Contract Administration

Question 1

What’s the role of the CA and their responsibilities?

Answer 1

a. Act as neutral agent between contractor and client
b. Ensure both parties completing contractual obligations
c. Keeping client updated
d. Issue instructions and contractual certificates

Question 2

What is a contract?

Answer 2

a. Legally binding agreement between two or more parties, outlining the obligations and responsibilities that each party has under the contract
b. In construction, a client will offer consideration to a contractor in exchange for a service

Question 3

What is required to form a contract?

Answer 3

a. Offer - clear/definite proposal made by one party to another
b. Acceptance - clear agreement to the terms of the offer
c. Consideration - something of value exchanged between parties
d. Intent - genuine intention to enter into legally binding contract

Question 4

What common construction contracts are there?

Answer 4

a. JCT Suite of Contracts
b. Intermediate works
c. Minor / major works
d. Design and Build
e. NEC (New Engineering Contracts) 4 such as professional service contract

Question 5

What is a standard form of contract?

Answer 5

a. Standard forms of contracts are agreements that employs standardised conditions and provisions that are supported by case law, in pre-printed forms
b. They are commonly selected to for efficiency, speed, cost, and time
c. By employing these provisions/clauses, it adds consistency to reduce disputes

Question 5

What are the advantages of a standard form of contract?

Answer 5

a. Speed and efficiency - reduced negotiation time due to set clauses / provisions
b. Cost - reduces time/cost of writing up the contract
c. Consistency - employing standard provisions/standards backed up by case law, easier to understand and reduce disputes
d. These contracts ensure everything is covered / less likely something is missed

Question 6

Disadvantages for standard forms of contract?

Answer 6

a. They can put more risk onto one party, such as JCT (onto contractor)
b. Lack of flexibility for specific circumstances, unlike bespoke contracts
c. Some provisions / clauses may not be relevant or applicable to all projects
d. Provisions / clauses could be out of date.

Question 6

Advantages of bespoke contracts?

Answer 6

a. Fully Tailored to the project’s specific needs, risks, and commercial goals.
b. Allows for innovative or non-standard arrangements.
c. Can reflect unique relationships between parties (e.g., joint ventures, alliances).

Question 7

Disadvantages of bespoke contracts?

Answer 7

a. Time-consuming and costly to draft and negotiate.
b. Higher risk of disputes due to unfamiliar or unclear clauses.
c. Lack of legal precedent, making outcomes less predictable.
d. May require more legal input throughout the project lifecycle.

Question 7

What may influence the choice of contract?

Answer 7

a. The complexity of the project, type of work, scope of works. More complex projects will require more detailed contracts
b. Risk allocation, some contracts put more risk on the contractor, such as JCT, whilst some are more collaborative like NEC.
c. Timescales
d. Budget / funding - Fixed for cost certainty, or more flexibility
e. Whether a standard form of contract is used, or a bespoke
f. The procurement route that is desirable - D&B, or traditional
g. If the client or contractor is familiar with a type of contract already

Question 8

What is the difference between JCT minor works and JCT intermediate?

Answer 8

Minor works
i. suitable for smaller, or less complex projects
ii. No allowance for sectional completion, partial possession, does not allow for named subcontractor, clerk of works & no opening up clauses

Intermediate works
i. medium sized more complex projects
ii. More control mechanisms
iii. Sectional completion, partial possession, named subcontractors, opening up clauses, and retention bonds

Question 9

What is the difference between NEC and JCT standard forms of contract?

Answer 9

a. JCT are more traditional, prescriptive contracts that place more risk on the contractor, favoured by the client - fixed price, used where predictability and risk allocation are key. The CA acts impartially between client/contractor
b. NEC contracts is designed for greater collaboration, and risk sharing between client and contractor, built on mutual trust - often preferred for more complex projects / uncertainty - PM takes more role in administration of the project. More simple language and enhanced guidance.

Question 10

What is a recital in a JCT contract?

Answer 10

a. Provide context to the project
b. 7 in total
c. First Recital - Nature and location of works
d. Second Recital - Documents provided by employer
e. Third Recital - Reference to pricing document
f. Fourth Recital - Relates to employers tax deduction if considered a contractor
g. Fifth Recital - Whether notifiable under CDM
h. Sixth Recital - Whether supplemented by a framework agreement
i. Seventh Recital - Supplementary provisions that may apply

Question 10

What is the difference between NEC 4 professional service contract and short term contract?

