JCT Contract Mechanisms Flashcards
What does Practical Completion trigger?
- End of contractor liability (termination of any liquidated damages)
- Insurance handover
- Handover of the premises
- Beginning of the defects liability period
- Retention releases (generally from 5% to 2.5%)
What does Practical Completion mean?
There is no legal basis for the term Practical Completion. It is when the works are complete to the satisfaction of the Contract Administrator. The CA cannot certify PC of there are outstanding works or patent defects, but they also cannot withhold PC for minor defects outstanding.
What express covenants may be within the contract define Practical Completion?
- Manuals (O&M)
- Testing and Commissioning Certificates
- Building Control sign off (Completion Certificate)
- Keys
What clause within JCT Minor Works contract deals with Retention?
The amount of retention is defined in the Contract Particulars, and then Clause 4.3 deals with Interim Payments.
What clause within JCT Standard Building Contract deals with Retention?
The amount of retention is defined in the Contract Particulars, and then Clause 4.20 deals with how the retention is dealt with.
What is Retention?
Retention is a sum deduced at each valuation (generally 5%) to provide the client with security that the contractor will return to correct any defects.
What clause within the Standard Building Contract deals with extension of time?
The “Adjustment to Completion Date” section of the contract deals with an extension of time:
- 2.26 provides definitions and interpretations
- 2.27 provides details of requirements for contractor’s notice of delay
- 2.28 provides details for fixing the completion date
- 2.29 defines Relevant Events
What is an Extension of Time?
If a contractor fails to complete the works within the allotted time for reasons beyond their control, the CA can consider an application for the contractor for an Extension of Time - which is a certificate that alters the completion date.
What happens in a contractor is in delay and no extension of time is available?
Time is considered to be “at large” and damages as defined in the contract may be enforceable
What needs to be considered by the CA regarding an Extension of Time request from the contractor?
- Whether the cause of the delay is a Relevant Event (SBC) or outwith the contractor’s control (MW)
- Will this delay have an effect on the completion date
- If so, to what extent
What are Relevant Events?
In the Standard Building Contract (Cl. 2.29) and the Intermediate Building Contract, relevant events are defined:
- Variations
- Loss or damage caused by specified perils
- Civil action
- Terrorism
- Force Majeure
- Exceptionally adverse weather conditions
- Deferment of possession of site
- Any impediment, prevention or default by the employer
- Approx. quantity in a Bill of Quantities is inaccurate
- Statutory works
- Strikes
What are the timescales involved in a Extension of Time?
Under the SBC - The contractor is obliged to alert the CA to any delay at the earliest opportunity. Once a request for an extension of time is received from the contractor, the CA has 12 weeks to assess and make a decision (if less than 12 weeks to completion, the CA needs to make a decision prior to the completion date)
Under MW - No specific timescales are defined
What is a Relevant Matter?
A Relevant Matter is a matter for which the client is responsible that materially effects to progress of the works. May give rise to an contractor’s claim for Loss and/or Expense. Might include:
- Failure to give site possession
- Failure to provide access to/from site
- Delays in providing instructions
- Discrepancy within contract documents
- Disruption caused by works carried out by the client
- Instructions relating to variations and expenditure of provisional sums
- Issues relating to CDM
What is a Specified Peril?
A specified peril is a relevant event which can justify an application for an extension of time, but not an application of loss and expense. Defined in MW and IBC: -Fire - Lightening - Explosion - Storm - Escape of water from tank or pipe - Earthquake - Riot/Civil commotion Specified risk are usually covered by the works insurance policy, and may give rise to a claim
What counts as exceptionally adverse weather conditions?
JCT does not define exceptionally adverse weather condition, meaning it is left to discretion. This means that it can be a potential cause for dispute.
NEC defines it as a 1 in 10 year event, otherwise the contractor should have allowed for the effects of weather within their price
What clause within a Minor Works contract deals with Loss and Expense?
Loss and Expense is dealt with in clause 5.10, where details of when a contractor is entitled to loss and/or expense is detailed.
What clause within a Standard Building Contract deals with Loss and Expense?
The “Loss and Expense” section deals with loss and expense:
- 4.23 deals with matters materially affecting regular progress
- 4.24 defines Relevant Matters
- 4.25 deals with amounts ascertained (addition to contract sum)
- 4.26 provides details of the contractor’s rights and remedies
What is the process involved in the Standard Building Contract for Loss and Expense?
