Contract

Question 1

what is the definition of a contract

Answer 1

A contract is an agreement made between two or more parties that creates legally binding obligations between them. The contract sets out those obligations and the actions that can be taken if they are not met.

Question 2

what are the 5 general principles that are universal in application

Answer 2

1. an ‘offer’ made by one party which is ‘accepted’ unqualified by the other party
2. an intention to create legal relations between the parties and for the parties to be bound by these obligations
3. a consideration passing from one party to the other in return for the provision of goods or services covered by the contract
4. definite terms, so that it is clear as to what conditions the parties are agreeing
5. legality, with only properly incorporated firms or competent persons entering into the contracts.

Question 3

what are 2 examples of standard forms of contract

Answer 3

Joint Contracts Tribunal (JCT)

New Engineering Contract (NEC).

These are typically used in engineering and construction projects.

Question 4

what are the 5 types of contractual relationship

Answer 4

1. Comprehensive
2. Sequential
3. Parallel
4. Sub-contract
5. Partner/Alliance

Question 5

what is the description of a comprehensive contractual relationship

Answer 5

This approach is sometimes known as a ‘turnkey’ contract where one party assumes responsibility for everything involved in the development and implementation of a specific solution.

The assumption is typically that a single supplier has direct access to all the resources required to undertake the project.

Question 6

what is the description of a sequential contractual relationship

Answer 6

The sequential use of two or more contractors during a project. This approach is often used when a project is too complex to be covered by a fully defined contract at the outset of the project.

The customer must understand the risk involved in this approach as it is not possible to define the overall project cost before engagement begins.

Question 7

what is the description of a parallel contractual relationship

Answer 7

The customer manages the relationships between all the various specialist suppliers.

This allows the customer to have more control of performance and/or cost but can involve significant management of the interfaces.

Question 8

what is the description of a sub-contract contractual relationship

Answer 8

Suppliers may employ several sub-contractors, particularly where the project requires the input of specialised goods and services. These can be ‘Back to Back’ and / or conditional.

Although the ‘prime-supplier’ takes responsibility for management of the interfaces, the customer should ensure that quality is maintained on out-sourced work packages.

Question 9

what is the description of a partner / alliance contractual relationship

Answer 9

The customer and the supplier work together to manage their contract and plan to avoid and control problems and risks.

The strengths and weaknesses of this approach are very similar to those associated with ‘Pain-share / Gain-share’ payment terms.

Question 10

what 9 items should be set out in the ‘contract terms and conditions’

Answer 10

1. General information: who the parties are, description and location of the works or services, the legal system that the contracts will use etc.
2. Responsibilities: the provider’s responsibilities for design, approvals, assignment of such responsibilities, sub-contracting
3. Time: schedule, milestones, completion date(s)
4. Quality: testing and defect rectification
5. Payment: certificates, release of monies
6. Alterations: Compensation events, change requests and dealing with unforeseen circumstances
7. Property: who owns what during the course of the contract, transfer of intellectual property rights (IPR) and copyright
8. Risk: assignment and management of risk,; the need for insurances
9. Disputes: how disputes will be managed; for example, non-performance issues