Level 1 Contract Practice Flashcards
What is a contract?
Legally binding agreement between two parties to provide goods and service within a specified timeframe.
What is necessary to form a contract?
Offer, Acceptance, Consideration, Intention, Capacity & Legailty
How is a contract executed?
Under hand: signed by both parties with a 6 year limitation period.
Under seal as a deed: signed and witness, 12 year limitation period.
Common contract documents?
- The contract
- Preliminaries
- Contract Sum
- Drawings
- Specification
- Planning agreements
- ERs
- Contractors Proposals
JCT
Joints Contract Tribunal
Contracts Administrator (Traditional)
Employer’s Agent (Design & Build)
- Oversees the project checking progress, payment, pc certs and notices of making good.
NEC Contract
New Engineering Contracts
Aimed at engineering projects but are easily adapted to building works.
- Includes a process of early warning
- PM overriding duty
- Compensation rather than Relevant events
What are the standard forms of JCT?
Design & Build
Minor Works
Intermediate Building
Major Projects
Construction Management
Design & Build
Used by all types of clients, create a single point of responsibility for design and construction.
Minor Works
Not used for complex projects
What is a collateral warranty?
A way of forming a direct contractual link between two parties which otherwise wouldn’t have - i.e contractor and client.
- use of quality and carrying out works in a professional manner
What is a letter of intent?
Outlining an agreement between two parties before a formal contract is created.
Advantages of LOI
- Establishment of good faith
- A summary of terms and structure of business transaction
- Identifys significant concerns that are a deal breaker.
Disadvantages of LOI
If not worded properly, it may be considered as binding on the parties, resulting in unforeseen obligation.
Performance Bond
Form of financial security used to cover the client against the contractor failing to fulfil their contractual obligations.
Client pays for this
Retention Bond
Used instead of taking retention from interim valuations, used to improve contractor cash flow.
PII
Professional indemnity insurance
- Covers professional negligence
Employer’s liability insurance
Covers the injury and death arising from business activities.
Types of payment methods
- Stage
- Milestone
- Third party certification
Construction Act introduced what?
Right to fair payment
Pay less notice?
- Issued after the final date for payment if the notice is unsound.
- The notice must specify the sum that the party
Elements in place for a contract?
Capacity - those must be of sound mind.
Intent - clear intention for both parties to do business.
Consideration - allows anyone reading the contract to see something of value be exhanchged.
Lawfulness - must be legal
Offer- must explain the nature of the offer and explain the nature of the change, reponsibilities and costs. & what happens if someone doens’t oblige.
Acceptance - signature
Clarity of terms - to avoid a breach of terms, certainty must be provided.
How is a contract under hand different from under deed?
A deed is signed by the parties as well as a witness. Traditionally authenticated by a seal.
Whereas under hand in only signed by the parties of the contract.
Under hand = 6 years
Deed = 12.
LADS
A Genuine pre-estimate of the likley loss of the employer should the completion date not be met.
Need to be substantiated if applied.
What in place before LDs to be deducted?
Non-completion notice
Payless notice / witholding notice.
What if the employer actually suffered no loss or damage?
It doesn’t matter.
The damages can still be deducted at the value stated in the contract.
What is the defects liability period?
Duration at the end of the contract, where the contractor undertakes any defects at their own expense.
If there is a discrepancy between the ER’s and CP which one takes precedence?
The Contractor’s Proposals.
What is a bespoke contract?
Contract conditions are drafter specifically for a project.
Advantages of standard forms over bespoke contract?
Written by legal experts
Rights and obligation clearly set out
Risks should have been allocated
Parties should be familiar
Case law has built up over time.
Disadvantages: Risks is rarely questions and becomes implicit.
May not be appropriate to the needs of a particular project.
When would you use a bespoke over standard form?
Used for major project with novel
Main parts of JCT contracts?
- Recitals
- Articles
- Contract Particulars
- Attestations
- Conditions
- Schedule
JCT Forms of Contracts?
- Minor works
- Intermedite
- SBC
- Major Projects
- Design & Build
9 Sections
- Definitions and interpretations
- Carrying out the works
- Control of the works
- Payment
- Variations
- Injury, damage and insurance
- Assignment, third party rights and collateral warranties
- Termination
- Settlement of disputes
When would you use JCT minor works?
- Simple in nature
- Project shorter in duration
-JCT guidance up to £200,000 - Lump sum
JCT Intermediate contract
- Projects that don’t exceed one year duration
- Simple in content and require only basic skills
JCT Standard contract
- Where the works have already been designed
What Are Relevant Events?
Events that entitle to EOT.
- 13 in total
- Vairations/ instructions
- Deferment of posession of site
- Suspesnsion by the contractor for non-payment
- Exeptionally adverse weather conditions
- Strike or lock out
- Civil commotion or terrorism
- Force Majeuore
EOT without a L&E claim?
Yes an EOT does not automatically mean entitlement to L&E
Certificates under JCT?
Interim Payment certs
PC, PP or SC
Non Completion Certs
Cert of making good
Partial Posession?
Relies on the contractor’s consent.
Sectional Completion?
Contractual obligation to hand over the section at the stated date
What is PC
Is a vague concept, not defined in the JCT, common pracitce where works are substantially complete and works dont prevent beneficial occupancy.
NEC
New Engineering Contract
Disadvantages of the NEC
They are often only considered to be used for civil engineering project and partnerships.
NEC
The role of the qs is not included in the contract.
The QS can adopt a supporting role
Specified Perils?
Significant events that would cause significant damage - fire, explosions, earthquakes, flooding etc.
