Suspension, Termination and Insolvency Flashcards
What does repudiation mean?
Allows a contract to be terminated when one party is not satisfying the agreed conditions.
How many the employer terminate the contract under JCT SBC 16?
-defective work
-suspension of work
-delay
5 defaults to terminate.
CA will issue written notice specifying the default. If it continues for 14 days the employer may issue termination notice within 10 days of the continuance.
How may the contractor terminate under JCT SBC 16?
Same procedure as above.
- failing to give possession
- withholding of certificates
- non payment
- assignment without consent
One reason which enables a contract to be terminated is by ‘frustration’, provide a brief explanation of this reason and its effects on the contract. Provide examples.
Frustration is when the nature of a contract has been changed between the parties because of an unforeseen event which is outside the control of the parties.
The parties can be discharged of their agreement immediately if this happens and agreement will be terminated from the time of the frustration event.
E.g. government restrictions
Under what circumstances does NEC4 enable the contract to be terminated?
- non payment by client
- insolvency by either party
- prolonged suspension
- corrupt act
- force majuere
A secondary option clause for termination by the client under NEC4 is termination for any reason (x11). Are there any problems with this? Why do you think its included?
There is a problem as it creates a risk for the contractor in the fact that the contract could be over at any point - leads to uncertainty.
Onerous task for the client to use this to terminate.
Can the employer remove a contractor from site who seems incapable of producing good quality work?
Yes - but only if the work is defective and the employer is able to claim damages for cost of rectification.
An accumulation of defects could lead to repudiation.
Under JCT can a contractor simply walk off site if the employer fails to pay? How does this compare with NEC?
JCT - a continued missed payment will lead to a breach and can lead to repudiation and contractor can walk off and terminate contract.
NEC4 has a 13 week period for which payment can be made, there is then a right to terminate once this period is up.
What would you do if on the way into work you heard a rumour that the main contractor on a project you are working on had gone into either administration or liquidation?
Speak to the CA and see if there is any evidence/is the source reputable?
Have subbies been paid? are there any signs of liquidation?
Are bonds in place - performance bond?
Can’t just terminate a contract due to a rumour.
How can you as a QS safe guard your client against the risk of insolvency of the contractor?
- bonds
- insurances
- credit checks
- reference checks
- check contractor debts
- collateral warranties
The MC on your project has submitted a notice to inform you employer/client that they have become insolvent. What procedures would you follow on hearing this news?
- secure site and materials
- check insurance cover
- do what contract says in relation to termination due to insolvency
- terminate the contract
- replace contractor
Discuss the options available for completing the project, for the above employer/client, paying particular attention to the pros and cons of each option.
- Employer can employ and pay others to complete works
- can use all temp buildings, plant, materials
A CA has to decide whether a contractor is proceeding regularly and diligently. To ensure that the CA does not advise the client to terminate the contract unreasonably, what would you advise the CA to base his decision on?
- check time sheets
- see whether programme is being followed/on target
- check the quality of the work
- is sectional completion being achieved?