Answer 10

a. Complexity and risk
b. Professional Service Contract (PSC) is for complex projects with sophisticated management needs
c. NEC4 Professional Service Short Contract (PSSC) is a simplified, shorter version for low-risk, low-complexity engagements

Question 11

What is an article in a JCT contract?

Answer 11

These set out what is agreed between the parties, such as:

i. The Contractor’s Obligations.
ii. The Contract Sum (the price for the works).
iii. The identity of the Employers Agent and Principal Designer.
iv. Information about the Employers Requirements and Contractor’s Proposals.
v. Details on the process for Adjudication and Arbitration in case of a dispute.

Question 12

What are the advantages and disadvantages of JCT design and build?

Answer 12

Pros
Buildability
Less risk on client
Works can start more quickly

Cons
Quality design hinges on thorough employer requirements, which contractor must fully understand.
Client has to be competent to understand design proposals.
Contractor may cut corners to build cheaper.

Question 13

What are liquidated damages?

Answer 13

a. Pre-agreed, fixed sum of money that one party pays to another for a specific breach of contract
b. Claimed by the client
c. Without the need to prove actual losses and avoids the complexity of calculating actual damages, but the agreed sum must be a “genuine pre-estimate of loss”
d. Example: Delay in completion > loss of rental profit

Question 13

What are statutory provisions v contractual provisions?

Answer 13

a. Statutory provisions are legally binding rules created by Parliament that set a universal, minimum standard
b. Contractual provisions are specific terms and conditions agreed upon voluntarily between two or more parties
c. Statutory rule takes precedence

Question 14

What is the difference between an under-hand contract and a deed?

Answer 14

main differences are the limitation periods, how they are executed, and the requirement for consideration

• Signing underhand the period is 6 years
• Executed as a deed the period is 12 years
• underhand requires consideration, deeds do not
• underhand can be signed by one person authorised by the directors
• a deed there are formalities such as two directors registered at Companies house must sign, or a director and secretary
• At my organisation, signing as a deed is for any contract over £100k

Question 15

What is the difference between a condition and warranty?

Answer 15

a. Condition is a fundamental term in a contract, a breach of which can lead to termination of the contract
b. Warranty is a secondary promise in a contract, its breach result in damages rather than termination

Question 15

What is a bond?

Answer 15

Bonds are used as a financial guarantee to protect a party within a contract against loss due to another party within the contract failing to meet their obligations, as set under the contract

Question 16

What is insurance?

Answer 16

Type of guarantee that provides financial cover in the event of unforeseen or accidental loss

Question 16

What are Preambles and what are included within them?

Answer 16

Provide context and framework for interpreting the technical context of the specification.

Included:
- Project title and description
- Scope of work
- Basis of measurement
- Roles refined
- Clarification of terminology
- Materials and standards
- Pricing instructions
- Regulation compliance

Question 16

What are preliminaries and what are included within them?

Answer 16

a. Items and costs necessary to set up and manage a project
b. Not directly related to physical construction work
c. Typically included within specification or bill of quantities

Examples:
- Ste offices and welfare
- Ongoing temporary utility costs
- Hoarding and fencing
- Project management and admin expenses
- H&S officer
- Scaffolding
- Permits
- Site clearance

Question 17

What key dates are listed within standard forms of contract?

Answer 17

a. Date of possession (of site) b. Completion date c. Defects Rectification Period d. Base Date - a date (typically tender return) to determine allocation of risks that occur after that date e. Interim Valuation Date - specified date, followed by monthly f. Key Dates (for specific conditions) g. Payment Dates (due date for payment, and final date for payment) h. Termination Date

Question 18

What is the payment timescale under a JCT contract?

Answer 18

a. Contractor makes interim payment application before each interim valuation date b. 7 days later - Due date (interim payment certificates issued) c. Within 5 days of due date - Employer payment notice d. 14 days after due date - Final payment

Question 18

What is a valuation?

Answer 18

Process of assessing the monetary value of work completed or to be completed by a contractor, often used to determine interim payments during a project's progress

Question 19

What is an interim certificate?

Answer 19

It is a certificate issued to the contractor that confirms the amount that they are owed for the work they have completed issued by the CA following interim valuation. It is issued by the CA.

