Contract Terms

Question 1

Why must you be careful of specific dimensions on a construction drawing?

Answer 1

These count as contract terms and are therefore legally significant

Question 2

What are the contractual responsibilities of an employer?

Answer 2

To provide site access, preliminary documentation and payment at times specified by the contract

Question 3

What is the right of the construction client?

Answer 3

The work is of a specified quality to be delivered by a specified date

Question 4

What are the rights of a contractor?

Answer 4

Site access free from disruption, payment on time, answers to queries, further instruction if necessary

Question 5

What does it mean if a Relevant Matter is found to have occurred?

Answer 5

The contractor is entitled to monetary compensation

Question 6

What does it mean if a Relevant Event is found to have occurred?

Answer 6

The contractor is entitled to more time to complete the contract

Question 7

What is the difference between a pricing mechanism and a payment mechanism?

Answer 7

Pricing determines the price of a tender and justification for it
Payment determines how, when and how much a contractor is paid

Question 8

What are the 5 payment mechanisms?

Answer 8

Lump sum
Remeasurement 
Activity schedule 
Cost reimbursable
Target price

Question 9

When is lump sum payment good?

Answer 9

For small scale or d&b contracts

Question 10

What is the difference between cost reimbursable and target price payment mechanisms?

Answer 10

CR simply bills the client the contractor’s costs plus a works fee
Target price aims to limit the final cost for the client to a specific amount

Question 11

How does target price payment work if the final cost is above or below the target?

Answer 11

If above, the cost is split evenly between the client and contractor up to 10% above the target, at which point the contractor incurs all the cost
If below, the leftover money is shared between client and contractor

Question 12

Give two examples of a Relevant matter

Answer 12

Variations

Discovery of historic material

Question 13

Give two examples of a Relevant event

Answer 13

Variations, adverse weather conditions

Question 14

List some advantages of target pricing (4)

Answer 14

Incentivises efficiency & cooperation
Limited client liability
Good basis for tender comparison
Low risk

Question 15

List 3 disadvantages of target pricing

Answer 15

Difficult to agree actual costs during construction
Final payment can be difficult to calculate
Overpayment is likely

Question 16

List some advantages of cost reimbursable pricing (5)

Answer 16

Early start
Can account for poorly defined work
Simple contracts
Better teamwork
No disagreement over variations

Question 17

List some disadvantages of cost reimbursable pricing (4)

Answer 17

Employer carries almost all risk
No efficiency incentive
Final cost unknown
Difficult to compare tenders