What are contra claims?
Imposed as a result of the contractor’s operations (such as a third-party claim resulting from contractor negligence or contractual breach, for example, flooding a neighbour’s property)
What is a Contract Sum?
The amount agreed and set out in the contract to be paid to the contractor for completion of the works
Why may a Contract Sum need to be adjusted when it comes to Final Account?
- Variations
- Fluctuations
- Prime Cost sums
- Provisional sums
- Payment to nominated sub-contractors
- Statutory fees
- Loss & Expense
- LD’s
How is Retention Held?
- The employer deducts retention. The contract states the following: ‘…the Employer’s interest in the retention is fiduciary as trustee for the Contractor (but without obligation to invest)’.
- Unless the employer is a local authority, the contractor may request that the employer place the retention monies in a separate bank account to comply with the above statement. The employer will certify that this has occurred to the contractor and then the architect/contract administrator. The employer benefits from interest earned on this account.
What is Retention?
- A percentage (usually 3-5%) of the amount certified as due to the contractor on an interim certificate that is deducted and retained by the client.
- Purpose is to ensure that the contractor properly completes the activities required of them under the contract
What’s the difference between a Relevant Event and a Relevant Matter?
- A ‘Relevant Event’ is an event that causes a delay to the completion date which is caused by the client, or a natural event not caused by a party. A contractor is entitled to claim an Extension of Time
- A ‘Relevant Matter’ is a matter for which the client is responsible that materially effects the progress of the works. This enables the contractor to claim direct/loss and or expense that has been incurred.
- A Relevant Event does not necessarily entitle the contractor to claim loss and expense, and a Relevant Matter need not necessarily result in a delay to completion
What is Tort?
A tort is a civil wrong by the “tortfeasor” that unfairly results in loss or harm to another. This makes the tortfeasor liable to other party. Law of Tort is separate to criminal and contract law and is dealt with by the civil courts.
What are the categories of Tort?
- Negligence (Most common)
- Nuisance
- Trespass
What happens if the client will not pay the retention?
- If retention is due to the contractor, then the client would be in breach of contract
- Contractor could bring dispute to adjudication / arbitration or the dispute resolution technique listed in the contract
What is the default retention in the JCT form of contract?
- Standard Building Contract 2016 with & without CDP = 3%
- Intermediate contract 2016 = 5%
- Intermediate contract 2016 with CDP = 5%
- Minor works contract 2016 – 5%
- Minor Works contract with Design = 5%
- Design and build 2016 = 3%
- Major Projects 2016 = NONE
When is retention released?
A portion (50%) is released on completion of the works with the other 50% released at the end of the rectification period (Final Certificate)
What is included and excluded with Retention?
Included: • Preliminaries • Measured works • Variations • Materials on site • Materials off site
Excluded: • Insurance • Statutory fees and charges • Costs relating to patent defects • Cost of opening up the works and testing the works • Loss and expense • Insurance for restoration works • Fluctuations in the cost of labour and material (Option A & B)
What is a Collateral Warranty
- A ‘Collateral Warranty’ is a formal contractual agreement which runs alongside another primary contractual agreement – its purpose is to create a contractual relationship between two parties where one would not otherwise exist due to Privity of Contract
- Privity of Contract provides that you cannot enforce either the benefits or liabilities of a contract to which you are not a party
- Therefore a Collateral Warranty provides for a duty of care to be extended by one of the contracting parties to a third party who is not party to the original contract
What is the Duration of Collateral Warranties?
Usually duration of limitation period of contract (6 or 12 years)
What are the disadvantages of collateral warranties?
- Administration of completing them - On large projects there can be a great number consultants and sub-contractors meaning resulting in a lot of warranties
- ‘The contracts (rights of third party)’ can offer a way around this difficulty by allowing the primary contracts to confer benefits upon third parties even though they are not party to the contract
Examples of when Collateral Warranties are used?
- Client with subcontractor’s
- Main Contractor and
- Client with any Contractor’s Design Portion (E.g. MEP, cladding specialist, joinery specialist etc.)
- Funder with developer providing ‘step-in’ rights if client goes insolvent
