SoE - Contract administration Flashcards
1
Q
Can you expand on your knowledge of the JCT/SBCC Standard Building Contract
A
The JCT/SBCC SBC allows for additional to the intermediate contract such as:
Employers’ representative, listed sub-contractors, retention bonds, variation and acceleration quotations, third party rights.
2
Q
What SBCC contracts allow for a clerk of works?
A
Standard Building Contract (& JCT Intermediate)
3
Q
What contract allow for sectional completion and named sub-contractors ?
A
Standard Building Contract (& JCT Intermediate)
4
Q
What are the main types of tendering?
A
- Open
- Selective
- Negotiated
- Serial
- Framework
5
Q
What are the main updates from the previous version (JCT/SBCC MW updates)?
A
JCT/SBCC MW 2016 updates include :
* Amendments to reflect CDM 2015
* Increased flexibility regarding insurance and ‘insured by other means’
* Simplified payment provision including the interim payment provision under the Housing Grant, Construction and Regeneration Act 1996
6
Q
What are the main updates from the previous version (JCT/SBCC MW updates)?
A
JCT/SBCC MW 2016 updates include:
* Amendments to reflect CDM 2015
* Increased flexibility regarding insurance and ‘insured by other means’
* Simplified payment provision including the interim payment provision under the Housing Grant, Construction and Regeneration Act 1996
7
Q
What is a traditional lump sum contract?
A
A lump sum contract is the traditional means of procuring construction, and involves a single ‘lump sum’ price for all the works being agreed before the works begin. This means that the contractor is able to accurately price the works they are being asked to carry out.
8
Q
What is the role of the contract administrator?
A
To administer the conditions/works under the terms of the contract. Acting impartially.
9
Q
What is a contract instruction and how would you deal with it?
A
In simple terms, a contract variation occurs when the parties agree to do something differently from the way they originally agreed, whilst the remainder of the contract otherwise operates unchanged. Such an agreement, if valid, would amount to a variation of the existing contract.
10
Q
What is traditional procurement?
A
Traditional procurement remains the most commonly-used method of procuring building works. It comprises a tripartite arrangement involving a client, consultants and contractor.
The traditional procurement route involves separating design from construction. The client first appoints consultants to design the project in detail and to ensure cost control and inspect the construction works as they proceed. Contractors are then invited to submit tenders for the construction of the project on a single-stage competitive basis.
Included in the contractor’s responsibilities are workmanship, materials and work undertaken by suppliers and subcontractors. The contractor is not responsible for the design (other than temporary works), although some traditional contracts may provide for the contractor to design specific parts of the works (see key criteria below).
Traditional procurement is typically undertaken under a lump sum contract. A single ‘lump sum’ price for all the works is agreed before the works begin, then stage payments are made as the works proceed. This is appropriate where the project is well defined when tenders are sought, and significant changes to requirements are unlikely. This allows the contractor to accurately price the works they are being asked to carry out.
11
Q
What are the others available JCT Contracts?
A
- Standard Building Contract;
- Design & Build;
- Intermediate Contract;
- Intermediate Contract with Design;
- Minor Works;
- Minor Works with Design;
- Major Projects (MP)
- Framework, non-binding and binding;
12
Q
What are the others available SBCC Contracts?
A
- Standard Building Contract (with, without and approximate quantities);
- Minor Works;
- Minor Works with CD;
- Major Projects (D&B);
- Measured term;
- Homeowner contract
13
Q
What is a letter of intent?
A
A letter of intent is a document outlining the understanding between two or more parties which they intend to formalize in a legally binding agreement. The concept is similar to a head of agreement, term sheet or memorandum of understanding
14
Q
What does the Housing, Grants Construction and Regeneration Act 1996 allow for within the contract?
A
- the right to stage payments
- the right to notice of the amount to be paid
- the right to suspend work for non-payment
- the right to take any dispute arising out of the contract to adjudication
15
Q
What are the types of specifications?
A
Specifications describe the products, materials, and work required by a construction contract. They do not include cost, quantity, or drawn information, and so need to be read alongside other information such as quantities, schedules, and drawings.
