1
Q
What is required to form a Contract?
A
- Capacity
- Intent
- Offer
- Consideration
- Acceptance
- Legality
2
Q
What are some examples of Forms of Contract used within the Construction industry?
A
- JCT
- NEC
- PPC
3
Q
Provide some examples of JCT Contracts
A
- Minor Works
- Intermediate
- Standard
- Design & Build
- PCSA (Pre-Construction Services Agreement)
4
Q
How are NEC4 Contracts structured
A
- Based on Core and Optional Clauses
- Core clauses - standard throughout (Payment, Compensation Events, Time/Programme)
- Optional clauses - dependent on pricing options
5
Q
What are the Pricing Options relevant to an NEC4 Contract regarding Optional Clauses?
A
- A = Priced with Activity Schedule (AS)
- B = Priced with BoQ
- C = Target cost with AS
- D = Target with BoQ
- E = Cost Reimbursable
- F = Management Contract
6
Q
What is a Target Cost / Target Price contract?
A
- Contract sum agreed between client & contractor based on tender submission
- Any profit/loss is shared between both parties, dependent on pain & gain mechanism within tender submission
7
Q
What is a Cost Reimbursable Contract?
A
- Works measured by the Contractor against a Schedule of Rates
- Contractor is paid based on that schedule
8
Q
What is a Cost Plus Contract?
A
- Contractors are paid for the actual costs incurred, plus agreed % for OH/P
- Client requires evidence of each cost before certifying payment
9
Q
What is a Guaranteed Maximum Price Contract?
A
- GMP agreed between Client and Contractor prior to entering into a Contract
- Any profit/loss is taken on by the Contractor - not shared
10
Q
What are some of the general differences between JCT and NEC contracts?
A
- Programme is a contractual document for NEC’s, not JCT
- Definitions for delay costs/add costs (JCT = relevant event for EoT, relevant matter for loss & expense, variations), NEC = Compensation Event
- NEC states timelines for variations (ie early warnings, notification, dispute/acceptance), not clear with JCT
11
Q
What are some examples of Sub-Contracts?
A
- Nominated (single Sub C)
- Named (list of Sub C’s)
- Selective
12
Q
What are Liquidated and Ascertained Damages?
A
- Sum applied against Contractors for failing to meet completion date
- Genuine estimate of loss to the Client
- Cannot be applied/deducted from Contractor’s valuations until non-completion certificate is issued
13
Q
What is Novation defined as in Construction Contracts?
A
- Transfer of rights and obligations under the contract
- Example: D&B Contract, design team appointed by Client can be novated to Contractor)
- Benefit - same design team throughout project avoids conflicts between parties
14
Q
What are Collateral Warranties?
A
Contract that accompanies main contract, allowing Clients to extend the contract terms to a third party
15
Q
What is the purpose of using Collateral Warranties in Construction projects?
A
- Entitles the third party to claim for losses which would otherwise not be recoverable (ie if main contractor becomes insolvent)
- Third parties include architects or sub-contractors - need to warrant to the funding party that their obligations are fulfilled under the contract
- CW’s often include obligations relating to appropriate quality of materials used/service provided in a professional manner
16
Q
What are some examples of letters provided in Construction projects?
A
- Letter of Intent
- Comfort Letter
- Consent to Spend
- Recognition of Contract
17
Q
What is a Letter of Intent?
A
A non-binding letter to outline an agreement, prior to the contract being executed
18
Q
What is a Comfort Letter?
A
- A non-binding high-level letter, used to provide written assurance that a Company will fulfill its obligations
- Confirms a relationship and states intention, but avoids making a promise to pay subsidiaries debts
19
Q
What is a Consent to Spend Letter?
A
- Allows Contractors to start placing orders/spending against the Contract
- Issued when scope of a project is fully agreed, but prior to executing a Contract
20
Q
What is a Recognition of Contract Letter?
A
Lists all terms of the Contract, prior to official sign-off
21
Q
How is the choice of Contract decided prior to starting a Construction project?
A
- Complexity of work
- Client attitude/objectives to time, cost, quality and risk
- Preference on traditional contracts or speed of delivery (ie D&B)
22
Q
What is a payment notice?
A
Issued directly by the Client 5 days after the due date for payment, notifying the relevant party (ie Contractor) of payment (ie in the form of an invoice)
23
Q
What is a pay-less notice?
