already been installed to identify where there would be reworks
4) Issued a a full drawing pack to the subcontractor, and agreed the change principles with the subcontractor
5) Agreed the value of the change swiftly with the subcontractor which allowed the same process upstream
85
What information would you include in a site instruction?
1) Date
2) Scope of works
3) Relevant clauses
4) Supporting documents (mark ups etc)
5) Programme information
86
What is a collateral warranty?
A separate contract that runs alongside an existing contract which creates a contractual link between two parties where one would not usually exist.
87
Could you give a working example of when a collateral warranty would be used?
When a client is concerned about the stability of contractor and wishes to enforce contractual obligations on the subcontractor in the event that contractor went into insolvency.
88
What is the difference between a bond and a collateral warranty?
A bond is a financial commitment backed up by a third party (e.g. a bank) which is contained within the main contract, whereas a CW passes on contractual obligations through a separate contractor.
89
Are there any alternatives to a collateral warranty? If so, what do they do?
Yes, right of third parties. They allow a third party to benefit from a contract entered into by others.
90
Can you name three ways a benefit can be transferred in a buiding contract?
1) Third party rights
2) Collateral warranties
3) Assignment
91
Are you aware of any case law regarding collateral warranties?
Parkwood Leisure v Laing O'Rourke
92
What happened in the Parkwood Leisure v Laing O'Rourke case?
1) Parkwood Leisure sub-let their facility to the council who went into contract with Laing O'Rourke
2) Works complete in 2007 and a defect was found in 2011
3) Laing O'Rourke entered into a collateral warranty with Parkwood Leisure just before PC
4) Defects were discovered in 2011, and Parkwood called upon the adjudication clause to recover
5) Laing O'Rourke argued the CW was not a construction contract as it was made in retrospect
6) The court ruled the CW was deemed a construction contract due to terms such as carry and complete
93
What is insolvency?
The inability for a company to pay its debts.
94
What are LOR's minimum requirements? Can you give 2 examples?
A set of internal minimal standards that Laing O'Rourke demand on every project regardless of the specification.
1) The banned use of monolithic class up to a height of 5m
2) Banned use of magnesium oxide boards within external façade due to ability to absorb heat/release corrosive chlorides
95
Had you inserted the LOR minimum requirements into your subcontract packages, how would you avoid any ambiguity between the specification and said minimum requirements?
Where stating the subcontractors requirement to follow the specification, insert line 'subject to LOR minimum requirements'.
96
How did you deal with the subcontractors non compliance with LOR's minimum requirements?
1) Read the subcontract scope of works and specifications in detail to determine if laminate glass was specified, which it wasn't.
2) Instructed the subcontractor to remanufacture all glass up to a height of 5m as laminate in lieu of the existing monolithic glass
3) Issued a separate instruction to the subcontractor to comply with all LOR minimum requirements going forward and identify any further ambiguities
4) Assessed the costs of variation in accordance with the valuation of variation rules.
97
When would you use a JCT intermediate contract?
1) Where fairly detailed contract provisions are needed
2) Where complex building service installations and other specialist works are not needed
3) Project procured via the traditional route
98
When would you use a JCT standard building contract?
1) Large complex project with detailed contract provisions
2) Employer is responsible for design, but includes an option for 'contractors design portion'
3) Project procured via the traditional route
4) Works can be carried out in sections
99
When would you use a JCT standard building contract?
1) Large scale construction contracts with major work
2) Used when contractor is experienced and willing to take on big risks
3) Project procured via the traditional route
100
What the key features of the JCT major project construction contract?
1) Novation mechanism put in place to maintain consistency with the architect
2) Employer employs a representative to exercise powers & functions
3) Limited contract conditions due to both parties own procedures
101
What are the key features of a JCT design and build contract?
1) Contractor can either complete a design based on the employers concept or start from scratch.
2) Employer uses an agent to administer the contract
102
When would you use a JCT prime cost contract?
1) Early start on site is required
2) Extent and nature of works are unknown until the project is underway
3) Project procured via the traditional route
4) Follows a cost reimbursement or cost plus payment structure
103
When would you use a JCT measured term contract?
1) Employers with regular flow of maintenance, minor works or improvement projects.
2) Suitable via traditional procurement route
104
When would you use a JCT construction management contract?