Specifications vary considerably depending on the stage to which the design has been developed, ranging from performance specifications (open specifications) that require further design work to be carried out, to prescriptive specifications (closed specifications) where the design is already complete.
- Prescriptive specifications give the client much more certainty about the end product when making investment decisions (such as when they appoint the contractor), and place a greater burden on the designer to ensure proper installation rather than the contractor.
- Typically, performance specifications are written on projects that are straight-forward, standard building types, whereas prescriptive specifications are written for more complex buildings, or buildings where the client has requirements that might not be familiar to contractors and where certainty regarding the exact nature of the completed development is more important to the client.”
16
Q
What are the types of procurement?
A
- Traditional contract 86%
- Single-stage design and build 41%
- Two-stage design and build 39%
- Management contract 18%
- PFI 10%
17
Q
Under JCT MW does the programme form part of the contract?
A
No however the contract promotes the use of one for reference generally.
18
Q
Under JCT what are included within the contract documents?
A
- drawings;
- specification;
- work schedules;
19
Q
What is the base date?
A
Base date: the base date is usually set at around the time of return of tenders. base date’ is a reference date from which changes in conditions can be assessed.
20
Q
Does JCT MW make reference to a possession date?
A
MW16 does not refer to the contractor being given ‘possession’ of the site, but states simply that ‘The Works may be commenced’ on the date stated in the contract
21
Q
What are the ground for termination from the client/corruption?
A
- Insolvency
- CDM breaches
- Corruption of the contractor
- Contractor failing to proceed regally and diligently
- Employer failing to pay amounts
- Either party can terminate is the works are suspended for a period of more than one month due to neutral events
22
Q
Why is it important to define a completion date?
A
The significance of having a completion date is that it provides a fixed point from which damages may be payable in the event of non-completion. Generally in construction contracts the damages are ‘liquidated’, and usually expressed as a rate per week of overrun.
23
Q
What is the reason for an extension of time?
A
One important reason for an extension of time clause is to preserve the employer’s right to liquidated damages in the event that the contractor fails to complete on time due wholly or in part to some action for which the employer is responsible
24
Q
What is ‘time at large’?
A
Construction contracts will usually include a date by which the works described in the contract should be completed. This is generally the date by which practical completion must be certified.
The phrase ‘time at large’ describes the situation where there is no date for completion, or where the date for completion has become invalid. The contractor is then no longer bound by the obligation to complete the works by a certain date.
Time can become at large because there is no clear completion date specified in the contract, or can be a situation that arises as a result of events (typically by agreement of the parties or by failure of the contract ‘machinery’), or if the contract does not allow the construction period to be extended.
25
When must a contractor give written notice regarding an extension of time?
Under MW16 the contractor must give written notice to the contract administrator ‘If it becomes apparent that the Works will not be completed by the Date for Completion’ (cl 2.7, or 2.8 in MWD16). The notice must be given regardless of the reason for the delay, i.e. whether it is caused by the employer, by a neutral event (such as bad weather) or by the contractor itself.
26
When would you issue a certificate of non completion?
If the completion date is not achieved, under JCT MW the certificate is not required but this failure should be recorded and circulated to all.
27
Does JCT MW state a list of relevant events?
‘Relevant Events’ under SBC16, for example exceptionally adverse weather, the ‘Specified Perils’, strikes, failure to supply information, site access and indeed any difficulty in movement on or around site.
28
When should the CA respond to a contractor EOT claim?
There are no time limits on when the contract administrator must respond to the contractor’s notice, but it is suggested that this should be done as soon as possible, in order to preserve the employer’s right to liquidated damages. The contract administrator should either fix a new completion date or notify the contractor that no extension of time is due. The contract administrator might call for information if this is necessary to make a fair and reasonable assessment, but this must never be considered as a delaying tactic.
29
Can an EOT be reduced following initial confirmation?
The second limitation is that there appear to be no provisions whereby the contract administrator may reduce a previous extension of time by fixing an earlier completion date where work has been omitted. Nevertheless, it is suggested that if work has been omitted, the contract administrator could take this into account when deciding what might be a reasonable extension in response to some further notice by the contractor.
