Contracts Flashcards
What needs to be in place for a contract to be valid
"Offer Acceptance Consideration Intent Legality Capacity"
What is the difference between expressed and implied terms
“Expressed terms - Explicitly agreed by both parties and can be oral or in writing
Implied - A term that hasn’t been agreed expressly by either party, but that has been implied by the other terms of the contract”
Can you tell me what a typical D&B contract would consist of
"It is 5 parts; 1. JCT 2. Amendments 3. Employers Requirements Consisting of: Prelims, Design specs & Appendices 4. Contractors Proposals 5. CSA"
What are Prelims
The purpose of preliminaries is to describe the works as a whole, and to specify general conditions and requirements for their execution, including such things as subcontracting, approvals, testing and completion
What are a couple of types of contract asides from lump sum
“Lump sum - Fixed price for works only extras are instructed change/ change not included e.g. ground risk
Re-measurable - based on approximate quantities or schedule of rates
Cost reimbursable - Contractor gets actual costs plus an agreed percentage for OH&P”
Are you aware of the NEC suite of contract
NEC is New Engineering Contract:
What are the NEC options
“Option A-F:
NEC – Option A Priced contract with activity schedule
NEC – Option B Priced contract with Bill of quantities
NEC – Option C Target cost with activity schedule
NEC – Option D Target cost with BOQ
NEC – Option E Cost reimbursable
NEC – Option F Management contract
NEC – ECC Short Contract “
You note about EOT & L&E what are the timescales in the JCT D&B contract to review
“EOT:
Contractor must notify when it becomes reasonably apparent
Must provide causes which is a relevant event
Must provide particulars of effect including estimated delay
Must supply information the employer may reasonably require
Shall notify within 12 weeks of receipt or when reasonably practicable
L&E:
Notify employer as soon a reasonably practicable
Provide assessment of L&E
Must supply information the employer may reasonably require
Within 28 days of receipt of initial assessment and information and 14 days of each subsequent update the Employer shall notify the contractor of L&E incurred. Insufficient detail to allow the contractor to understand the differences”
What clauses in the contract deal with EOT & L&E
“Relevant Event - EOT 2.23-2.26
Relevant Matter - L&E 4.19-4.23”
How many Relevant Events are there
14
How many Relevant Matter are there
5
If a scheme was in delay and the client wished to levy damages following expiration of the contract completion date how would you go about that
“Issue notice of non-completion
Calculate value of omission
Issue this to the client for them to issue
5 day before due date as payless
What signs would you look for in order to understand if a contractor was in trouble of insolvency
“Not paying the supply chain
Falling cashflow
Inactivity on site
Demanding swift payment
Withdraw of labour”
What would you advise the client to do if a contractor went insolvent
“Withhold payments and the release of retention monies
Secure the site and make it safe
Secure both contractors’ and subcontractors’ materials and plant.
Employ a security firm on a visiting or permanent basis.
Ensure the project has adequate interim insurance
Make an inspection of the site and record the progress accurately.
What is the difference between assignment and novation
“Assignment is where the benefit (service) is transferred but the burden to pay remains with the client.
Where the benefit (service) and burden (cost) is transferred”
Would you advise the client to execute the contract under hand or as a deed
“As a deed as it has limitations period of 12 years
Under hand is 6 years”
What are the standard timescales for payment in a JCT D&B contract
“IVD is noted in the contract
7 days to the due date
5 days to issue the Payment certificate
14 days from the due date to pay”
What is the difference between an EA/CA
“Employers Agent - Acts on behalf of the client
CA - must act independent and have an agency function”
What is the risk to a client if the don’t pay by the final date for payment
“If the failure continues for 7days after notice to the employer of intention to suspend has been issued they can suspend performance
It also entitled the contractor to Relevant Event
And will be reimbursed for reasonable costs for suspension
If the default continues for 14 days following notice the contractor can on or within 21 days from expiry of the 14 days terminate the contract
What is the importance of a base date
“It sets the reference date from which conditions are deemed known by the contractor so are reflected in their price.
