Contract Administration Flashcards

Question

What if the client fails to pay within the interim payment final due date?

Answer 1

NB. Interest runs on late payment Please note that these are the standard payment terms and may be subject to amendment if required. Could be in breach of contract?

Answer 2

In addition, the Housing Grants Construction and Regeneration Act gives the right to suspend performance for failure to make payment that has been notified as due. Where the architect/contract administrator fails to issue an interim certificate the employer should immediately review the amount claimed in the contractor’s application as that is the amount that will be due unless a pay less notice is served. If the employer disagrees that the amount claimed in the contractor’s application is due, it must serve a pay less notice within the prescribed period; a notice served late will be invalid. Once the deadline for service of a pay less notice in that payment cycle has been missed it is too late: the employer has lost the opportunity to withhold money from that payment. Even if the employer has evidence of discussions or correspondence with the contractor disputing the amount applied for this will not obviate the requirement to pay. Serving a valid payless notice is not just a question of issuing it within the prescribed timeframe. The notice must also be in the correct form and contain the requisite details.

Answer 3

Section 5 – Injury, damage and insurance This section outlines the contractor's liabilities re insurance provision during the contract period. Evidence of insurance will need to be produced at or prior to the pre contract meeting. Section 5.1 – Insurance ‘The contractor shall be liable for, and shall indemnify the Employer against any expense, liability, loss, claim or proceedings whatsoever in respect of personal injury or death of any person arising out of or in the course of or caused by the carrying out of the Works, except to the extent that the same is due to any act or neglect of the Employer, any Employer’s Person or any Statutory Undertaker.’ Ensure you select the appropriate Insurance option from choices A, B or C.

Answer 4

* Section 6 –Termination Insolvency client or employer default -non payment * Repudiatory breach * Refusal to carry out work. * Abandoning the site. * Removing plant from the site. * Failure to make payments. * Employing others to carry out the work. * Failure to allow access to the site. * Failure to proceed regularly and diligently. * Failure to remove or rectify defective works. * Repudiatory breach * where one of the parties to a contract behaves in such a way that it indicates it no longer intends to accept its obligations under the contract, this is considered to be a repudiatory breach (or fundamental breach) allowing the innocent party to terminate the contract and to sue for damages.

Answer 5

The Housing Grants, Construction and Regeneration Act 1996 (HGRA - also known as the Construction Act) is intended to ensure that payments are made promptly throughout the supply chain and that disputes are resolved swiftly. Confers rights to the contractor. Provisions of the act include: 1. The right to be paid in interim, periodic or stage payments. 2. The right to be informed of the amount due, or any amounts to be withheld. 3. The right to suspend performance for non-payment. 4. The right to adjudication. 5. Disallowing pay when paid clauses.

Answer 6

Termination ends the contract itself whereas determination ends the contractors employment under the contract but the contract still remains and so do the parties rights.

Answer 7

Concurrent delay is a situation where several causes of delay are running in parallel and seem to almost cancel eachtoher out. An example might be where consultants details were issued late, but an industrial dispute delayed progress of critical work at the same time. In more recent judgments, the courts have disregarded arguments about which was the dominant delay and judgement has been made on the basis that the loss should lie where it falls. In the above example, the contractor may be entitled to an extension of time and relief from damages but not entitled to loss and expense. To resolve look at the critical path

Answer 8

* An independent third party tries to resolve the dispute between parties by bringing them together to discuss and come up with a mutally agreeable solution * Their decision is not legally binding so they have to agree to it expressely as a sepearate contact. * It can be expensive. * Section 7.1 - Mediation ‘Subject to article 6, if a dispute or difference arises under this Contract which cannot be resolved by direct negotiations, each Party shall give serious consideration to any request by the other to refer the matter to mediation’.

Answer 9

* Fast dispute resolution * Construction adjudication is a statutory right introduced into UK construction contracts by the Housing Grants, Construction and Regeneration Act 1996, applicable to all relevant contracts entered into after 1 May 1998. * It provides a temporarily binding decision which must be complied with by the parties until overturned or varied by the courts, arbitration or agreement. * Adjudication is a contractual or statutory procedure for swift interim dispute resolution. * It is provided by a third party adjudicator selected by the parties in dispute. * Adjudication is often subject to a strict timetable and may be based purely on documentary submissions (see for example, NEC Engineering and Construction Contract, option W2). * Adjudicators can adopt an inquisitorial role which may involve taking the initiative in ascertaining facts and law. * Adjudication decisions are binding unless and until they are revised by arbitration or litigation. * There is no right of appeal and limited right to resist enforcement. * Award of legal costs is at the discretion of the adjudicator unless this is excluded by the terms of the contract. * Based on decision and written information received from both parties, the whole process can take up to 28 days and the decisions are binding. * If parties to a construction contract do not agree an adjudication procedure, then one is imposed by statute * Section 7.2 – Adjudication ‘If a dispute or difference arises under this Contract which either Party wishes to refer to adjudication, the Scheme shall apply except that for the purposes of the Scheme the Adjudicator shall be the person (if any) and the nominating body shall be that stated in the Contract Particulars.’