30
Does MW allow for occupation of the site prior to completion?
MW16 makes no provision for the employer to use or occupy the site or the works or any
part prior to practical completion. If arrangements for phased occupation have not been agreed in the contract documents, a situation may arise where the contractor has not completed by the date for completion, but part of the works are complete or sufficiently complete to allow the employer to have "beneficial use" of those parts and the employer is anxious to occupy them. There is nothing in the contract that allows for this; therefore, a separate ad-hoc agreement would have to be made.
31
What triggers practical completion?
Under clause 2.9 (2.10 in MWD16) the contract administrator is obliged to certify the date at which, in the contract administrator’s opinion, works have reached practical completion and the contractor has complied sufficiently with clause 3.9 (its CDM obligations, for example the supply of information required for the health and safety file) and, in the case of MWD16, clause 2.1.3 (supply of CDP drawings). The date certified is the date when the last condition is fulfilled.
it is implied that it will be a fair and reasonable exercise of professional judgment.
However, it has been held that the contract administrator has a discretion to certify practical completion where there are very minor items of work left incomplete, on de minimis principles
32
What does practical completion trigger?
* Start of the rectification period
* release of half of the retention
* Employer takes responsibility of the site
* liability for liquidated damages cease
33
How and where would you process liquidated damages?
May deduct damages from the amount due under the next certificate or reclaim the sum as a debt Under MW16 the contract administrator is not required to certify non-completion, but it may be prudent to record the failure in a letter to both the employer and the contractor. Once the date for completion has passed, the contractor is said to be in ‘culpable delay’.
The liquidated damages may either be recovered from the contractor as a debt or deducted from monies due (cl 2.8.2, or 2.9.2 in MW16). In both cases the following preconditions must have been met:
* the contractor must have failed to complete the works by the completion date (cl 2.8.1,or 2.9.1 in MWD16);
* the contract administrator must have fulfilled all duties with respect to the award of extensions of time.
34
Do liquidated damages need to be proven or estimated for a claim?
It is no longer considered essential that the amount is calculated on the basis of a genuine pre-estimate of the loss likely to be suffered. Provided that the amount is not ‘out of all proportion’ to the likely losses, the damages will be recoverable without the need to prove the actual loss suffered, irrespective of whether the actual loss is significantly less or more than the recoverable sum. In other words, once the rate has been agreed, both parties are bound by it. Of course, for practical reasons, the rate should always be discussed with the employer before inclusion in the tender documents, and an amount that will provide adequate compensation included to cover, among other things, any additional professional fees that may be charged during this period. If ‘nil’ is inserted then this may preclude the employer from claiming any damages at all , whereas if the clause is left blank then the employer may still be able to claim general damages.
35
What notice would you need to submit if you are planning to recoup liquidated damages form a payment?
Within a pay less notice
36
What is the process for issuing an extension of time if liquidated damages have been claimed?
If an extension of time is given following the date for completion, the employer must immediately repay any liquidated damages recovered for the period up to the new completion date.
37
What are the key powers of the contract administrator JCT MW?
* Agree variations
* Issue a pay less notice on behalf of the client
* issue certificates
* certify practical completion making good defects
38
How should a main contractor appoint sub contractors?
MW16 stipulates that ‘Where considered appropriate, the Contractor shall engage the sub-contractor using the JCT Short Form of Sub-Contract
39
At what point can you no longer issue variations under the contract?
Following practical completion/Final account.
40
Does the contractor have a right to access the site during the rectification period?
Yes, but cannot force access. Although the right to return to site ceases at the end of the three-month period, the contractor’s liability for defective materials or workmanship continues throughout the statutory limitation period.
41
How long does the contract administrator have to notify the contractor of the existence defects?
MW16 requires the contract administrator to notify the contractor of the existence of defects within 14 days of the end of the rectification period .
Unlike SBC16, the form does not state that the contract administrator must issue a schedule of defects. It is suggested that it would be sufficient for the contract administrator to write to the contractor to inform it that defects had appeared, and of their general nature.