1) Where the employer employs separate trade contracts and a contract manager
2) Suitable via the traditional procurement route
105
When would you use a JCT management contract?
1) Large projects
2) Flexibility and early start is required
3) Management contract employs trade contractors
4) Employer is responsible for design
106
What is practical completion, and what happens at practical completion?
1) PC is the point the project is complete with minor defects and unfinished works which can be complete without disturbance to the occupier.
2) Employer issues a Practical Completion Statement which legally binds practical completion
3) 50% of the retention is released to the contractor
4) Defect rectification period commences
5) Capabilities to levy damages ends
107
Who can deduct damages from the contractor?
The employer in the event that the contractor finishes beyond the contract completion date without and extension of time granted.
108
Can you please provide an example of a time you advised on the provision of vesting certificates when preparing interim payment?
When working on kings cross S5 I was responsible for the interim valuations each month. Within the contract there were multiple works packages which were eligible to early payment as per the listed item schedule such as carpentry, curtain walling, façade panels. I would arrange a vesting visit with the client and subcontractor and show the materials stored offsite labelled clearly and separated from other materials. I would also demonstrate that the subcontractors insurance covered the value of the materials. Following agreement of the materials, I would issue a vesting certificate to both parties advising the client of the transfer of ownership of the materials following signature and payment.
109
What are the dangers of early payment for materials and how would you mitigate them?
Danger of theft, loss, damage or insolvency which can be mitigated through:
1) Vesting procedures
2) Stage payments
3) Advanced payment bonds
4) Adequate insurance
110
Can you please explain your understanding of defined costs in the NEC suite of contracts?
1) Defined costs are the actual costs incurred in accordance with the schedule of cost components
2) Essentially it is the actual costs less retention, disallowed costs and any costs already included within the fees (i.e. overheads)
111
Can you list me the different types of bonds that may be included within a construction contract?
1) Performance bond
2) Advanced payment bond
3) Retention bond
4) Off site materials bond
5) Tender Bond
112
What is a performance bond?
1) A form of financial security between a contractor and employer / developer
2) In the event that the contractor defaults, the bank would pay the retention bond sum to the employer/developer
113
What is a retention bond?
1) A form of financial security provided by a surety to the contractor in the event that the contractor failed to carry out any obligations or remedy any defective works
2) It is used an alternative to retention as it improves the contractors cashflow.
114
What is an off site materials bond?
1) A form of financial security by the contractor whereby a third party surety would pay the employer for the value of materials stored off site in the event that the contractor went insolvent.
115
What is an advance payment bond?
1) An upfront payment made by the employer to the contractor which is backed up by third party (guarantor)
2) A payback schedule is agreed as the works progress
3) Should the contractor fail to pay back the money, the employer may call on the bond to recover the money from the bank.
4) Usually used when expensive materials need to be purchased
116
What is a tender bond?
1) Requested by the employer when carrying out a tender
2) Provides financial security against the risk of a successful bidder failing to enter the contract
3) Helps prevent idle tendering
117
What is the difference between an on-demand & conditional performance bond?
1) On demand is available immediately when called upon without having to meet any preconditions, unless the demand is fraudulent
2) A conditional bond requires the employer to provide sufficient evidence that the contractor has not performed their obligations under the contract.
118
What is the cost of a performance bond?
It varies dependent on the financial stability of the contractor and number of previous claims.
119
What is an alternative to a performance bond?
A parent company guarantee, where if the smaller company breaches the contract and fails to remedy the breach, the parent company is obliged to step in.
120
What are the disadvantages of a retention bond?
1) The employer will have to pay a premium to take out the bond.
2) There is no financial incentive for the contractor to finish promptly (presuming there are no damages).
121
When would an NEC PMI become a compensation event?
1) When it fits the category of one of the compensation events noted in clause 60.1
2) If the PM deems it is a compensation event, he should state that within his PMI
3) If he doesn't, the contractor may issue an NCE against the PMI in accordance with CL 61.3
4) An
122
How would you respond if the client advised that LAD's were to be £100k per week?
1) Check that the LAD's are based on genuine pre-estimate of the loss incurred as a result of the delay & explain this would need to be substantiated
2) If the LAD's are deemed punitive, there i would advise that this is not enforceable are
3) If unagreed, the employer would need to demonstrate financial through dispute resolutions.