Answer 10

1. Arbitration is a procedure whereby both sides to a dispute agree to let a third party, the arbitrator, decide. 2. In some instances, there may be a panel. 3. The arbitrator may be a lawyer, or may be an expert in the field of the dispute. 4. They will make a decision according to the law. 5. The arbitrator’s decision, known as an award, is legally binding and can be enforced through the courts. 6. Arbitration allows for the resolution of disputes outside of court. 7. The parties will refer the dispute to an independent person (the arbitrator) who will make a final and binding decision (clause 9.6). 8. Arbitration is often slow and as expensive as litigation in court despite the intention that it is to be cheaper and more flexible. 9. Selecting arbitration means that the parties may waive their rights to issue court proceedings if the outcome is not as they desired. 10. It is not, therefore, usually favoured as the means for resolving disputes. 11. Surveyors can become Chartered arbitrator chartered insitute or arbitrators, 12.

Answer 11

Contracts may also allow suspension of performance. The circumstances allowing suspension are generally similar to those allowing termination. Suspension can be useful, for example, if the client has difficulty in raising funds to pay for the work to proceed at the speed anticipated by the contract. In addition, the Housing Grants Construction and Regeneration Act gives the right to suspend performance for failure to make payment that has been notified as due. Either party may have the right to terminate at the end of a suspension period, or if a suspension becomes prolonged with no prospect of work re-commencing.

Answer 12

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.

Answer 13

Extension of time EOT in construction contracts Construction contracts generally allow the construction period to be extended where there is a delay that is not the contractor's fault. This is described as an extension of time (EOT). When it becomes reasonably apparent that there is, or that there is likely to be, a delay that could merit an extension of time, the contractor gives written notice to the contract administrator identifying the relevant event that has caused the delay. If the contract administrator accepts that the delay was caused by a relevant event, then they may grant an extension of time and the completion date is adjusted. Relevant events may include: Variations. Exceptionally adverse weather. Civil commotion or terrorism. Failure to provide information. Delay on the part of a nominated sub-contractor. Statutory undertaker’s work. A delay in giving the contractor possession of the site. Force majeure (such as an epidemic or an 'act of God'). Loss from a specified peril such as flood. The supply of materials and goods by the client. Strikes. Changes in statutory requirements. Delays in receiving permissions that the contractor has taken reasonable steps to avoid. The contractor is required to prevent or mitigate the delay and any resulting loss, even where the fault is not their own. Assessing claims for an extension of time can be complicated and controversial. There may be multiple or concurrent delays, some of which are the contractor's fault and some not. There are many occasions where contractors contribute to delay themselves by their performance during design periods, when producing drawings, mock ups and samples or in inter-facing with sub-contractors. Crucial in assessing applications for extension of time is the quality of the information provided and records available. For more information, see How to prepare a claim for an extension of time. Claims should be judged against the actual progress of the works, not the programme, and must demonstrate the link between the breach (cause) and the delay. The contract administrator may review extensions of time after practical completion and further adjust the completion date. Mechanisms allowing extensions of time are not simply for the contractor's benefit. If there was no such mechanism and a delay occurred which was not the contractor’s fault, then the contractor would no longer be required to complete the works by the completion date and would only then have to complete the works in a 'reasonable' time. The client would lose any right to liquidated damages. Claims for extension of time can run alongside claims for loss and expense (relevant matters) however, one need not necessarily lead to the other.

