Contract practice (L3)

Question 1

On the Williamsgate project how did you resolve the contractors proposed amendment to clause 45.2?

Answer 1

• I explained the distinction between the assessment under clause 45.2 and clause 45.1 to the Contractor
• such that clause 45.2 assess only the amount the Contractor would have otherwise incurred in correcting the Defect and so he is no worse off than if he were given access to correct it
• And so it is unreasonable to propose this clause be deleted and the Employer not receive any payment and is also left with an uncorrected Defect

Question 2

Did you think it was a reasonable request from the Contractor?

Answer 2

• No
• Given the distinction between the assessment under clause 45.2 and 45.1
• Such that clause 45.2 assess only the amount the Contractor would have otherwise incurred in correcting the Defect and so he is no worse off than if he were given access to correct it
• And so it is unreasonable to propose this clause be deleted and the Employer not receive any payment and is also left with an uncorrected Defect

Question 3

ON the Thirlmere Reservoir project, tell me about the amendment you refer to that stated use does not constitute take over.

Answer 3

• Under vanilla terms, if the Employer uses a part of the works other than for a reason stated in the Works Information and not to suit the Contractors method of working, he is deemed to have taken over that part of the works and a compensation event occurs 60.1(15), the Employer takes on the consequences of normal ownership including wear and tear and any Delay Damages are reduced from the date of take over (in the proportion that the benefit of the taken over part has to the benefit of the whole of the works)
• However, under UU’s Framework amended NEC3 contract, the Employer may use any part of the works before Completion and it is not to be treated as him having taken over the works, unless and to the extent he directs otherwise.

Question 4

Who was responsible for the insurance of the Employer was using an element of the works prior to completion?

Answer 4

• Under vanilla terms, upon take over, the Employer takes on the consequences of normal ownership including wear and tear and therefore should insure his asset in the usual way
• However, because of the amendment under clause 35.1 such that use does not constitute take over there is no risk for the Employer to insure against
• However, having said that the Employer also has an Owner Controlled Insurance Programme (OCIP) covering construction all risks for contracts awarded under the Framework meaning the Employer had arranged the insurance for the construction risks on this project

Question 5

What would happen if the Employer obstructed or delayed the Contractor as a result of take over?

Answer 5

• Because he is deemed to not have taken over, this would be dealt with under the usual provisions of clause 33.1
• If such use obstructed or delayed the Contractor, the Contractor’s remedy is a compensation event under clause 60.1(2)

Question 6

What is the advice you have given on retention?

Answer 6

• That following issue of the Completion certificate half of the retention needs to be released
• Likewise following issue of the Defects certificate, the remaining retention needs to be released to the Contractor

Question 7

What different types of warranties can be used on a project and why?

Answer 7

• A warranty is a representation made by one party that another can and will rely on.
• It is a promise that something will be done a certain way or to a certain standard.
• A breach of a warranty only gives the right to recover damages not to terminate which can occur if a condition is breached
• Type of warranties that can be used on a construction project include:
   Design warranties -to ensure it will be robust and compliant with building regulations
   Construction warranties -to ensure high standards and good construction practice
   Materials and workmanship warranties – to ensure materials and workmanship are defect free for a reasonable duration after the project
   Performance warranties – to ensure the completed project will deliver as expected e.g. energy performance or process performance
   Collateral warranties – to ensure there is a contractual link with a third party (such as a sub-contractor) to the primary contract (between a client and contractor) such that a contractual claim can be made (by the client) in the event such third -party breaches its contract which adversely impacts on the primary contract – particularly useful in a situation where the main contractor is insolvent

Question 8

What might be the risks from a bespoke contract?

Answer 8

• They may not adequately or fairly make provision for all circumstances
• They may create ambiguity and/ or contain inconsistencies
• They may have unintended consequences due to poorly defined risk allocation
• There is limited precedent or case law to guide dispute resolution
• They can make contract administration more intensive compared to standard forms
• They may create gaps in insurance coverage

Question 9

What is the impact of issuing a Non-completion notice?

Answer 9

• It is a condition precedent under some standard forms such as JCT for the deduction of damages

Question 10

Tell me about a time you have advised on the most appropriate contractual procedure during a contract?

Answer 10

• For example, on the Franklaw project, the Project Manager was considering giving an instruction changing the works information but firstly wanted to understand the cost and time implications of doing so
   for the contractor to supply and install an instrument to detect high water level in the attenuation basin
• I advised that the Project Manager can instruct a quotation for a proposed instruction to allow this to happen
• I also advised that in such an instance the Contractor does not put such proposed instruction into effect

Question 11

How do you introduce contract amendments into your contracts?

Answer 11

• For example, on the Williamsgate project, contract amendments were introduced via a Deed of Variation following a negotiated settlement
• Additionally, under the CDP Framework Agreement amendments to the standard NEC3 ECC terms of conditions have been amended through a list of special conditions appended to the Framework Agreement,
• Contract amendments can also be introduced via the use of Z clauses