Contract Practice L1

Question 1

Explain the different contract options available with the contracts you commonly use.

Answer 1

JCT Intermediate allows sectional completion. MWD and ICD allow contractor design portion.

Question 2

Explain the difference between a contract Under Seal (Deed) and a contact Underhand.

Answer 2

6 Years and 12 years latent defect period for PII after completion.

Question 3

Explain what a Collateral Warranty is and when and why one may be required.

Answer 3

Creates a contractual link between parties who are not the original parties to the contract. Third party company providing design for a contractor.

Question 4

Explain what a Novation Agreement is and when and why one may be required.

Answer 4

When design consultants are contracted to the client and are then ‘novated’ to the contractor.

Question 5

Explain when/how a Letter of Intent might be required, and the advantages it offers.

Answer 5

Enables contractors to order materials before the contracts are signed in order to meet programme dates.

Question 6

Explain the risks associated with a Letter of Intent and how these can be minimised.

Answer 6

Parties may delay/forget to sign the contract.

Question 7

Explain the difference between Sectional Completion and Partial Possession.

Answer 7

Sectional completion is planned within the Contract. Partial possession is agreed during the project. Requires Contractor agreement.

Question 8

Explain the possible reasons for using Partial Possession on a project.

Answer 8

When a Client requires early occupation of a completed area.

Question 9

When might a Term Service Contract (TSC) be used?

Answer 9

For ongoing maintenance and repair work over a fixed period of time.

Question 10

Outline some of the key terminology differences between NEC and JCT contracts.

Answer 10

Compensation events and relevant events. Early warning system to help manage risk (NEC). Allocation of risk (JCT).

Question 11

What are the advertised benefits in using the NEC suite of contracts?

Answer 11

Fostering collaboration and clear communication for better project management. Based on pro active risk management rather than what happens if things go wrong.

Question 12

What are the basic components of a JCT Contract that you have knowledge of?

Answer 12

Agreement (Parties), Recitals (work description), Articles (Contract sum, PD & PC), Contract Particulars (Contract specifics dates, LAD’s, retention, insurances)

Question 13

What is a parent company guarantee?

Answer 13

A form of security for Clients where a parent company guarantees the performance of the contractor. The parent company becomes legally responsible if the contractor defaults.

Question 14

What acts govern third party rights? What is their purpose

Answer 14

Contracts (Rights of Third Parties) Act 1999. Allows 3rd parties not original to the contract to enforce the terms of the contract.

Question 15

What is the difference between a bond and a collateral warranty?

Answer 15

A bond is a financial commitment backed by a 3rd party. A collateral warranty passes on terms of the contract.

Question 16

How can the benefits of a contract be passed onto a third party?

Answer 16

Collateral warranty, third party rights.

Question 17

What is a performance bond?

Answer 17

Financial security provided by a bank/insurance company to make payment to the employer if the contractor defaults under the contract. (Typically 10%)

Question 18

What are patent and latent defects?

Answer 18

Patent defects are discoverable by reasonable inspection. Latent defects cannot be discovered by reasonable inspection.

Question 19

What expenses can be included in LAD calculations?

Answer 19

Loss of income, additional professional fees, costs incurred from other parties, associated legal costs.

Question 20

Can you provide some examples of a relevant event?

Answer 20

Variations, adverse weather, force majeure

Question 21

What are specified perils within the contract?

Answer 21

Fire, flood, earthquakes, explosions

Question 22

What is subrogation?

Answer 22

Allows an insurance company that has paid a loss, to step into the shoes of its client and sue the party responsible for the loss.

Question 23

What is the importance of a form of tender under contract law?

Question 24

What are the limitations/risks of issuing PC?