Question 19

What is the process of undertaking a valuation?

Answer 19

- The contract sets out a timeframe for when the valuations should be carried out - under JCT contracts this on the same or closest business day of each month following the commencement of works until completion - The quantity surveyor will complete the valuation by reviewing the value of the works and materials in place at that point in time

Question 20

Explain the CAs role in issuing instructions

Answer 20

- It is the CAs responsibility to issue formal instructions, this should be given in writing and issued promptly - CA needs to be aware of the cost implications, and ensure that the costings are accurate - It is an alteration to specification (design, quality, work process, cost)

Question 21

What is sectional completion?

Answer 21

- Utilised when sections are incorporated into the contract - Works are divided into separate sections - Each section has date of possession and completion, LADs, total value, and rectification period - Allows for great control over projects from the client

Question 22

What is partial possession?

Answer 22

- When a part of the construction project under the contract is deemed to have met practical completion, that area can be given partition possession and is handed over to the client upon agreement from the contractor - The responsibility of site falls back to the client, the 2.5% retention is realised, and the defects period starts - Implications are that retention is released, defects period starts, client responsible for site and insurance - Only occurs when sections are not utilised in a project

Question 23

What is practical completion?

Answer 23

a. When all construction works as described / specified in the contract have been carried out, and the client takes possession of the site and can use the building safely. b. Implications of issuing practical completion certificate? c. Starts the defect period d. 2.5% retention is released e. Stops any LADs being charged f. Insurance changes over to client g. Possession of site falls back to client

Question 23

What is early use?

Answer 23

a. Allows client to use part of the site before the project is complete, with the risk of the site still remaining with the contractor b. PC is not triggered, so retention is not released, defects period does not start, and LADs can still be charged c. If delay caused by the client to works as a result of early use, contractor may claim or EOT or L&E.

Question 24

What is a non completion certificate?

Answer 24

a. Issued when the contractual completion date is met, and the contractor has failed to complete the works specified in the contract b. Removes the potential for time at large c. By issuing the non-completion certificate, the client can then charge LADs by a pay less notice

Question 25

What is a retention period?

Answer 25

a. (Usually) 5% of the contract sum is withheld from the interim valuations b. Practical completion 2.5% released to contract and 12month defect period starts c. Once defect period ends, client has 14 days to issue the defect list d. Contractor has to make good to defects in reasonable time e. Client issues certificate of making good and final 2.5% released

Question 25

What is retention?

Answer 25

A portion of a payment withheld by a client from a contractor to serve as a security for the contractor's performance and the correction of any defects that may arise during the project

Question 26

What is the final account?

Answer 26

a. An agreed statement regarding the amount of money to be paid at the end of a building contract, signed by client / contractor to evidence it is correct b. Triggers final account statement and allows CA to issue final certificate c. Final payment should be issued within 2 months of end of rectification period.

Question 27

What is the final certificate?

Answer 27

a. Issued when the final account is agreed between client/contractor b. It is issued by the CA, that a construction project is fully complete c. Done at the end of the defects period, releases any remaining money to contractor

Question 28

What is the certificate of making good?

Answer 28

a. Certificate that is issued by the CA once all defects have been made good by the contractor at the end of the defect's periods at their own expense b. This brings about issuing the final certificate and releasing any remaining money

Question 29

What are the contractual certificates?

Answer 29

a. Interim certificates b. Extension of time c. Certificate of non completion d. Certificate of termination e. Practical completion f. Schedule of defects (not a cert, but a document) g. Certificate of making good h. Final certificates

Question 30

What changes were introduced to JCT 2024?

Answer 30

a. Collaboration: Parties must work together in good faith (now mandatory). b. Sustainability: Contractors encouraged to suggest eco-friendly improvements. c. Dispute Resolution: Early notification and negotiation now standard. d. Time: Faster interim decisions; new delay events added (e.g. epidemics). e. Building Safety: Updated for new safety laws, including roles under CDM and Building Regs.

Question 31

What is time at large?

Answer 31

If the employer prevents the contractor from finishing on time (e.g., by delaying decisions), and the contract doesn’t allow for a new completion date to be set, then the original completion date becomes invalid. Results in: - The contractor is no longer liable for liquidated damages for late completion. - Instead, the contractor must complete the works within a reasonable time.