Contract Practise

Question 1

What is a contract?

Answer 1

A legal agreement between two parties.

Question 2

Why are Contracts required / relevant for the construction industry?

Answer 2

Provides protection for both the employer and the contractors. It also prevents disputes.

Question 3

What are the different ways in which a contract can be made?

Answer 3

Verbally and written

Question 4

What are the key requirements for a contract to be made binding?

Answer 4

• Offer
• Acceptance
• Consideration
• Intention to create legal relation

Question 5

What are common main contract documents in JCT Design and Build.

Answer 5

Form of contract, employers requirements, contractors proposals, CSA, programme and clarifications.

Question 6

What are common main contract documents in JCT Intermediate.

Answer 6

Contract Drawings, specifications, bill of quantities.

Question 7

What standard forms of JCT contracts are you aware of?

Answer 7

Intermediate, Design and Build, Intermediate, Major, and Minor.

Question 8

Under what procurement route would you consider using a JCT Minor Works Building Contract.

Answer 8

Traditional procurement route.

Question 9

When might a JCT Minor Works Building Contract be appropriate?

Answer 9

Small, low value, basic construction projects where the work involved is simple in character.

Question 10

Under what procurement route would you consider using a JCT Intermediate Building Contract?

Answer 10

Traditional procurement route.

Question 11

What is retention?

Answer 11

An amount of money owed to the contractor held by the employer, to ensure the contractor is completing the works in accordance with the contract, until the end of the rectification period.

Question 12

How is retention released?

Answer 12

Typically 1/2 s released on practical completion and 1/2 released at the end of the rectification period. This may vary depending on what is agreed at contract negotiation.

Question 13

What is a Notice of Completion of Making Good?

Answer 13

A certificate confirming that the contractor has made good any defects during the rectification period.

Question 14

What are the advantages for standard contracts?

Answer 14

• Standardised contracts backed up by case law
• Known across the industry
• Reduced legal costs

Question 15

What are the advantages for bespoke contracts?

Answer 15

• Contracts can be customised to address project specific needs
• Greater control over the agreed dispute resolution and payment methods.

Question 16

What are the disadvantages for standard contracts?

Answer 16

• Can be overly complicated for smaller projects
• Limited flexibility to address specific project needs

Question 17

What are the disadvantages for bespoke contracts?

Answer 17

• Increased legal costs to draft a bespoke contract
• Time consuming
• Lack of case law or precedent can make it difficult to resolve disputes

Question 18

What is a relevant event?

Answer 18

An occurrence, such as delays caused by the client or external factors, that entitles the contractor to an extension of time for project completion.

Question 19

What is a relevant matter?

Answer 19

An occurrence, such as changes in design or unforeseen site conditions, that affects the contractor’s ability to perform the work as originally agreed and may justify a claim for additional costs or time.

Question 20

What are some examples of relevant events?

Answer 20

In JCT D&B
- Extreme weather
- Force Majeure
- Delay of possession of site
- Civil Commosion

Question 21

What is a letter of intent?

Answer 21

A document that outlines the intentions of parties involved in a construction project before a formal contract is signed.

Question 22

What are the benefits of a letter of intent?

Answer 22

• Alleviates time-constraints
• Allows more time for negotiations on the contract details
• Provides clarity of scope of works

Question 23

Is a letter of intent legally binding?

Answer 23

Not necessarily. However, some elements include legally binding provisions. So it’s important that the client consults a solicitor to understand their obligations as it can sometimes be seen as legally binding.

Question 24

What are the disadvantages of a letter of intent?

Answer 24

• Not necessarily legally binding, but can unintentionally become legally binding.
• Ambiguity on the project outcome
• May create a delay to create an official document

Question 25

What is a performance bond?

Answer 25

• insures client against the contractor failing to fulfil contractual obligations
• typically 10% of the contract value

Question 26

What is an advance payment bond?

Answer 26

• if it has been agreed that the contractor will receive an advanced payment.
• the bond is an insurance in favour of the client to call on if the contractor fails to meet its obligations or becomes insolvent
• typically they are on-demand bonds

Question 27

What is an off-site materials bond?

Answer 27

• used to pay for materials that remain off site.
• protects the client against failure of the contractor
• typically the bond is the value of the off-site materials and reduces as deliveries to site are made
• typically an on-demand bond

Question 28

What is a bid bond?

Answer 28

• rare in the UK
• typically on-demand
• used to secure the tenderer’s commitment to commence the contract.

Question 29

What is a retention bond?

Answer 29

• an insurance taken out for the full value of the retention in lieu of deducting retention from interim payments
• the client can call upon the bond if the contractor fails to address issues during the rectification period as they would with retention.
• to pay for direct loss or damage suffered by a third party as a result of a breach of contract.
• typically a small percentage (0.4 - 2%) of the retention value

Question 30

What is a defects liability bond?

Answer 30

• used to ensure the contractor continues to provide services that become apparent after PC
• typically on-demand
• used on jobs where there are no outstanding costs

Question 31

What bonds are you aware of?

Answer 31

• Performance bond
• Bid bond- Retention bond
• Defects liability bond
• Advance payment bond

Question 32

What is a primary obligation?

Answer 32

‘the main duty a party has to fulfil’

• simple or on-demand bonds

Question 33

What is a secondary obligation?

Answer 33

‘A penalty that applies if the party breaches their primary obligation’

• conditional bonds
• parent company guarantees

Question 34

What is the difference between bonds and guarantees

Answer 34

A guarantee is linked to non-performance of the underlying contract. A bond is different in that it can be paid on demand, regardless of the underlying contract.

Question 36

What are some examples of relevant matters?

Answer 36

• Instructions related to variations
• Epidemics (new in JCT 2024)
• Unexploded ordnance

Question 37

On Silbury House, you helped with the production of a schedule of derogations. Can you tell me what particular derogation you advised your client on getting legal advice on?

Question 38

Can you give me a couple more derogations you found or would anticipate in the schedule

Question 39

On York road, you advised your client they weren’t liable for an additional weeks claim in relation to ground conditions. Can you set out how you went about advising this against the contract?

Question 40

On Devonshire square, you make sure to follow the JCT valuation rules. When does the valuation process begin under this contract?

Question 41

Can you give me some differences between JCT Intermediate contract and JCT Design and Build contract?