123
What happens if the employer incurs no financial loss or damage as a result of delayed completion where pre agreed LAD's are in place?
It doesn't matter, the LAD's should still be enforced.
124
How would you calculate damages to a subcontract package?
1) Should be based on a genuine pre-estimate of loss incurred as a result of delayed completion.
2) Should ideally be back to back with the contract damages.
3) Should not be punitive.
125
Does your current or previous project have provisions for damages in the contract?
S5 - £16,000k per week which gradually went up to £66k per week
NTT - tbc
126
How would you deal with a loss and expense claim for delay if one was received?
1) Ensure the correct procedures have been followed, through issuance of a notice of delay .
2) If a notice was received, i would review the case with the wider team and agree the facts.
3) I would work through each of the relevant events and accept/reject with an explanation as to why.
4) If enough information was provided i would state the amount of EOT granted, if not i would ask the subcontractor to provide their assessment.
5) I would also determine whether the relevant events also constitute to a relevant matter thus attracting loss and expense.
6) If it was a relevant matter, I would ask the subcontractor to ascertain the loss incurred as a result of the delay.
7) When reviewing i would consider all of the facts, including any concurrent delays caused by the subcontractor.
127
Please describes the methods you would use to assess a loss and expense claim?
1) Checking if the event is a relevant matter, some relevant events do not constitute a relevant matter such as adverse weather conditions.
2) Ensure the contractor has issued a cause and effect assessment to review, and not a simply a prelim bolt-on between the contract completion date and practical completion.
3) Ensure the prelims claimed are genuine prelim costs incurred and not just the prelims included within the initial tender
4) Review costs ascertained for each heading: prolongation, finance charges & disruption/productivity loss.
5) Review the subcontractors records in detail.
128
As a contractor, how would you go about recovering costs for unforeseen ground conditions?
1) Check whether this is deemed a compensation event in accordance with CL 60.1
2) One of the clauses states "unforeseen conditions that an experienced Contractor would have been unlikely to have expected to have come across"
3) I would check contract data part 1 to identify any mention of historic ground changes, as well as checking with internal team.
4) If it could not have been reasonably foreseen, i would notify a compensation event.
129
Can you give three benefits of including damages within a contract?
1) The employer is able to recover financial loss incurred as a result of delay
2) The contractor is incentivised to stick to the programme
3) Both parties are clear on the risks associated with delays from the outset.
130
How would you protect your employer in the event that one of your subcontractors did not complete their works?
1) If retention is included within the subcontract, i would ensure this is not released until the works are finished to the correct standard.
2) If a retention bond was included, i would call upon the bond.
3) Should the subcontractor continue to fail to complete their works, i would employ others to carry out the works on their behalf and charge them for any extra overs in accordance with the subcontract.
131
How would you subcontract in the future if the scope was unclear?
1) Inform the employer of the timescales in terms of appointing a subcontractor and request urgent scope clarifications.
2) Where the scope remains unclear, I would allow provisional sum in the subcontract activity schedule, and set clear dates as to when the available to them.
3) When the scope becomes clear, I would expend the provisional sum through a formal instruction.
4) If the form of contract was NEC, i would make assumptions for the subcontractor price upon, and then instruct the subcontractor later down the line with changes to the conditions.
132
What would you expect to see in a contract with damages?
JCT
1) Contract particulars - states weekly rate of damages
2) Clause 2.28 - sets out requirement for non completion certificate
NEC
1) CD part 1 - sets out damage charges for each section
2) Clause X5 - sets out the need for a completion certificate
3) Clause X18 - sets out limits of liability, if not included, liability is unlimited.
133
How long does the contractor have to notify a variation/NCE in both JCT and NEC standard contracts?
JCT - The contractor is not obliged to issue a formal notice, but it is recommended to do so within a reasonable timeframe, instead the contractor should issue an instruction
NEC - Unlike JCT the NEC has a NCE mechanism. The Contractor must issue an NCE (CL 61.3) within 8 weeks of the contractor becoming aware of the event .
134
How long does the contractor have to respond to an NCE in NEC contract?
1 week, period for reply does not count here
135
How long does the contractor have to issue a quotation in both JCT and NEC contracts?
JCT - 3 weeks
NEC - 3 weeks
136
How long does the employer have to review/assess a quotation in both JCT and NEC contracts?
JCT - ?