Answer 14

If ‘time is at large’, ie there is no date for completion, or the date for completion has become invalid (with no mechanism for extension), then the contractor is no longer bound by the obligation to complete the works by a certain date. The client would then not be able to claim liquidated damages from the contractor and the contractor would only have to complete the works in a 'reasonable' time. The client would then only be entitled to damages if they could established that the contract was not completed within a reasonable time. 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. It is not uncommon on construction projects that the works are not completed by the date for completion. If this is because of delays for which the contractor is responsible, then the contract will generally include a provision for them to pay liquidated damages to the client. These are pre-determined damages based on a calculation of the actual loss that the client is likely to incur if the contractor fails to meet the completion date. Some contracts require that a certificate of non-completion is issued as a pre-requisite to deducting liquidated damages. If the works are delayed because of events for which the client is responsible (an act of prevention) or by agreed neutral events, the contracts will generally provide for an extension of time to be granted, changing the completion date (see relevant events). If contracts did not allow the construction period to be extended under such circumstances, then time would be at large. The client would then not be able to claim liquidated damages from the contractor as there would be no date against which they could be calculated and the contractor would then only have to complete the works in a 'reasonable' time. The client would only be entitled to damages if they could establish that the contract was not completed within a reasonable time. It is important therefore that clauses describing relevant events cover all necessary eventualities, otherwise if an event occurs that is not covered, time will be at large. NB: Construction contracts generally include a provision requiring that the contractor proceeds ‘regularly and diligently’ irrespective of whether it is apparent that the completion date will be achieved.

Answer 15

Acceleration is the process of speeding up the work of a contractor so that a particular activity, or the project as a whole, can be completed before the date required under the contract. Generally, it is the client that requires the acceleration of construction work. A client might require that a building is handed over earlier than is set out in the contract or, where the contractor has been allowed an extension of time, may require completion earlier than the revised completion date. This is referred to as 'directed acceleration'. Where the contractor incurs additional costs as a result of this sort of acceleration, it can result in a claim against the client. Typically, the contractor does not have to prove the works were actually completed more quickly than originally agreed, just that they made a reasonable attempt to do so and that the attempt resulted in additional costs. Acceleration of the works may also be undertaken by the contractor voluntarily, if, for example, they wish to move on to another project, mitigate inefficiencies and delays that may have been incurred, or to save on costs. They may also be motivated by bonuses awarded for early completion. However, if acceleration is undertaken voluntarily, the contractor will not be able to claim additional costs from the client. There are several techniques available for accelerating work: Working overtime. Adding new shifts. Providing additional labour. Additional supervision. Providing additional resources, such as plant and equipment. Re-sequencing work activities (also known as project crashing or fast tracking). Adopting alternative construction methods, such as off-site manufacturing. Changing the design or specification. Reducing the scope of the works (for example transferring responsibility for some works from the contractor to the client), and Early procurement of key items. These techniques are likely to result in additional costs and may not guarantee early completion. While the same number of tasks need to be performed, they are condensed into a shorter period, and so are likely to require more resources. In addition, purchasing costs may be higher due to time pressures, incomplete information and the complexity of managing the interfaces between elements. A greater number of variations are also likely than on a traditional contract. Options such as working overtime typically result in employees being paid at a higher rate (typically 1.5-2 times the regular rate). Acceleration is also likely to result in additional risks. If resources are focused on critical-path activities, there is the possibility that non-critical-path activities will be affected. Quality, safety and compliance can be affected, and acceleration can result in an overall loss of productivity, perhaps due to tiredness on the part of workers being required to do overtime, or unfamiliarity of the site and the project on the part of additional workers being brought in. It is recommended that acceleration agreements are prepared prior to the implementation of acceleration measures to clarify the position regarding factors such as cost, reward and risk. For more information, see Agreement for the acceleration of construction works.

Answer 16

Fluctuations in construction contracts Fluctuations provisions in construction contracts provide a mechanism for dealing with the effects of inflation, which on large projects lasting several years can be very significant. On smaller projects, the contractor will be expected to take inflation into account when calculating their price (a firm price). On larger projects, the contractor may be asked to tender based on current prices (prices at an agreed base date) and then the contract makes provisions for the contractor to be reimbursed for price changes to specified items over the duration of the project (a fluctuating price). Fluctuation clauses in contracts may allow for: Changes in taxation. Changes in the cost of labour, transport and materials (sometimes referred to as 'escalation'). Increases in head office or administrative costs.

Answer 17

The term 'Joint Fire Code' refers to a document called Fire Prevention on Construction Sites: The Joint Fire Code published by the Fire Protection Association (FPA) and the RISCAuthority. Construction sites are particularly vulnerable to fire. The losses that follow can be high, in economic terms as well as through delays, injury or loss of life. In the 1980's, insurers were beginning to question whether it was commercially viable to continue insuring construction sites. In 1992, the Joint Fire Code was first published, providing guidance on fire safety on site as well as the prevention and detection of fire. The Joint Fire Code was widely welcomed and supported across the industry, both by designers, contractors and insurers. It is supported by the Association of British Insurers, the Chief Fire Officer Association and the Contractor's Legal Group, and is endorsed by institutions such as the RIBA, ICE, and HBF. There is now also close liaison with the Health and Safety Executive to ensure the code is aligned with HSG 168 Fire Safety in Construction Work. The Joint Fire Code covers activities through all stages of design, procurement and construction. Generally it applies to contracts with a value of more than £2.5million, but it can also apply to lower value contracts which are considered to be high risk or which form part of larger projects. The code describes '...a series of simple precautions and safe working practices (to) ensure that adequate detection and prevention measures are incorporated during the design and planning stages and that work on a site is undertaken to the highest standard of fire safety.' The code is accompanied by the Construction Site Fire Prevention Checklist, which is in the form of a series of questions, responses to which can be used to create a record of compliance with the code. Since its first publication in 1992, incidents of fire on site have reduced significantly. On some construction contracts, the parties will be required to indicate whether the code applies (and whether the project is a 'large project' with a value of £20 million or more). Compliance with the code may also be a requirement of some insurance policies. Requiring compliance with the code in a construction contract can lead to a reduction in insurance premiums, however, failure to comply with the code could then result in the withdrawal of insurance which might be considered a breach of contract.

