Contract Practice Flashcards

Question

What is Sectional Completion?

Answer 1

- Agreement within the Contract that sections of the work will be completed by a specified date. Each section has its own Value, Liquidated Damages and PC date.

Answer 2

- Agreement - who is entering the contract - Recitals - where is the project and what is required - Articles - Sets out the principles of the contract - Contract Particulars - project specific details - Attestations - execution as a deed / underhand - Execution - signed by parties - Conditions - unamended JCT clauses

Answer 3

- Option A - Taken out by CONTRACTOR (joint names) - Option B - Taken out by CLIENT (joint names) - Option C - Taken out by CLIENT (joint names) for work to EXISTING STRUCTURES

Answer 4

- Contractor's Public Liability Insurance - injury to persons or property in the course of completing the works - Employer Liability - Contractor takes out insurance in names with Employer, protecting employer against any claims due to injury / damage to property etc. - Works insurance - Option A/B/C - Terrorism cover - Pool Re cover against loss or damage to the works/materials due to terrorism - Professional Indemnity Insurance - Contractor takes out insurance to protect against negligence claims

Answer 5

- Covers against any physical loss or damage to works/materials - Covers cost to remove debris, shoring and propping of works - Excludes repair, replace and rectify costs

Answer 6

- Insurance that includes the Employer and Contractor as composite insurers - Means insurers have no recourse against another named party

Answer 7

- Subrogation is another party's legal right to collect a debt or damages on your behalf - Insurers have the right to subrogate and claim back from another party - Does not apply on Joint Names policies

Answer 8

- Insurance against damage to works or materials from terrorism

Answer 9

- Fire/Flood/Earthquake/Civil Commotion/Lightning

Answer 10

- Client Variation - Deferment of possession - Civil disruptions - Ecological / Archaeological finds

Answer 11

- Client Variation - Impediment by client to prevent works - Opening up / testing works (unless neglience by contractor found) - Archaeological finds

Answer 12

- Prolongation - Disruption - Loss of Profit - Interest charges

Answer 13

- Must be actual loss incurred by the Contractor - Needs to be substantiated - invoices, proof of additional abliur - Based on agreed rates where applicable - Reasonable rates if not applicable

Answer 14

Terms of an agreement that are expressly agreed between the parties. Ideally, they would be written down in a contract but where the contract is verbal they will be the terms discussed and agreed.

Answer 15

A contractual term that has not been expressly agreed between the parties but has been implied into the contract either by common law or statute.

Answer 16

Tort is a civil wrong Part of the civil law A claim in tort is concerned with loss or harm

Answer 17

Statutory provisions are set out by law and must be complied with regardless

Answer 18

Contract provisions relate to the contract in question and therefore only apply to a specific project.

Answer 19

While legally binding, there is difficulty in proving the specific terms and conditions of the agreement. Having a written contract is always the preferred option.

Answer 20

Typically used to describe a letter from an employer to a contractor indicating the employer's intention to enter into a formal written contract for works described. Typically asks the contractor to begin those works before the formal contract is executed.

Answer 21

- Detailed description of the work to be completed - Contract Sum (if agreed) - Date for possession and completion - Insurance provisions required - Method of payment - Expiry date of letter - Typically states the employer's right not to award the main contract - ADR method

Answer 22

Allows work to commence before the main contract is signed / agreed

Answer 23

May lead to complacency and disincentivises both parties from signing the main contract Contractually less robust Employer loses incentive in negotiations for the main contract

Answer 24

- Where the Employer needs to commence works before a certain date - Where materials have long lead times and early procurement would aid the programme

Answer 25

It's a legally binding agreement like a contract - we would not draft those

Answer 26

- Comfort letter - letter expressing a parties intention to act a certain way - Instruction to proceed with intent to spend - allows work to proceed up to a certain value - Recognition of contract- also referred to as a letter of acceptance. Usually marks the completion of negotiations

Answer 27

Ampleforth Abbey Trust vs Turner & Townsend The defendant project managers were retained by the Trust in relation to a project to build new accomodation at a school. The defendant's retainer included obligations 'faciliating, assisting and being involved in the procurement of the building contractor and the building contract'. The Contractor never signed the building contract and the whole of works (which were completed late) were procured using letters of intent. The effect of this was that the Trust was not able to claim Liquidated Damages for the late completion of the works. HHJ Keyser QC held that the defendant had been negligent in failing to take the steps reasonably required a competent project manager for the purpose of finalising the building contract.

Answer 28

A form of security that may be required by clients to protect them in the event of default on a contract by a contractor that is controlled by a parent company (or holding company). Typically, such a default might be caused by the insolvency of the contractor.