The onus would then be on the contractor to identify and make good all defective work. If the contract administrator prefers to issue a schedule, it might be wise to state that it is not intended to be a comprehensive list, and that the contractor should make its own
inspection. It would also be sensible to make the employer aware that the contractor must be allowed access, as to prevent this might result in the employer being unable to claim for the costs of remedying the defective work
42
Can the employer accept the defects and suggest deduction from the retention fund?
If the employer would prefer to accept the defects rather than require them to be corrected, then an appropriate deduction is made from the contract sum (cl 2.11). As noted above (see paragraph 5.31), care should be taken to establish the full extent of the problem and negotiate a deduction before such a course of action is taken as it is unlikely that the employer would thereafter be able to claim for consequential problems or further remedial work.
43
What are prolongation costs?
Prolongation costs are the additional costs that a contractor has incurred as a result of the completion of the works being delayed by an event that is the responsibility of the other party (usually the Employer). Such events might include; failing to give the contractor possession of the site on the date specified in the contract; delays in giving instructions, and so on.
44
Does JCT MW allow for advanced payments?
No, the contract would have to be amended to suit.
45
What does a valuation include?
The value of the work properly executed and the value of materials and goods properly brought onto site
46
What risks are attached with including materials on site within interim payments?
The employer could be at risk, however, where materials have not yet been built in, even where the materials have been certified and paid for. The contractor might not actually own the materials paid for because of a retention of title clause in the sale of materials contract.
47
What is a payment notice?
When the CA has not produced a payment certificate the contractor can produce a payment notice.
48
What happens if the employer fails to pay the contractor?
Clause 4.6.1 makes provision for simple interest on late payment of interim and final certificates. This is set at 5 per cent above the official bank rate of the Bank of England (cl 1.1), and the interest accrues from the final date for payment until the amount is paid.
The contractor is also given a ‘right of suspension’ under clause 4.7. This right is required by the HGCRA 1996 (as amended). If the employer fails to pay the contractor by the final date for payment, the contractor has a right to suspend performance of all its obligations under the contract, which would not only include the carrying out of the work, but could also, for example, extend to any insurance obligations
49
What are the insurance options under JCT MW?
5.4A, 5.4B and 5.4C. Clause 5.4A is for use with new buildings, and is taken out by the contractor, 5.4B is for use with existing buildings where the policy will cover the new works and existing structure, and is taken out by the employer, and 5.4C is used where neither of these options is appropriate and the parties agree their own insurance arrangements (these are to be set out in the contract particulars).
50
If a contractor submitted an obvious error in there submission what would you do with a JCT contract?
* Alternative 1 = Details provided and the contractor has the choice to confirm or withdraw submission with no amendments
* Alternative 2 - Details provided and opportunity to confirm or amend to correct the error.
* Source - JCT Practice note - Tendering"
51
What 8 Conditions need to be met for a contract to be in place?
* Offer by one party (tender)
* Acceptance by the other party (tender return)
* Consideration (price of the promise)
* Intention to form a contract
* Legality of contract
* Capacity to make agreements
* Consent
* Possibility of Performance
52
What are the advantages of standard forms over bespoke contracts?
* Written by legal experts
* Rights and obligations of each party are clearly set out to the required level of detail.
* Risks should have been allocated equitably between parties
* Parties should be familiar with the provisions in the form
* Fewer unforeseen anomalies
* The time and expense of preparing a fresh document for each occasion is avoided
* Case law is built up over time – provides a good source of knowledge and clarity.
53
When pricing an Extension of Time, what would you include for and what rates?
* Include for costs of prolongation of site preliminaries – welfare facilities, utilities etc.
* Facilities management staff, security, cleaners
* Subcontractor mobilisation costs
54
How would you assess an adverse weather claim for EOT?
* Need to be supported by historical weather data taking into account the time of year and region the project in question is located in.
* The contractors claim should be based on data from a recognised independent source and the data would be compared to previous years to assess if the prolonged period is equivalent to the EOT.
55
What is a Rectification Period, and what is the process involved?
