RICS > Contract Practice - Level 1 > Flashcards

Contract Practice - Level 1 Flashcards

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1
Q

What key function does a contract perform on a construction project?

A

A contract protects all parties’ interests by turning the project’s scope, cost, and time commitments into enforceable obligations, reducing ambiguity and helping manage risk.

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2
Q

What is a contract?

A

A contract is a legally binding agreement between two or more parties that creates enforceable rights and obligations, typically involving an offer, acceptance, consideration, and the intention to create legal relations.

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3
Q

Define express terms?

A

express terms are the “spelled-out” rules of the agreement, not left to assumption.

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4
Q

Define implied terms?

A

implied terms are the “unstated” rules that the law or custom assumes are part of the contract.

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5
Q

What six conditions need to be met for a contract to be in place?

A

Offer, Acceptance, Consideration, Intention, Capacity and Legality.

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6
Q

What are the main suites of construction contracts?

A

JCT, NEC, FIDIC, ACA, AIA

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7
Q

What is tort?

A

A tort is a civil wrong. Negligence, Nuisance, Trespass

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8
Q

What are the influences that will affect contract selection?

A

Complexity, Risk, Procurements, Location.

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9
Q

Can you name three standard forms of contracts that can be used on a construction project?

A

A101 - Fixed Price, A102 - Cost Plus Fee with GMP and A201 - General Conditions of Contract.

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10
Q

What does JCT stand for?

A

Joint Contracts Tribunal.

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11
Q

Tell me about some of the key changes that were made

A

Modernisation, digital collaboration, updated dispute resolution.

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12
Q

How was the JCT contract suite modernised through the last update?

A

Supports e-signatures, digital communication.

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13
Q

How does JCT facilitate electronic working?

A

Supports e-signatures, digital communication.

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14
Q

How has the JCT contract suite incorporated diversity and inclusion?

A

New clauses promoting equality and inclusion.

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15
Q

What form of NEC contract might the Target Cost Contract be a good alternative for?

A

NEC Option C (target cost contract).

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16
Q

What are the main parts of the JCT contracts?

A

Conditions, contract particulars, schedules.

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17
Q

What is a contractor’s all risk insurance or contract works insurance?

A

Covers loss/damage during construction.

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18
Q

What is a collateral warranty?

A

Third-party rights to rely on contractor/consultant.

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19
Q

What is your understanding of what a letter of intent is?

A

Preliminary commitment before formal contract.

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20
Q

What is a comfort letter/consent to spend/recognition of contract?

A

Informal assurance, not legally binding.

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21
Q

When might you use advance payments?

A

Used to fund early-stage works or procurement.

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22
Q

What is the final account?

A

Reconciled total cost of the works.

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23
Q

What is the purpose of a final account?

A

To agree final payment and close contract.

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24
Q

On the issue of the final account, what are the relevant time periods in a JCT form of contract?

A

Final account usually within 3 months post-completion.