Answer 29

They can be particularly useful where a small contractor is part of a large, financially stable group of companies. The guarantee is given by the parent company to the client and in the event that the contractoe defaults on their obligations, the parent company is required to remedy the breach, meeting all the contractor's obligations under the contract.

Answer 30

Contracts (Rights of Third Parties) Act 1999

Answer 31

The Act allows third parties to enforce the terms of contracts that they are not a party to, but which benefit them in some way, or which the contract allows them to enforce. It gives parties access to various remedies in those contract terms are breached.

Answer 32

- Time and Cost- Since no separate doucment is being entered into, using the Act cuts down on the time and cost associated with warranties being drawn up, signed and circulated - Certainty - Once the rights to be conferred on third parties are negotiated and agreed by all parties, there is limited room to revisit wording when protection is required - Subcontractors - The third party rights process can be extended into subcontracts, so that (provided the relevant building contract and subcontract are drafted accordingly) an employer can confer third party rights in relation to work done by subcontractors unilaterally. This avoids the need to chase a large number of individual warranties.

Answer 33

- Lack of flexibility - once the schedule of third party rights being conferred has been agreed, there is limited room for negotiation. This can keep costs down, but in some circumstances the inflexibility can cause a problem if a specific provision is required for a particular party, such as an incoming tenant or purchaser. - Need for careful drafting to ensure that all the necessary rights are conferred on the third party, for example the right to commence adjudication proceedings

Answer 34

If a lot of collateral warranties are required, it can involve a lot of administration and cost. No separate document required, so easier to get in place.

Answer 35

A formal contractual agreement that runs alongside another contract. Its purpose is to create a contractual relationship where one would not otherwise exist. For example, between employer and subcontractor

Answer 36

Any third party with a financial interest in the project but is not a party to the main contract. E.g. funding institution, future tenants, purchaser. The Employer may want one with subcontractors so that they have a contractual relationship for redress if main contractor went into liquidation.

Answer 37

Bond a financial commitment backed up by a third party. A collateral warranty passes on contractual obligations. Bonds contained within the contract whereas a collateral warranty are a side agreement.

Answer 38

- Collateral Warranties - Third Party Rights - Assignment

Answer 39

Parkwood Leisure vs Laing O'Rourke In light of the particular wording used in the colleteral warranty, there was no doubt it should be treated as a construction contract under Section 104 of the House Grants, Construction and Regeneration Act 1996

Answer 40

To enable the Client to retain a direct contractual link with the Design Team.

Answer 41

The process where the benefit of a contract is transferred from one party to another, but the burden of the contract remains with the original party.

Answer 42

It is standard to allow assignment of rights twice without consent The assignment should be notified in writing to the other party

Answer 43

- Performance - Retention - Off site materials - Advance payment - Tender

Answer 44

A form of security provided by a contractor to the employer. It consists of an undertaking by a bank or insurance company to make a payment under circumstances where the Contractor has defaulted under the contract.

Answer 45

- If the contractor is new or unapproved - If there is concern over the contractor's finances / commercial standing - The economy might be heading into recession - The employer simply wants to protect their commercial exposure

Answer 46

On demand bonds have the money immediately available on demand without needing to satisfy any pre-conditions (including establishing the Contractor's liability) unless the demand is fraudalent. Conditional bonds require the Employer to provide evidence that the Contractor has not performed their obligations under the contract and that they have suffered a loss consequently.

Answer 47

10% of the Contract Sum

Answer 48

The cost largely depends on the financial stability of the Contractor and the number of previous claims

Answer 49

If the Contractor goes insolvent, the Employer will be liable to pay all costs to deal with it Costs include sourcing a new contractor to complete the works and any premium that will attract. The Employer will not be able to pursue the contractor as the company will be in the process of liquidation

Answer 50

Requested by the Employer when inviting contractors to tender for a contract. Provides security against the risk of the successful bidder failing to enter the contract. Should help prevent idle tendering.

Answer 51

Covers an employer against the risk of paying the contractor for materials being manufactured off site. If the contractor becomes insolvent, the employer can claim oin the bond for goods paid for (in the event they are not delivered to site)

Answer 52

A bond that provides the Employer the same level of comfort as retention, but the contractor has the real benefit of retaining the cash in their account.

Answer 53

- The Employer will have to pay the premium for taking out the bond (usually via the Contract Sum) - May reduce the Contractor's incentive to complete the works promptly and to the desired standard

Answer 54

May be used in difficult market conditions to aid the contractor's cash flow

Answer 55

An advanced payment bond is required to protect and support payments to contractors in advance of work being done. Some contracts require the purchase of materials in advance of a contract commencing. There is always a risk to the employer in advancing money to a contractor who may not be well know to them to allow the purchase of goods to enable the contract to commence An advanced payment bond protects the payment being advanced in exchange for a bond underpinned by a suitable guarantor to give peace of mind to both parties.