If any defects are found within the Rectification Period, the CA will issue an instruction that notes a schedule of defects, which should be issued no later than 14 days after the expiry of the rectification period. The contractor should then return to rectify those identified defects at no cost to the employer. Once these works have been carried out the CA will issue a certificate of making good to document these works.
56
What is the difference between Sectional Completion and Partial Possession?
Sectional Completion of is a pre-arranged situation, whereas Partial Possession occurs within the course of the project, and needs to be consented to by the Contractor.
57
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
58
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
59
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.
60
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
61
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
62
What is a collateral warranty?
A collateral warranty is a binding agreement which gives third parties contractual rights which are collateral to an underlying contract to which it is was not an original party.
63
What is frustration to a contract?
Frustration occurs when circumstances that are not the fault of either party mean it is impossible to continue with the contract. The contract will come to an end without any party being considered to be in breach. it does not cover contracts that were always going to be impossible to perform. For example, it would not apply in the case of a contract to construct a tall building that could not be fulfilled because the ground conditions were completely unsuitable. Some events that may lead to a frustrated contract include: The government imposing unforeseen restrictions on building. Laws being passed that make it illegal to undertake what was promised under the contract The building where works were to be carried out being destroyed. An event that was crucial for the contractual obligations being cancelled
64
What certificates might the contract administrator be required to issue under the contract?
The CA will be required to issue a number of certificates. Confirmation of certain events, milestones and occurrences e.g.
* Practical completion
* Making good of defects
* Partial possession
* Making good to relevant part
* Non-completion
* Payment certificates
65
Can you explain what the contract sum means?
The Contract Sum is the agreed lump sum the client will pay the contractor for the work. This figure will quite often be subject to change (normally an increase) and this will then become the Final Account figure
66
What is a contract instruction and what should it contain?
A contract instruction is an important legally binding document and may well be referred to in any disputes or legal action which may arise between the client and the contractor so it is essential that the CA ensures the format and content of the document is accurate and compliant with legal protocol
The format should be as follows (in writing but can be verbal initially):
* Names of the parties involved
* Include the Project Name
* Specify the Date
* Provide an issue number
* Circulate to all necessary parties
* Quantify the financial implication
The content of instructions will include the following:
* Only what the contract states e.g. A Variation of the works
* Removal of work not in accordance with the contract
* Expenditure of Provisional Sums
* Opening up of the works for inspection/testing
67
What is a provisional sum?
A provisional sum is a figure specified within the tender and contract documents which is included to fund an item which cannot be fully specified prior to work commencing for various reasons. An example would be an inclusion of £10,000 to cover provision of new foundations which cannot be specified due to the uncertainty of the ground conditions. The contractor will then be required to complete the work within that sum therefore the sum included should be adequate
68
What is the certificate of making good defects?
This certificate (and also the certificate on ˜Not making good) need to be completed by the contract administrator following rectification/failure to rectify defects and certifies their rectification or otherwise. These will either trigger the Final payment to the contractor or result in withholding money until they are rectified.
69
When would you use JCT Minor works and when wouldn't you?
JCT Minor Works contract selection criteria. The JCT Minor Works contract is commonly used for projects likely to be administered by a building surveyor under the traditional procurement method and it is under the following criteria:
* Where the work involved is simple in character.
* Where the work is designed by or on behalf of the client/employer.
* Where the client/employer is to provide drawings and/or a specification and/or work schedules to define adequately the quantity and quality of the work;
* Where an architect/contract administrator is to administer the conditions.
* Where the approximate maximum value is £500k but this is flexible depending on the complexity of the project.
It is not however suitable:
* Under a design and build procurement route as a design and build contract
* Where bills of quantities are required
* Where provisions are required to govern work carried out by named specialists
* Where detailed control procedures are needed
70
What are the contract particulars?
Contract Particulars This section contains the all-important contract clauses covering items including:
* Carrying out the works
* Control of the works
* Payment
* Injury, damage and insurance
* Termination
* Dispute
71
How would you calculate loss and expense incurred?