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25
When must the final certificate be issued?
After agreement on final account.
26
Tell me two of the information or statements that must be contained in the final certificate.
Total sum due, release of retention.
27
What are the four elements of a valid contract?
Offer, acceptance, consideration, intention.
28
How does dispute resolution work in a contract you have experience of?
Mediation, adjudication, arbitration, and litigation is selected as favored ADR techniques prior to signing the contract.
29
What is common law?
Law developed by court decisions.
30
What do you understand by invitation to treat in contract?
Invitation to negotiate, not an offer.
31
What is the difference between a contract executed under seal and underhand?
Seal = formal, longer limitation period; underhand = simple contract.
32
When selecting a form of contract what factors do you consider?
Project type, risk, client needs, location.
33
What alternative forms of contract are there available and what would influence your recommendation of a form of contract?
FIDIC, NEC, AIA; choice based on project specifics.
34
Name 3 factors you think make this form of contract valid for your work?
Clear scope, price, timescale, and parties’ agreement.
35
If the contractor on a D&B contract fails to issue the final account within the due period what action should you advise your client to take?
Client should issue a notice or dispute and withhold final payment.
36
What are liquidated damages?
Pre-agreed damages for delay
37
What is your understanding of retention and bonds?
Retention withheld money; bonds guarantee contractor’s obligations.
38
What is your understanding of early possession?
Client takes control before practical completion.
39
Tell me about some of the insurances a subcontractor would need if they were responsible for a part of the design work.
Public Liability, Professional Indemnity (for design), Employers’ Liability.
40
What do you understand by a parent company guarantee?
Parent guarantees contractor’s obligations.
41
When might it be used?
To reduce client risk on contractor default.
42
What is your understanding of sectional completion?
Project completed in parts, handed over sequentially.
43
What is your understanding of performance bond?
Security that contractor will perform.
44
When might it be used?
Large or high-risk projects.
45
What is you understanding of limitation of liability?
Caps contractor’s financial exposure.
46
Talk me through how you’ve ensured insurances from subcontractors were at the correct level.
Review certificates and coverage limits.
47
What is the AIA and what role does it play in construction contracts?
The American Institute of Architects (AIA) develops widely used standard form contracts to allocate risk, define responsibilities, and streamline project delivery in construction.
48
Name the main AIA standard form contracts and their typical uses.
A101 – Owner–Contractor, fixed price (lump sum). A102 – Owner–Contractor, cost-plus with GMP. A201 – General Conditions of the Contract for Construction (used with A101/A102).
49
What are the key components of the AIA A101 contract?
Scope of work, contract sum, payment terms, contract time, liquidated damages, and incorporation of A201.
50
How does the AIA A201 General Conditions support project delivery?
Defines roles, rights, and duties of owner, contractor, and architect; covers changes, payments, delays, insurance, and dispute resolution.
51
What are the typical pricing methods used in AIA contracts?
Lump sum, cost-plus with GMP, and cost-plus without GMP.
52
How does the AIA contract structure differ from JCT or NEC?
AIA uses a modular, document-based approach with separate general conditions, while JCT integrates conditions and NEC uses plain-English, collaborative management processes.
53
What is the process for change orders under AIA contracts?
Initiated by owner, architect, or contractor; documented on a Change Order form; requires agreement on scope, time, and cost impacts.
54
How is risk allocation handled in AIA contracts?
Risks are allocated to the party best able to manage them, with clear clauses on delays, design responsibility, and unforeseen conditions.
55
Explain the role of the Architect under AIA contracts.
Acts as owner’s representative for design, contract administration, reviewing submittals, certifying payments, and interpreting documents.
56
How are disputes typically resolved under AIA contracts?
Initial decision by the Architect, followed by mediation; if unresolved, arbitration or litigation per contract choice.
57
What is an Application for Payment in the AIA system?
A formal request from the contractor to the architect for payment, usually monthly, using AIA G702/G703 forms.
58
How are delays and extensions of time managed under AIA contracts?
Contractor requests extension; architect determines validity; time adjustments documented by change order or construction change directive.
59
What types of insurance are required under AIA contracts?
Commercial general liability, workers’ compensation, property insurance, and builder’s risk.
60
How does the AIA contract address contractor’s design responsibilities?
Primarily places design responsibility on the architect, but contractor assumes design liability if providing delegated design.
61
What is the difference between AIA A101 (Lump Sum) and A102 (Cost Plus) contracts?
A101 fixes the price; A102 reimburses actual costs plus a fee, with or without a GMP.
62
How are subcontractors addressed in AIA contracts?
Contractor is responsible for their performance; owner may object to proposed subcontractors.
63
What is the role of certificates of payment and substantial completion?
Certificates of payment authorize interim payments; substantial completion marks when work is fit for intended use.
64
How does liquidated damages work in AIA contracts?
A pre-agreed daily amount payable by the contractor to the owner for late completion.
65
What are the key contract termination provisions in AIA agreements?
Termination for cause (default) or convenience (owner’s choice), with defined procedures and entitlements.
66
How do collateral warranties function within the AIA framework?
Not common in U.S. practice; instead, third-party reliance is addressed through certifications or assignments.
67
Explain novation and its relevance in AIA contracts.
Novation transfers contractual obligations to a new party; rarely used in AIA standard forms.
68
How are contract modifications and amendments handled under AIA contracts?
Via change orders (mutual agreement), construction change directives (owner-driven), or minor changes (architect-approved).
69
What is the typical timeline for submitting and approving payment applications?
Monthly submissions; architect typically certifies within 7 days; owner pays within 14 days after certification.
70
How does the AIA address project closeout and final accounting?
Requires punch list completion, final payment application, release of claims, and consent of surety.
71
What is the role of the owner’s representative or construction manager under AIA contracts?
Acts on behalf of the owner in administering the contract, reviewing progress, and coordinating parties.
72
How does the AIA incorporate sustainability and environmental requirements?
Through supplementary conditions or the AIA Sustainable Projects Exhibit (E204).
73
What are the common limitations of liability clauses in AIA contracts?
Caps on damages, waivers of consequential damages, and mutual waivers for certain risks.
74
How do AIA contracts incorporate digital and electronic communications?
Allow email, electronic documents, and digital signatures if agreed.
75
What are the differences in dispute resolution clauses compared to NEC and JCT?
AIA uses a tiered approach (architect → mediation → arbitration/litigation); NEC promotes early warning and adjudication; JCT uses adjudication and court/arbitration.
76
How does the AIA contract suite support Design-Build and Construction Manager at Risk procurement methods?
Through dedicated forms (e.g., A141 for Design-Build, A133 for CM at Risk) with tailored risk and payment structures.
77
What are the typical payment terms in AIA contracts
Payment is generally due within 7 to 14 days after the architect issues the certificate for payment (per AIA A201, Section 9.4).
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