A
- Issued no later than 5 days before the final date for payment
- Issued directly by the Client, notifying reasons for paying less than the amount applied for
24
Q
What is a Performance Bond?
A
- Insurance policy paid by the Contractor, to mitigate financial risk for the client
- A financial guarantee held by the provider of the bond to cover a percentage of contract sum, typically 10%
- Client can approach provider direct, but can only claim value of the bond if there is evidence of Contractor Insolvency
25
What is a Parent Company Guarantee?
- Ensures that the Parent Company of a Contractor will fulfill contractual obligations in the event of insolvency
- Lasts 6 (under hand) or 12 years (as a deed), depending on how the contract is signed
- Example - FT Group (Walter Thompsons, TWL)
26
What is a risk of utilising Parent Company Guarantees?
Should a contractor become insolvent, there is a chance that the Parent Company group is also struggling financially - no certain guarantee that Contractual Obligations can be fulfilled
27
What are the various insurance options within JCT Contracts?
- A = New Build, insurance lies with Contractor
- B = New Build, lies with Employer
- C = Alts to existing buildings, lies with Employer
28
Why would a Joint Names Policy be used in construction contracts?
Provides protection for both parties - if one party makes a claim against the other, the accused is protected by that policy
29
What are Materials On-Site?
- Materials contained on-site by the Contractor that have yet to be used/installed
- Payment can be certified for mats on-site if in good condition & protected
- Evidence required prior to payment and must be delivered in reasonable time against programme
30
What are Materials Off-Site?
- Materials ordered by the Contractor yet to arrive to site (ie cost for manufacture)
- Listed materials must be listed in the contract
- Vesting cert required to transfer ownership from Contractor to Client
31
What is Retention of Title in construction contracts?
Offers protection to Sub C's if they are not paid by the main contractor, as a result the Sub C retains ownership of the materials in question
32
What is the difference between an Employer's Agent and a Contract Administrator?
- EA named in D&B contracts, CA named in MW/IC
- EA responsible for monitoring progress, quality inspections - CA only administers the contract
- Also issue payment certs once received by QS
33
What is retention?
Monies held back by the client for the purpose of rectifying defects - money is released in two stages upon PC and EoD
34
What happens if a Contractor refuses to rectify any defects, prior to a Certificate of Making Good Defects being issued?
- Cost of rectification is paid by the client to a separate party for them to rectify the defects
- That cost is deducted from the Contractor's retention value via a pay-less notice
35
What are the requirements to grant an Extension of Time request?
- Notice from the Contractor as soon as apparent
- Detailed reasons for delay (relevant events)
- Extent of delay
36
What are the timescales for Clients to approve Extension of Time requests?
Notice of acceptance/dispute is required within 8 weeks of the formal request for an EoT
37
What are examples of Relevant Events than entitle Contractors to additional costs?
- Variations to scope/design
- Adverse weather
- Civil commotion
- Epidemics
- Deferment of possession
- Work by Statutory Undertakers
- Impediment prevention or default by the Employer
38
What are examples of Relevant Matters that entitle Contractors to additional costs?
- Variations to scope/design
- Contract Administrator's/Architect's Instructions
- Impediment
39
What is Partial Possession?
Where the employer takes possession of a section of work, prior to completion of the overall project
40
How is Partial Possession certified?
- Completion date for a particular section has been met, results in Partial Possession Cert being issued
- Can be claimed by Employer upon their request, however Contractor can reasonably refuse if sequence of work is affected (ie access, material storage)
41
What are some examples of amendments that can be incorporated within Construction Contracts?
- Payment
- Insurance
- COVID
- Loss of profit from the Contractor or any claims to that effect
42
What are the consequent events of issuing a Practical Completion certificate?
- Insurance coverage switches from Contractor to Client
- Client gives up the right to levy LAD's
- Defects Liability Period begins
43
What are some of the differences between JCT 2024 and 2016 Contracts?
- 2024 allows electronic signatures
- 2024 adopts gender-neutral language
- EoT review timeline reduced from 12 weeks to 8
- Building regs Principal Designer and Principal Contractor named instead of CDM regs
44
What are Unliquidated Damages?
- Sums claimed against the Contractor for failing to meet completion - sum is not stated in the Contract
- High risk to Contractor as potentially large sums can be claimed, if Client proves evidence of actual loss incurred