Answer 56

Items such as historical artefacts (pottery, coins), bones or fossils, something of historical interest or value

Answer 57

Use best endeavours to avoid disturbing Cease work if it would endanger the object Take necessary measures to preserve in existing location and condition Inform the CA or PM of the discovery and location

Answer 58

Usually the Employer. Significant delays and costs can arise.

Answer 59

Broadly defined as a defect in workmanship, design, materials or systems used. The result is a failure of the building project or structure that causes damages to people or property, which in turn leads to financial losses or harm to the owner.

Answer 60

Patent defects are those which can be discovered by reasonable inspection. Examples include wall cracks, sagging gutters, broken windows etc.

Answer 61

Latent defects are those which cannot be discovered by reasonable inspection, for example problems with foundations.

Answer 62

12 months will allow the building to go through all the seasons of the year, therefore most defects will become apparent during this period.

Answer 63

The transfer of the rights and obligations of a contract to a third party. In a D&B contract used to describe the process by which design consultants are transferred from the Client to the Contractor

Answer 64

Reduced learning curve - working with the Client at an early stage the design team can gain a strong understanding of the Client's requirements. Reduced contractual risk for the Employer - responisbility is transferred to the Contractor so the Employer has minimum risk contractually.

Answer 65

- The Employer will generally require collateral warranties - The Employer may need to employ a shadow team for compliance purposes - There is potential for a conflict of interest, particularly in relation to services that are yet to be performed

Answer 66

It is used as an assurance of project completion and is intended as a safeguard against subsequent defects that the Contractor may fail to remedy

Answer 67

If the Contractor does not return to correc the defects, then retention may be used to fund the payment of others to correct the defects. The Contract Administrator will need to check the contract on the ability to do this and the relevant notices will need to be given to the Contractor

Answer 68

Half at the time the Practical Completion Certificate is released, half at the expiry of the defect rectification period

Answer 69

Professional negligence is when a professional fails to perform their responisbilities to the required standard or breaches a duty of care. This poor conduct subsequently results in a financial loss, physical damage or injury to their client or customer.

Answer 70

Make a claim on their professional indemnity insurance

Answer 71

Manufacturers and/or suppliers of products used in construction works are at risk of claims being made against them for damages if defects in those products result in damage or injury. Product liability insurance protects the policy holder against liability resulting from these defects.

Answer 72

Public liability insurance protects against liabilities for injury to third parties or their property. For example, a member of the public could make a claim if a fallen brick damaged their car, or if a supplier trips over a cable.

Answer 73

Employer's liability insurance can pay the compensation amount and legal costs if an emploee claims compensation for a work-related illness or injury

Answer 74

Contractor Designed Portion. Typically used on traditionally procured projects, design responisbility for specific elements of the work is transferred to the contractor

Answer 75

With CDP the design responsibility lies with the employer except for certain defined elements that are transferred. Under D&B all responsibility for the design rests with the contractor.

Answer 76

A performance specification is provided at tender stage, which the contractor provides design proposals in response. These are reviewed by the design team and either accepted, commented upon, or rejected.

Answer 77

Steelwork connections Cladding Roofing Temporary work MEP Elements

Answer 78

Domestic subcontractors are chosen by the contractor to execute a package of works. Neither the Employer or their consultants influence the appointment or the conditions.

Answer 79

The Employer provides a list of subcontractors that are pre-approved. The contractor selects one from the list through the tendering process. Once appointed by the contractor, they become a domestic subcontractor.

Answer 80

It provides the Employer with more control on the slection of a subcontractor by the contractor, while still leaving them with the element of choice and the responsibility of monitoring their performance.

Answer 81

A subcontractor is selected by the Employer to carry out an element of the works. They are still employed by the Contractor.

Answer 82

As they are being imposed on the contractor, the contractor will generally be allowed to object under certain conditions (for example safety). The contractor and subcontractor may have conflicting procedures, ethics, attitudes etc

Answer 83

As the Employer has selected them in the first instance, their work should be of high quality and acceptable to the employer

Answer 84

Insolvency is concerned with the inability to pay debts

Answer 85

- Thoroughly check financial accounts for stability - Check for front loading in their tender submission - Bank references - Use credit checking agencies (Dun and Bradstreet report) - Previous referenes from consultants and employers - Request a bond and / or PCG - this won't prevent insolvency but will give the employer comfort.

Contract Practice Flashcards

(109 cards)