The contractor makes a claim for any direct loss and/or expense incurred due to a default by the employer or a relevant matter. The contractor must submit any supporting information required by the CA. If reasonably incurred, it is considered to be an Ascertained Amount and is added to the contract sum.
What clause within the JCT Minor Works contract deals with Liquidated Damages?
Clause 2.9 deals with liquidated damages. Amount of liquidated damages should be defined in the contract particulars
What clause within the JCT Standard Building Contract deals with Liquidated Damages?
The section “Practical Completion, Lateness and Liquidated Damages” deals with liquidated damaged. More specifically clause 2.31 deals with the requirement to issue a Certificate of Non-Completion and clause 2.32 details the situation where liquidated damages may be applied, and the process for doing so. Amount of liquidated damages should be defined in the contract particulars
What is the difference between liquidated and non-liquidated damages?
Liquidated damages are a genuine pre-estimate of loss. When used actual loss is irrelevant, and once set they can only be revised down.
Unliquidated damages are when the section in the contract particulars is left blank, and the loss must be calculated at the time and need to be proven
How is the amount of liquidated damages applied in a contract calculated?
Liquidated damages should be a genuine pre-estimate of loss due to delay. They may include loss of rent, extended professional fees, the requirement to rent additional spaces etc.
What is the process required for liquidated damages to be claimed by an employer in the Standard Building Contract?
Under the SBC for liquidated damages to be applied a Non-Completion Certificate must be issued. Following that the client can either deduct the damages from monies due to the contractor, communicated via a pay less notice, or recover the amount as a debt, as long as it is communicated via a notice.
What is the process for liquidated damages to be claimed by an employer in the Minor Works contract?
Under the MWBC there is no requirement for a Non-Completion Certificate to be issued. If the work is not complete by the completion date, the employer can either deduct monies due to the contractor, communicated via a pay less notice, or recover the amount as a debt, as long as it is communicated via a notice.
What clause in the Minor Works contract deals with Non-Completion Certificates?
None. Non-Completion Certificates are not required under the minor works contract
When would a Non-Completion Certificate be issued?
A Non-Completion Certificate would be issued when works are not complete at the relevant completion date, and no Extension of Time has been issued. Liquidated damages cannot be claimed unless a Non-Completion Certificate has been issued.
What clause in the Minor Works contract deals with Pay Less Notices?
Clause 5.5 “Payments - amounts and notices” and more specifically 5.5.4 deals with Pay Less Notices
What clause within the Standard Building Contract deals with Pay Less Notices?
Clause 4.13 “Pay Less Notices are general provisions” deals what should be included within a Pay Less Notice, which clause 4.12 “Interim payments - final date and amount” details the situation in which a Pay Less Notice shall be issued
What is a Pay Less Notice, in what situation would it be issued and what are the timescales involved?
A Pay Less Notice is a notice issued either to the Employer or the Contractor noting the intention to pay less monies than noted as due in a valuation. Where a valuation is considered to be wrong, or where for example the client wishes to claim liquidated damages, then a Pay Less Notice should be issued to detail the amount to be paid. A Pay Less Notice must be issued not later than 5 days before the final date for payment
What clause within the Standard Building Contract deals with Partial Possession?
The section “Partial Possession by Employer” deals with partial possession. More specifically:
- 2.33 deals with Contractor’s Consent for the Employers partial possession;
- 2.34 deals with Practical Completion of the space, and defines the Relevant Part and Relevant Date;
- 2.35 deals with defects within the Relevant Part;
- 2.36 deals with insurance of the Relevant Part; and
- 2.37 deal with liquidated damages (reduction) in respect of the Relevant Part
What is the process for partial possession?
If the Employer wishes to take partial possession of some part of the works prior to the completion date, they must first gain consent to do so from the Contractor. The Contractor cannot unreasonably withhold or delay such consent. Following that, the Relevant Part is deemed to have reached Practical Completion at the Relevant Date, where partial possession took place. This then triggers the start of the defects rectification period for the Relevant Part, starting at the Relevant Date. This also means that the insurance of the Relevant Part now becomes the responsibility of the Employer (specific dependent on insurance arrangements used). Additionally, the amount of liquidated damages should be reduced to reflect the % of the Relevant Part.