Answer 18

An unforseen act of god Very broadly, it relates to exceptional, unforeseen events or circumstances that are beyond the reasonable control of a party to a contract and which prevent or impede performance of their obligations under the contract. Generally it cannot be an event that the party could reasonably have avoided or overcome, or an event attributable to the other party. Clauses referring to force majeure attempt to set out the circumstances to which the term applies to and prescribe how such situations should be treated. Depending on the provisions of the contract, the following may be considered to constitute force majeure: Unforeseen changes to legislation. Wars and other hostilities (such as terrorism). Fires. Exceptionally adverse weather. Civil unrest, such as riots or revolution. Strikes (other than by the contractor or subcontractors). Natural catastrophes such as earthquakes, floods and volcanoes. Epidemics or pandemics. In some contracts, force majuere is considered a 'relevant event', that may allow the contractor to claim an extension of time if they have been prevented or impeded from performing their obligations under the contract. Although, if the contractor has continued to perform their duties, despite the occurrence, they may not be able to make a claim.

Answer 19

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.

Answer 20

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.

Answer 21

JCT MW - simple in nature works, under 500K, dont need BOQ, traditional procurement With CD - if not enough info to complete design of part or want contractor to take on the risk for the element. JCT Intermediate - Sectional completion and BOQ JCT Design and build - with DAB procurement JCT Standard Building contract - large/complex projects, traditional procuremet with or without BOQ JCT Major Works

Answer 22

contract documents which are the agreement, the conditions, the employer's requirements, the contractor's proposals including concept drawings, and the contract sum analysis. first recital sets out the work to be undertaken by the contractor (the works). employer's requirements expand on this in clause 1.1. Second recital -contractors proposal contract sum analysis into the contract. The contractor's proposals are the contractor's response to the employer's requirements outlining how the contractor intends to satisfy the standards and requirements set out by the employer. Professional Indemnity Insurance The obligation to maintain such insurance under clause 6.15 and 16 (2016 version) only applies where a level of indemnity has been inserted into the contract particulars. It is therefore essential that this is completed

Answer 23

The employer's requirements are a set of instructions that the employer provides to the contractor setting out the standards that are to be satisfied when designing and constructing the building. The employer's requirements should be confirmed prior to execution of the contract as although modifications can be made once the contract is in force, such adjustments are construed as a 'change' under clause 5.1.1 (clause 2.12). As the contractor is not responsible for either the content of the employer's requirements or for verifying the adequacy of any design within them (clause 2.11) it is the employer that is liable for the consequences of a 'change'. Design and build contracts do not therefore inherently relieve the employer from ‘all design’; retaining responsibility for any deficiencies in the underlying design. These consequences may include a claim for an extension of time (clauses 2.24; 2.25; 2.26.1) and for loss and/or expense (clause 4.20) by the contractor. An exception to this occurs where the contractor identifies a divergence from statutory requirements in the employer's requirements or the contractor's proposals. If such a divergence arises, the contractor is to give written notice to the employer specifying the divergence and proposing an amendment to remedy it (clause 2.15.1). With the employer's consent, the contractor is to complete the design and construction of the works in accordance with this amendment at its own cost. f there are any discrepancies or divergences in the contractor's proposals, the contractor is to notify the employer (clause 2.13), who will recommend how to resolve the situation. The contractor is to implement the employer's recommendation at its own cost (clause 2.14.1). If the discrepancy lies in the employer's requirements, it is the contractor's proposals which prevail. If the discrepancy is not dealt with in the contractor's proposals or any of the construction information (as defined in clause 2.8), the employer is to modify the employer's requirements, which will be construed as a change (clause 5.1), potentially giving rise to claims for extensions of time and/or loss and expense.