NEC - 2 weeks
137
What should you do when managing change?
1) Comply with change timescales in accordance with the contract type to avoid time barring.
2) Maintain a register of events
3) Work in a collaborative manner
138
What are the implications of novation in a construction contract?
1) The benefit and burden in transferred from one party to another
2) A new contract is created, which must be agreed by all three parties.
3)
139
As you say you are confident on the use of both NEC and JCT contracts, can you please advise on some different scenarios and which contract you would use?
JCT - Private sector, more traditionally used, more opportunity to transfer risk to the contractor.
12 different contracts which are selected based on risk, size, type experience, programme etc.
NEC - Widely used in public sector, experienced clients, proactive with an appetite for greater collaboration.
6 different options from A-E, which are widely decided based on the nature of the project and risk appetite.
140
Can you please explain the NEC change procedure?
1) Either party must notify an early warning for anything risks that may extend programme durations or increase costs etc.
2) A risk reduction meeting should take place as soon as possible, where the existing risks are discussed, minutes are taken, actions and owners are set, and timescales are noted.
3) This should be signed by both parties and recorded on a risk register.
4) If the the risk still materialises and progresses to a compensation event, either party must notify the compensation event.
5) If the employer notifies, he should request a quotation with such instruction within 3 week, if the contractor raises, the employer must accept/reject within 1 week and request a quotation accordingly.
6) Upon submission of the quotation, the contractor then has 2 weeks to review the quotation and implement the compensation event through an ICE.
141
What are the pitfalls of a letter of intent?
1) They are contractually less robust than a main contract.
2) They can make both parties complacent in signing the main contract
3) It is ambiguous on whether it constitutes to a legally binding construction contract
142
What would you include in a risk register?
1) Risk heading
2) Risk details
3) Risk Actions
4) Risk owners
5) Action dates
6) Probability & likelihood scores
7) Estimate of costs
143
Can you give an example of a time you mitigated a risk?
On the NLE I managed the screed and tiling subcontract package. I notified the SC with an early warning for screed cracks which would require later remedial works. The subcontractor informed us that they would expect this to be considered a compensation event, whilst we argued the cracks were due to workmanship. The action of the meeting was for the subcontractor to conduct a report with the screed manufacturer to determine the cause of the cracks. The conclusion was the cracks could be prevented by introducing crack inducing joints every 6 meters. This worked, and demonstrates a good example where early warning avoided a compensation event for reworks.
144
What is the standard of care required by designers?
Reasonable skill & care: duty of care as arose from the supply of goods and services act 1982, common law states that works should be carried out as a competent member of the profession should.
Fit for purpose: Imposes a higher duty than skill and care as it is less ambiguous. It is an obligation to achieve a specified result and therefore negligence does not need to be proved in accordance with the sale of goods act 1979.
Both are an expensive yet uninsurable risk on a project.
145
When checking insurance provisions in a contract, what key information would you check for?
1) Insurance cover required
2) Time period required
3) Each & every claim or aggregate
4) Fully retroactive
146
How is the risk of damage from terrorism cover insured?
Pool re cover insurance
147
How is the risk of specified perils covered?
Through all risk insurance
148
What were some of the key amendments in your main contract and were they stepped down?
149
What is an Assentation within the JCT contract?
The process of confirming something is firm or genuine, in JCT form it relates to the formal signature of all parties.
150
What is a Recital within the JCT contract?
Included a the start of the contract to provide background information, outline intentions and establish a framework.
151
What is an Article of agreement in a JCT contract?
Provides key information including contract sum, key parties & dispute resolution procedures.
152
Can you tell me any case law around loss and expense?
Walter Lilley Case
1) Walter Lilley employed as main contractor under a standard JCT
2) Little to no design was complete prior to WLC's involvement
3) Architect granted an EOT on multiple occasions
4) Architect was eventually changed
5) Upon completion WLC was not granted an EOT for the overall delay due to concurrencies
6) The judge found that the delays should be determined by relevant events
7)
153
How would you respond to main contractor insolvency?