I would review the contractors claim and review the preliminaries to determine what costs are genuine as a result of the extension, for example, it is unreasonable for the contractor to give a blanket average cost of the preliminaries as items such as scaffolding costs or skips or washroom facilities etc may not have been required at the end when the delay was added. These costs are then combined to create my own idea of what the costs should be and usually, I will discuss this with the contractor so that a fair settlement can be made for the genuine costs incurred by the delay.
72
What type of procurement routes do you know about?
* Traditional – design is separate from construction
* Design and Build – Contractor performs both design and construction
* Management – The client is responsible for the design but the contractor defines the works packages and arranges for these to be carried out
73
What is a prime cost?
Where you have a specific cost for the purchase of materials but does not include the cost of installation.
74
What are the duties of a CA?
In short, to administer the obligations of the contract. This includes inviting contractors to tender, preparing contract documents, preparing progress reports preparing interim payment applications, valuing works, acting impartially, preparing the final certificate, collating the schedule of defects.
75
What are preliminaries?
They are a list of project details that are prepared in order to allow the contractor to fully price the project including items which may not be in the specification but important as part of the job such as safety precautions to price up, site facilities, utilities usage, access etc.
76
What are the key elements of a contract executed under deed?
The contracts are executed under seal, signed by the parties, witnessed and stipulated that it is under deed.
77
What is a PCSA?
Pre Contract Service Agreement – designed for appointing a contractor to carry out pre-construction services under two stage tender process. It allows the contractor to collaborate with the employer and their team to develop detailed design.
78
What RIBA stage would you go out to tender?
Single stage – go out to tender at Stage 4 which is technical design.
Two stage – go out to tender at stage 2 or 3 which is concept design or spatial coordination.
79
What is novation?
The transfer of contractual rights and obligations from one party to another
80
What is assignnation?
The assignor transfers rights, property or other benefits to the assignee.
81
What are the limitations with a letter of intent?
The main disadvantages of letters of intent are as follows: They can become legally binding under certain circumstances when this was not the intention of the organizations. By agreeing to a letter of intent at an early stage in the process you may hinder your ability to negotiate a better deal late in the process.
82
What are the different tender processes?
* Single Stage – Tender is issued to several contractors, the pack includes all the detail required to provide a cost. The preferred tender is selected and discussions can start.
* Two Stage – First stage is the same as single stage. The contractor will be chosen to provide input into the design or a specific part of the design to help build a specification. This package then goes out to tender again and may include that original contractor. The downside is that it often reduces competition and some contractors will refuse as you already have a relationship with the original contractor.
* Negotiated – similar to single stage but you only go to one contractor and aim to negotiate the cost down to a fair amount but there is no competition.
83
How do you try to mitigate delay in a project?
How do you try to mitigate delay in a project ?
84
How do you try to mitigate delay in a project?
* Detailed site investigations.
* Careful monitoring and regular meetings.
* Effective site management.
* Collaborative working and effective coordination.
* Careful scheduling.
* Full commitment to the project by all parties
85
What are the usual payment terms under JCT contract?
Every 4 weeks unless stated differently in the contract document.
86
What time is the payment timeline under JCT MW?
The Interim Valuation Date determines the due date for each interim payment which is the date 7 days after the relevant Interim Valuation Date (clause 4.3).
Payment of each interim payment must be made within 14 days from the due date of the interim payment (i.e. 21 days from the Interim Valuation Date).
That simple structure sets out the time framework but in order for a payment to be made it is necessary to certify the amount of each payment. The Architect/Contract Administrator shall within 5 days of the due date for each interim payment (i.e. 12 days from the Interim Valuation Date) do this by issuing an interim certificate.
87
What is included within a payment certificate?
o Date
o Certificate no
o Contract sum
o Details for parties
o Gross valuation
o Net amount
o Issued by
88
What would you do if a contractor has submitted an over estimated valuation?
Possible answer: Issue a pay less notice and record the reasons and evidence why
Actual answer: coincide progress meetings with valuation dates and agree estimate on site. If this is not received in time, arrange to meet on site or agree items not to be included where not complete and get contractor to amend valuation so CforP is correct and a pay less notice is not required
89
What is a latent defect?