Answer 24

The contractor can ask for an extension of time as it could be considered a client variation.

Answer 25

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.

Answer 26

Should the materials, goods or workmanship not be in accordance with the standards specified in the employer's requirements (or other documents), clause 3.13 enables the employer to instruct the removal of such materials, goods or work. If as a consequence of the instruction a change is required, no adjustment can be made to the contract sum and no claim can be made for an extension of time. Alternatively, the employer can instruct an inspection or test (under clause 3.12) to check if the materials, goods or work meets the specified standards. In these circumstances there may be no adjustment of the contract sum unless the inspection or testing shows that the standard is met. If the required standards have been met then the contractor may be entitled to claim for an extension of time and/or loss and expense.

Answer 27

- End of contractor liability (termination of any liquidated damages) - Insurance handover - Handover of the premises - Beginning of the defects liability period - Retention releases (generally from 5% to 2.5%)

Answer 28

There is no legal basis for the term Practical Completion. It is when the works are complete to the satisfaction of the Contract Administrator. The CA cannot certify PC of there are outstanding works or patent defects, but they also cannot withhold PC for minor defects outstanding.

Answer 29

- Manuals (O&M) - Testing and Commissioning Certificates - Building Control sign off (Completion Certificate) - Keys

Answer 30

The amount of retention is defined in the Contract Particulars, and then Clause 4.3 deals with Interim Payments.

Answer 31

The amount of retention is defined in the Contract Particulars, and then Clause 4.20 deals with how the retention is dealt with.

Answer 32

Retention is a sum deduced at each valuation (generally 5%) to provide the client with security that the contractor will return to correct any defects.

Answer 33

The "Adjustment to Completion Date" section of the contract deals with an extension of time: - 2.26 provides definitions and interpretations - 2.27 provides details of requirements for contractor's notice of delay - 2.28 provides details for fixing the completion date - 2.29 defines Relevant Events

Answer 34

If a contractor fails to complete the works within the allotted time for reasons beyond their control, the CA can consider an application for the contractor for an Extension of Time - which is a certificate that alters the completion date.

Answer 35

Time is considered to be "at large" and damages as defined in the contract may be enforceable

Answer 36

- Whether the cause of the delay is a Relevant Event (SBC) or outwith the contractor's control (MW) - Will this delay have an effect on the completion date - If so, to what extent

Answer 37

In the Standard Building Contract (Cl. 2.29) and the Intermediate Building Contract, relevant events are defined: - Variations - Loss or damage caused by specified perils - Civil action - Terrorism - Force Majeure - Exceptionally adverse weather conditions - Deferment of possession of site - Any impediment, prevention or default by the employer - Approx. quantity in a Bill of Quantities is inaccurate - Statutory works - Strikes

Answer 38

Under the SBC - The contractor is obliged to alert the CA to any delay at the earliest opportunity. Once a request for an extension of time is received from the contractor, the CA has 12 weeks to assess and make a decision (if less than 12 weeks to completion, the CA needs to make a decision prior to the completion date) Under MW - No specific timescales are defined

Answer 39

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

Answer 40

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

Answer 41

JCT does not define exceptionally adverse weather condition, meaning it is left to discretion. This means that it can be a potential cause for dispute. NEC defines it as a 1 in 10 year event, otherwise the contractor should have allowed for the effects of weather within their price

Answer 42

Loss and Expense is dealt with in clause 5.10, where details of when a contractor is entitled to loss and/or expense is detailed.

Answer 43

The "Loss and Expense" section deals with loss and expense: - 4.23 deals with matters materially affecting regular progress - 4.24 defines Relevant Matters - 4.25 deals with amounts ascertained (addition to contract sum) - 4.26 provides details of the contractor's rights and remedies

Answer 44

The contractor makes a claim for any direct loss and/or expense incurred due to a default by the employer or a relevant matter. The contractor must submit any supporting information required by the CA. If reasonably incurred, it is considered to be an Ascertained Amount and is added to the contract sum.

Answer 45

Clause 2.9 deals with liquidated damages. Amount of liquidated damages should be defined in the contract particulars

Answer 46

The section "Practical Completion, Lateness and Liquidated Damages" deals with liquidated damaged. More specifically clause 2.31 deals with the requirement to issue a Certificate of Non-Completion and clause 2.32 details the situation where liquidated damages may be applied, and the process for doing so. Amount of liquidated damages should be defined in the contract particulars

Answer 47

Liquidated damages are a genuine pre-estimate of loss. When used actual loss is irrelevant, and once set they can only be revised down. Unliquidated damages are when the section in the contract particulars is left blank, and the loss must be calculated at the time and need to be proven

Answer 48

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.