Refer to the RICS practice notes on insolvency and conduct the following:
1) Obtain/secure any materials stored of site (vested)
2) Follow the contract with regards to termination of the contract
3) Value the works complete to date (statement of valuation)
4) Call in on any bonds that may be in place (performance bonds)
5) Explore step in rights for any collateral warranties in place
6) Keep records of day to day progress
154
What are the advantages and disadvantages of a performance bond? Give 2 for each
+ Protects the client from financial loss as a result of contractor default
+ Incentivises the contractor to provide best practice
- Costs a premium which eats into contractors profit
- Doesn't protect the employer from time lost on Programme
- New companies would struggle to obtain a bond, potentially pricing out good contractors
155
Can you name any specialist types of insurances found in a JCT contract?
Terroism cover
Pollution and contamination
Latent defects
156
Can you give any examples of clauses that might be stepped down and why? Name 3?
1) Providing documents - e.g collateral warranties or consequences of not providing O&M's.
2) Notifications of claims - The same timescales should be used to prevent a situation where the contractor is time barred because the subcontractor notified too late
3) Levels of insurance - e.g PI claims need to be consistent with main contract
4) Liability periods - If the main contract liability period is longer than the subcontractors, this would risk the main contractor of being liable for a defect causes by the subcontractor
157
What legislation governs limits of liability in UK construction?
The limitation Act 1980
This brings time limits for bringing different types of legal claims
158
What is the difference between a Z and X clause in NEC contracts?
X clauses are secondary options which are bespoke to the contract and can be adjusted to suit the relevant risk profile of a project.
Z clauses are amendments to standard clauses of the NEC and are more concerned with the terms and conditions of the contract.
159
Who holds design liability in the JCT form of contract?
Design liability is dependent on the procurement route selected. For example on a D&B contract the contractor would have more design liability when compared to traditional.
Nevertheless, design liability and limitations is set out in clause 2.17 of the contract (Design Works - Liabilities and Limitations)
160
In NEC contracts, do all PMI's constitute to a compensation event? If no, please provide 2 examples of when a PMI would and wouldn't be a compensation event?
No, the project manager may issue an instruction in accordance with clause 14.3, if he believes it to be a CE he must state that in the instruction linking to clause 60.1. Alternatively, the contractor may notify a CE.
Wouldn't
1) Instruction to resubmit a programme
2) Instruction to remove somebody from site
3) Instructing them to proceed with something that is already in the WI
Would
1) Changing the works information
2) Exceptionally adverse weather conditions
3) Force Majeure
161
Can you please provide an example of a time you advised on a choice of contract?
When working on a residential project the builders work hole schedule was incomplete. The detail drawings were complete meaning there was sufficient information to provide a rate for each detail but not the quantity of holes. I therefore advised the contract was let on a remeasurable basis to allow the critical works package to commence earlier.
162
What are the PAYMENT timescales for NEC & JCT's forms of contracts?
JCT
IVM - Up to the due date
Due Date - IVM + 7 days
Payment Notice - Due Date + 5 days
FDP - Due date + 14 days
Payless - FDP - 5 days
NEC
IVM - 7 days prior to due date
Due Date - As agreed
Payment Notice - Due Date + 5 days
FDP - Due date + 14 days
Payless - FDP - 7 days
163
Is the value issued within the payment notice final? When can it be changed?
No, the employer can issue a payless notice which amends the payment figure up to 5 days before the final date for payment.
164
Have any of your contract amended standard payment terms?
Yes.
NLE
FDP - 14 days > 28 days
Payless- 5 days > 1 day before FDP
JCT
FDP 14 days > 21 days
165
Does your contract include an adjudication clause?
Yes, Article 7 states the right for either party to refer to adjudication in accordance with clause 9.2 which sets out the adjudication rules.
NEC, in the NEC this is stated as a W clause.
Finally, there is a statutory right to adjudicate in line with the construction act 1996, which states that providing the contract is deemed a 'construction contract' either party has a right to adjudicate.
166
Under your option you mention mitigating LAD's for your company. Are you able to name conditions precedent that the Employer under your Contract would have needed to meet to deduct LAD's and the amount that could be deducted?
1) Issue a notice of non completion
2) Issue another notice stating the employer may withhold monies
3) A second notice must then be issued stating they will be deducting liquidated damages
4) If a final payment has already been issued, a final pay less notice must be issued
167
Outside of your write ups, please can you provide another example of when you have demonstrated good contract practise?
1) Residential project - advising on use of remeasurable firestopping package
2) Quantity of works was unknown
3) Works were critical and required promt start
4) Rates were fixed and quants were remeasured