A latent defect exists before its discovery. It cannot be identified from reasonable inspections; hidden or concealed flaw.
90
What is a patent defect?
A patent defect is identified during the rectification period as a result of reasonable inspection.
91
What is Loss and Expense?
Construction contracts will generally provide for the contractor to claim direct loss and/or expense as a result of the progress of the works being materially affected by relevant matters for which the client is responsible, such as:
* Failure to give the contractor possession of the site.
* Failure to give the contractor access to and from the site.
* Delays in receiving instructions.
* Opening up works or testing works that then prove to have been carried out in accordance with the contract.
* Discrepancies in the contract documents.
* Disruption caused by works being carried out by the client.
* Failure by the client to supply goods or materials.
* Instructions relating to variations and expenditure of provisional sums.
* Inaccurate forecasting of works described by approximate quantities.
* Issues relating to CDM.
* Claims may comprise costs resulting from disruption to the works or from delays to the works (prolongation).
The contractor must give written notice of a claim as soon as it becomes reasonably apparent that the regular progress of the works is being materially affected. This need not necessarily result in a delay to the completion date, and so claims for loss and expense and claims for extensions of time do not necessarily always run together.
Claims are restricted to 'direct' loss and expense and so 'consequential losses' (such as lost production) are generally excluded. Direct losses are those that 'flow naturally' from the breach of contract.
There is disparity between contract types about whether items such as head office overheads can be included in claims for loss and expense, and some court rulings have allowed such claims. If there are specific consequential losses which the parties to the contract wish to exclude, it may be prudent therefore to state these explicitly within the contract.
NB: The New Engineering Contract (NEC3) contains provision for the contractor to claim payment for 'compensation events' rather than loss and expense.
92
Is a contractor always entitled to loss and expense when they are granted an extension of time?
No, only if the delay is deemed a Relevant Matter and only if the contract includes a relevant matter provision.
93
What current challenges is Covid and/or Brexit bringing to Contract Administration?
Unpredictable timescales for material procurement and labour shortages may cause extensions to programmes.
94
What happens after the rectification period ends?
A joint snagging inspection will be carried out with contractor and agent to identify what defects need to be repaired. Once the repairs are carried out, the CA will release the retention in the final payment application and the issue a certificate of making good defects. Contractor issues their final account.
95
What insurance would a contractor require before commencing works on site?
* Professional indemnity
* Public liability
* Employers liability
* All risks insurance
96
What is the difference between named and nominated subcontractors?
Client may wish to nominate their own subcontractor for specific works rather than allow the contractor to choose. This usually occurs where the client already involved the subcontractor in the design process and wants a very specific outcome. The nominated contractor is still appointed by the main contractor.
Named sub contractors are where the client will provide a list of acceptable sub contractors. The tender will allow a provisional sum for the subcontractor package. When the contractor is appointed, they will go to the named contractors to tender for the sections. (they can reasonably rejected the names)
97
What is the benefit to JCT MW insurance options being in joint names?
Employer and contractor cannot make claims against each other.
98
What is the term culpable delay?
When the completion date has not been met by the contractor and the fault of the contractor
99
What is required for a under hand contract?
Signed by director and secretary
100
What is required for a under deed contract?
Signed by director and company seal affixed
101
What is a defined and undefined provisional sum?
* Defined provisional sums are those that are sufficiently well defined and/or detailed to allow the contractor to make allowances for them in their programming, planning and pricing preliminaries.
* Undefined provisional sums are less well described as they refer to work which is not completely designed. As such, the contractor cannot be expected to make allowance for them in their programming, planning and pricing preliminaries. This means the contractor may be entitled to an extension of time and/or additional payments when the actual works are undertaken.
* An example of an undefined provisional sum might be work required below an existing structure, where the ground conditions, and so the extent of work required, cannot be determined until the structure is demolished and the ground opened up.
102
What is a vesting certificate?
What is a vesting clause or a vesting certificate? A vesting clause is a contractual term which deals with the transfer of ownership of goods and materials and a vesting certificate is a document evidencing that transfer of ownership of those goods or materials.