Answer 49

Under the SBC for liquidated damages to be applied a Non-Completion Certificate must be issued. Following that the client can either deduct the damages from monies due to the contractor, communicated via a pay less notice, or recover the amount as a debt, as long as it is communicated via a notice.

Answer 50

Under the MWBC there is no requirement for a Non-Completion Certificate to be issued. If the work is not complete by the completion date, the employer can either deduct monies due to the contractor, communicated via a pay less notice, or recover the amount as a debt, as long as it is communicated via a notice.

Answer 51

None. Non-Completion Certificates are not required under the minor works contract

Answer 52

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.

Answer 53

Clause 5.5 "Payments - amounts and notices" and more specifically 5.5.4 deals with Pay Less Notices

Answer 54

Clause 4.13 "Pay Less Notices are general provisions" deals what should be included within a Pay Less Notice, which clause 4.12 "Interim payments - final date and amount" details the situation in which a Pay Less Notice shall be issued

Answer 55

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

Answer 56

The section "Partial Possession by Employer" deals with partial possession. More specifically: - 2.33 deals with Contractor's Consent for the Employers partial possession; - 2.34 deals with Practical Completion of the space, and defines the Relevant Part and Relevant Date; - 2.35 deals with defects within the Relevant Part; - 2.36 deals with insurance of the Relevant Part; and - 2.37 deal with liquidated damages (reduction) in respect of the Relevant Part

Answer 57

If the Employer wishes to take partial possession of some part of the works prior to the completion date, they must first gain consent to do so from the Contractor. The Contractor cannot unreasonably withhold or delay such consent. Following that, the Relevant Part is deemed to have reached Practical Completion at the Relevant Date, where partial possession took place. This then triggers the start of the defects rectification period for the Relevant Part, starting at the Relevant Date. This also means that the insurance of the Relevant Part now becomes the responsibility of the Employer (specific dependent on insurance arrangements used). Additionally, the amount of liquidated damages should be reduced to reflect the % of the Relevant Part.

Answer 58

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.

Answer 59

The section " Practical Completion and certificates" deals with Sectional Completion. The process is the same as Practical Completion, but applies to isolated areas of the works - "Sections". The Sections along with their associated completion dates and amount of retention released should be defined in the contract particulars.

Answer 60

Acceleration is dealt within the the Schedule Part 2 Variation and Acceleration Quotation Procedure at the back of the contract

Answer 61

If a contractor wanted to avoid liquidated damages due to delay, or perhaps to free up staff. A client may wish to accelerate a programme to avoid the works being completed late.

Answer 62

The client invites the contractor to provide an acceleration quotation. The contractor then provides an acceleration quotation, detailing time savings possible and required adjustment to the contract sum, or provides details of why acceleration is not possible. The contractor has 21 days to submit their quotation. The quotation then remains open for acceptance for 7 days from receipt. If the quotation is to be accepted, the CA will issue Confirmed Acceptance which details the adjustment to the contract sum and the adjustment to the completion date. If the quotation is not to be accepted, a fair and reasonable amount will be added to the contract sum for the preparation of the quotation.

Answer 63

Clause 2.11 deals with defects found within the Rectification Period, and clause 2.12 notes the requirement for a Certificate of Making Good Defects. The Rectification should be defined within the contract particulars

Answer 64

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.

Answer 65

2 months after the end of the rectification period, or 2 months after the issuing of a certificate of making good, the CA will issue a final certificate, that details the outstanding amount due to the contractor (generally the remaining retention only)

Answer 66

If there is an ongoing dispute resolution process then a final certificate should not be issued

Answer 67

When two or more delays occur at the same time. Scots Law allows for review of different delays separately, not as one global claim. English Law focuses on the original delay.

Answer 68

Alterations or modifications of design, quantity or quality of works including: - additions, omission or substitutions - alterations of the materials - removal from site any of the executed works Also, imposition of the Employer of any obligations or restrictions: - access to site - limitation of working space - limitation of working hours - order or works

Answer 69

The value of variations will be the value of: - all variations required by CA - all work treated as a variation - instructions of expenditure of provisional sums - all works where approx quantities are used Shall be such an amount as agreed by the Employer and Contractor, or as valued by QS in accordance with the valuations rules in an amount can't be agreed on

Answer 70

- Rates taken from the pricing documents - Rates taken from the pricing document for basis, with fair allowance included as required - If not similar to other work, should be valued at a fair rate - Or through Day Work

Answer 71

Prime Costs, as supplied by RICS, for an activity, plus % Percentage Additions as provided in the Contract Particulars. If used, contractor must provide diaries