If a change happens after this date it is not considered to be included in the price
This affects a divergence”
For a single stage tender process what would the typical base date be
Date of tender
What is a nominated sub contractor
“Sub contractor who the employer instructs the contractor to employ.
Performance remains employers responsibility”
Do you know what a Performance bond is
It is an insurance back surety which provides generally 10% of the contract sum should the contractor fail in their insurance.
When woulda Performance Bond typically expire
“PC
end of 12 months defects”
What is the difference between Partial Possession and Sectional completion
“PP - When the client takes possession prior to a completion date. (Cannot be unreasonable withheld)
Sectional Completion - Contractual date
- Must have clearly defined LAD’s
- And retention
- Same as PC”
What happens at PC
“50% retention released
Client cant levy LAD’s
Defects period begins
Client must insure works”
What is the construction act 1996 introduce
“Interim payments
Suspension
Adjudication
Pay when paid
Applies to verbal contracts”
What are the tree types of LOI
“Letter of comfort - used for extending tender period. Does not for a contract
Authority to spend - Allows works to progress on site or works ordered. Subject to final agreement of contract conditions
Recognition of Contract - Contract conditions agreed but the contractor is to start while the contract is bound and signed. “
If you were working on a refurbishment scheme what insurance option in the JCT D&B would you expect to see
Insurance Option C - Existing Building - All risk insurance taken out by employer in joint names for full reinstatement of works
What formulas can you use to review a Loss of profit claim
“Hudson formula
(Head office costs +profit) /100 X contract sum/period in weeks X weeks in delay”
What is a divergence and what is a discrepancy
“Discrepancy - Inconsistency between contract documents
Divergence - When a document does not comply with the statutory requirements”
How are Divergences and Discrepancies dealt with through the JCT
“Discrepancy: Contractors obligation to notify immediately
- If between CP’s & Contractors design documents contractor liable for cost and delay
- If between ER’s contractor proposes amendments if it is a change contractor entitled to money & time
Divergence: Both have an obligation to notify
- The risk remains with the contractor unless the non compliance is due to a statutory change after the base date”
What is the joint fire code
Introduced to provide guidance on fire safety on site as well as prevention and detection
When does the joint fire code apply?
Applies to schemes over £2.5m
When is considered a large scheme under the Joint Fire Code
Considered a large scheme over £20m
What is PPC
"Project Partnering contract This creates a multi party 2 stage contract. Advantages Integrated design team Improved output as integrated team Increased opportunity for innovation Reduced risk of dispute
Disadvantages
Can become paper exercise if not correct buy in
Can be costly as normally done on cost reimbursable
”
What is an EOT
“Extension of Time - Adjustment of completion date
Relevant Events - 14”
Steps of EOT
“When reasonably apparent the contractor notifies of circumstances and reference to relevant events
Written details given ASAP to confirm delay and if impact cost
Give employer estimated completion ASAP
EA review the claim against Relevant Events stating time given against each RE.
Must be resolved within 12 weeks”
How is an EOT assessed
“Review the substantiation provided by the contractor
assess delay if any against each action”
What is L&E
“Loss and Expense
When the contractor claims for direct loss due to Relevant Matters - 5”
How is L&E assessed
“Contractor notify the EA when reasonably apparent
Provide information as soon as reasonable practicable, followed by initial assessment of Loss & Expense
Contractor shall provide further details as request by the client
Within 28 days of initial assessment and 14 days of each subsequent update notify the contractor of the ascertained amount of L&E incurred contractor should be able to identify the cost given against each RM”
What is included within L&E claim
“Prelims if programme impact
Labour & plant costs if this has caused disruption
Increased cost if delay has impacted prices
Loss of profit Hudson formula
Overheads”
How does a contractor evidence actual loss
“Through providing cost details through good record keeping costs at a period.
Details of increases
Sub contractors - costs passed on Material suppliers costs passed on time delay to programme resulting in additional prelims Storage costs etc "