Under such circumstances, a ‘vesting certificate’ or ‘certificate of vesting’ may be required from the contractor (or sub-contractors or suppliers), certifying that ownership of the goods, plant or materials listed in a schedule will transfer from one party to the other upon payment and confirming that they will be will be properly identified, separately stored, insured and are free from encumbrances (such as retention of title).
103
What is a bond?
A construction bond is a written agreement in which one party (the surety) guarantees that a second party (the principal) will fulfil its obligations to a third party (the oblige). If the principal defaults on its obligations, the surety must complete them or pay the completion costs to the oblige.
Bonds are a means of protection against the non-performance of the contractor. They are an undertaking by a bondsman or surety to make a payment to the client in the event of non-performance of the contractor. The cost of the bond is usually borne by the contractor, although this is likely to be reflected in the contractor's tender price.
Bonds can be 'on demand' or 'conditional', with conditional bonds requiring that the client provides evidence that the contractor has not performed their obligations under the contract and that they have suffered a loss as a consequence.
See also Bonds v guarantees.
Performance bond
A performance bond is commonly used as a means of insuring a client against the risk of a contractor failing to fulfil contractual obligations to the client, although they can also be required from other parties. Performance bonds are typically set at 10% of the contract value. This compensation can enable the client to overcome difficulties that have been caused by non-performance of the contractor, such as, finding a new contractor to complete the works.
Advance payment bond
If the client agrees to make an advance payment to the contractor, (for example where the contractor incurs significant start-up and procurement costs before construction begins), a bond may be required to secure the payment against default by the contractor. This will normally be an on-demand bond.
Off-site materials bond
It can sometimes be appropriate for the client to pay for items even though they remain ‘off-site’. For example, where a contractor has made a large payment for plant or materials that have yet to be delivered to site, or if the client wishes to ‘reserve’ key items in order to protect the programme. This is similar to the situation where an advanced payment is made in that a bond secures the payment against default by the contractor and is likely to be an on-demand bond. The bond might be up to the value of the off-site items, with the value of the bond reducing as deliveries to site are made.
Retention bond
Retention is a percentage (often 5%) of the amount certified as due to the contractor on an interim certificate that is retained by the client. The purpose of retention is to ensure the contractor properly completes the activities required of them under the contract. Half of the amount retained is released on certification of practical completion and the remainder is released upon certification of making good defects. An alternative to retention is a retention bond, where the client agrees to pay the amounts which would otherwise have been held as retention, but instead a bond is provided to secure the amount that would have been retained. As with retention, the value of the bond will usually reduce after practical completion has been certified.
Defects liability bond (or defects liability demand guarantee)
The defects liability period (now called the 'rectification period' in Joint Contracts Tribunal (JCT) contracts) begins upon certification of practical completion and typically lasts six to twelve months. During this time, it is the contractor's responsibility to rectify any defects that become apparent in the works. A defects liability bond can be used to ensure that the contractor continues to provide services, rectifying defects that become apparent after practical completion has been certified. This is generally an on-demand bond that may be required on projects where there are no remaining payments to be made, or other security such as retention, after practical completion.
104
What is partial completion? What contract did you run this under?
The client may wish to take possession of part of a building or site, even if works are ongoing. This can be programmed within the original contract documents it the need can be foreseen through a requirement for sectional completion which is not allowed under JCT MW, but in the absence of such a provision many contracts offer the more open-ended option of partial possession.
The effect of partial possession is that:
* Any part for which partial possession is given is deemed to have achieved practical completion.
* Half of the retention for that part must be released.
* The defects liability period begins for that part.
* Liquidated damages reduce proportionally.
* The client is responsible for that part and should insure it.
* The contractor is not obliged to allow partial possession (although permission cannot be unreasonably withheld), and may not wish to if, for example, access routes are difficult to achieve, it would disrupt the works, or it would incur additional costs. There could also be additional difficulties if the occupants of the part that has been possessed disrupt the contractor, which could result in a claim for extension of time and/or loss and expense.