Answer 72

- All instructions should be in writing - Contractor confirms any verbal instructions within 7 days, then CA has a further 7 days to change the details, otherwise the contractor's confirmation becomes the instruction (takes affect from date of confirmation by CA) - If no confirmed in writing, but complied with, CA may confirm in writing prior to final certificate

Answer 73

- CA may issue written instructions - CA may issue verbal instructions, if confirmed by CA in two days

Answer 74

1. Domestic - employed directly by contractor, paid directly by the contractor 2. Named - a small number of contractors may be included in the tender documents. Contractor then approaches named sub-contractor for costs. If contractor is appointed, the sub-contractor becomes a domestic sub-contractor 3. Nominated - rarely used and has been removed from JCT. Contractor runs a sub-contractor tender process, and client selects preferred sub-contractor for appointment by the contractor

Answer 75

- SBC - Named persons, minimum list of 3 - IBC - Allows for single names subby for specified works, CA may change the name prior to execution of sub-contractor, treated like a prov sum - MWBC - includes for named

Answer 76

- 7 days before due date - contractor's valuation - Due Date - 5 days after due date - CA payment cert - 14 days after due date - final date for payment - 5 day before final date for payment - CA pay less

Answer 77

2 months after the end of the rectification period, the issue of the certificate of making food and issue of statement of final adjusted final account - whichever is later Due date is date of issue, and payment must be within 28 days

Answer 78

- Quality of works to reasonable satisfaction of CA - All adjustments to contract sum have been made - All EoT have been given - All L&E are concluded

Answer 79

Fluctuation provisions provide a mechanism for dealing with inflation, which is appropriate on long projects. In short projects, the contractor is expected to take inflation into account in pricing Often struck out of the contract for fixed price lump sum

Answer 80

- Contribution to tax & levy only; where only legislative changes will be taken into account - Labour, materials & tax changes; rates of labour, cost of materials and legislative changes will be considered - Formula adjustments; published indices used to apply to final account

Answer 81

The base date is generally 7 days prior to the submission of tenders, and is the point in time the contractor should use to price based on the market. It is assumed that the contractor has inquired about prices and lead in times. Additional compensation may be available if the market has drastically changed between the base date and the date on contract

Answer 82

Contract sum is exclusive of VAT, but employer is required to pay VAT on any contract payments

Answer 83

Option A - All Risks Insurance of the Works by the Contractor Option B - New Building - All Risk Insurance of the Works by the Employer Option C - Insurance by Employer of Existing Structures and Working in or Extension to Them

Answer 84

Option A - All Risk Insurance of the Works by Contractor - New build works where contractor required to effect the contract works insurance. All risk insurance for full reinstatement value of works. Contractor to maintain up to date of PC. Contractor to issue a copy to Employer

Answer 85

New Building - All Risk Insurance of the Works by Employer - Employer takes out a Joint Names policy of all risk insurance. Contractor to notify of any claims

Answer 86

Insurance by Employer of Existing Structures and Works in or Extension to Them - Employer insures existing structures and the contract works

Answer 87

- Negates the requirement for both parties to procure insurance, therefore reducing over insurance bill for the project - Under a joint names policy the insurer waives subrogation rights, meaning that the parties (Employer/Contractor) cannot claim against each other under the insurance, therefore avoid litigation - The policy cannot be cancelled without both parties being aware

Answer 88

A bond is a means of protection against the non-performance of a contractor. They are undertaken by a bondsman or surety to make a payment to the client in the event of non-performance. Cost of the bond will be borne by the contractor. Bonds can be on-demand or conditional. Conditional bond require proof of non-performance and loss suffered as a consequence

Answer 89

A performance bond is a means of insureing the client against the risk of a contractor failing in their contractual obligations. Typically set at 10% of contract value. Generally a default bond will be used, where the employer must prove there has been a breach, and that there has been loss suffered. Will expire at PC/issue of Cert of Making Good

Answer 90

An advance payment bond allows for surety to the employer if they provide an upfront payment to the contractor prior to works being complete. Appropriate if high cost initially for materials/site set up/plant hire etc. Advance payment bond should be a on-demand basis. Careful drafting required to ensure that on-demand basis and circumstances for payment are clear

Answer 91

Retention bonds involved the monies that would have been held as retention being paid into a bond instead of being held by the employer. Will reduce at PC as with normal retention

Answer 92

A parent company guarantee is essentially a promise by the contractor's parent company that they will make good an any default or any any liabilities of the contractor. Used when the contractor's has a parent company with a stronger financial covenant. Require legal advise for drafting and proper inclusion within contract. Drafting needs to be careful, as changes to contract without approval from parent company may void the obligations (EoT counts as a change)

Answer 93

1. Contracts (Rights of Third Parties) Act 1999 2. Housing Grants Construction and Regeneration Act 1996 3. The Construction (Design and Management) Regulations 2007.

Answer 94

* third part rights confers rights * collateral warranties separate document produced by a olciitor versus third part contract rightss of third parties. * **The 1999 act** enables third party rights to be created by a contract. This is seen by some to offer an alternative to collateral warranties. * However, the contract must expressly state that a third party has specific rights for the Third Party Rights Act to apply, and often these are excluded * Despite collateral warranties tending to be the preferred option, third party rights are increasing in popularity since they can be incorporated into building contracts, subcontracts, etc., with a simple notice; avoiding the need to producedetailed additional agreements. * The administrative exercise of organising collateral warranties can be considerable, sometimes costing more in money and time than their actual value. * However, there is a perceived weakness of the Act in that it does not deal directly with assignment or with step-in rights for funders. This can be handled by careful drafting that includes all assignees, and executes any step-in undertakings as a deed.

Answer 95

* Because of the rules of **Privity of contract:** * Without being expressly agreed, third parties are unable to enforce a term of contract they are involved in. * E.g occupiers, funders. * Construction security: A lender may be unable to make an effective claim for losses directly from the party who caused something to go wrong. * Unlikely success of a claim in tort: To claim for pure economic loss (i.e. damage caused by a defective building), a contractual right is much more likely to be successful than a claim in tort.

Answer 96

1. Preambles - * A preamble is an explanation of a document, commonly found in contracts, specifications and bills of quantities. * It can help with the interpretation of the document. * Anything which doesnt affect the contract price and doesnt need to be priced. * e.g. tendering procedures, parties to the contract 2. Prelims - cost of set up and administration of the construction projecct e.g. access, welfare, plant, precosntruction info. These items will affect the contractors price. 3. Schedule of Works - itemised construction with which are to be costed by the contractor. Prelims CIOB describes preliminaries as: '...the cost of administering a project and providing general plant, site staff, facilities, and site based services and other items not included in the rates.' a description of a project that allows a contractor to assess costs which, whilst they do not form a part of any package of works, are required by the method and circumstances of the works. They might, for example, describe things such as subcontracting, approvals, testing and completion procedures. Preliminaries and work sections together describe what is required to complete the works required by the contract. * A preamble is an explanation of a document, commonly found in contracts, specifications and bills of quantities. It can help with the interpretation of the document. A preamble might include, a description of the parties to the contract, the background to the document, the objectives of the project, and so on. * A description of the parties to the contract. * A description of the competence (or lack of it) of the parties to the contract. This can be taken to set a general standard for the quality of goods or services expected, or the level of support required. * The background to the document. * A summary of the negotiations. * Tendering procedures. * The objectives of the project. * Other related documents or previous contracts and their relationship to the current document. * It should only include important information and should avoid including or repeating rights or obligations which should be set out in the main body of the document.

Answer 97

1. NEC collaborative contract, programme in contract 2. FIDIC - 3. PPC

Answer 98

**Joint fire code** 1. Refers to a document called **Fire Prevention on Construction Sites:** 2. The Joint Fire Code published by the **Fire Protection Association (FPA)** and the RISCAuthority. 3. Construction sites are particularly vulnerable to fire. 4. The losses that follow can be high, in economic terms as well as through delays, injury or loss of life. 5. In the 1980's, insurers were beginning to question whether it was commercially viable to continue insuring construction sites. 6. In 1992, the Joint Fire Code was first published, providing guidance on fire safety on site as well as the prevention and detection of fire.

Answer 99

Contracts may be executed under seal (signed by the parties, witnessed and most importantly made clear that it is executed as a deed - see below) or under hand (a 'simple contract' that is just signed by the parties)

Answer 100

Measured term contracts * Measured term contracts (such as JCT MTC 2011) are used where the client has a regular programme of works that they would like to be undertaken by a single contractor. They are generally used for minor works or for maintenance work. * The contract will generally define: 1. the buildings that will be covered by the works 2. the term (usually between 1-3 years), 3. an estimate of the likely total value of the works that will be required over the term 4. an estimate of the likely size of individual orders. * Appointment is based on an agreed schedule of rates related to the categories of work that are likely to form part of the programme. * Payments are then calculated based on an agreed schedule of rates. * fixed term * call-off projects * A call-off contract, also known as a blanket order, is a purchase order which enables bulk orders over a period of time. This is a form of framework agreement that is often used in construction where projects can last for months or even years * schedules of rates * known quality * supervision aspects.

Contract Administration Flashcards

(125 cards)