Contract Practice - Level 1

Question 1

What are the main types of building contracts used in the UK?

Answer 1

JCT (Joint Contracts Tribunal), NEC (New Engineering Contract), and others such as PPC2000 and GC/Works.

Question 2

When should a JCT Intermediate Building Contract be used?

Answer 2

For projects of moderate complexity where some design input is required from the contractor.

Question 3

What is the purpose of contract particulars?

Answer 3

To set out project-specific details such as parties, contract sum, and key dates.

Question 4

What is a schedule of works?

Answer 4

A document detailing the scope and sequence of construction activities.

Question 5

What is a contract instruction?

Answer 5

A formal direction from the contract administrator to the contractor to carry out a variation or additional work.

Question 6

What is a variation under a building contract?

Answer 6

A change to the works agreed after the contract has been signed.

Question 7

What is an interim payment application?

Answer 7

A request from the contractor for payment for work completed to date.

Question 8

What is a valuation in a JCT contract?

Answer 8

The process of assessing the value of work completed for payment purposes.

Question 9

What is the purpose of a retention in building contracts?

Answer 9

To withhold a portion of payment until defects are rectified after completion.

Question 10

What is a defects liability period?

Answer 10

A set period after practical completion during which the contractor must rectify defects.

Question 11

What is the difference between JCT and NEC contracts?

Answer 11

JCT is more prescriptive and traditional; NEC is more flexible and promotes collaboration.

Question 12

What is a contract programme?

Answer 12

A schedule setting out the planned sequence and timing of works.

Question 13

What is a certificate of practical completion?

Answer 13

A document confirming that the works are substantially complete and fit for occupation.

Question 14

What is a final account?

Answer 14

The agreed statement of the total amount due under the contract.

Question 15

What is a liquidated damages clause?

Answer 15

A provision specifying the amount payable by the contractor for late completion.

Question 16

What is the purpose of insurance in building contracts?

Answer 16

To protect against risks such as damage, injury, or loss during construction.

Question 17

What is a direct loss and/or expense claim?

Answer 17

A claim by the contractor for additional costs incurred due to delays or changes.

Question 18

What is the role of the contract administrator?

Answer 18

To manage the contract impartially, issue instructions, and certify payments.

Question 19

What is a notice period in contract practice?

Answer 19

The required time for giving formal notice of certain events or actions under the contract.

Question 20

What is the significance of contract records?

Answer 20

They provide an audit trail and evidence in case of disputes.

Question 21

Name 3 relevant Events in JCT contract?

Answer 21

In a JCT contract, a Relevant Event refers to a circumstance or occurrence that may entitle the contractor to an extension of time for completing the works. It does not automatically entitle the contractor to additional payment—that would fall under a Relevant Matter.
Here are some common Relevant Events under JCT contracts:

• Variations instructed by the employer.
• Delay in giving possession of the site.
• Architect’s instructions or failure to give instructions on time.

Question 22

What is a relevant matter in a JCT contract?

Answer 22

In a JCT contract, a Relevant Matter refers to a situation that may entitle the contractor to loss and expense compensation—typically under Clause 4.24 of the JCT Design and Build 2016, for example.
These are different from Relevant Events, which relate to time extensions. Relevant Matters deal with financial claims due to disruption or additional costs caused by the employer or other specified circumstances.
Common Relevant Matters include:

• Variations to the works instructed by the employer.
• Failure to give possession of the site on time.
• Late instructions from the employer or contract administrator.

Question 23

What are the main types of procurement route used in both private and public sectors?

Answer 23

Traditional
Single-stage design and build
Two-stage design and build
Management contract
PFI

Question 24

How do you select the most appropriate contract for a construction project?

Answer 24

Based on the projects scale and complexity

Question 25

What are the key differences between NEC and JCT?

Answer 25

Time – A programme is a key document within NEC and is used as a tool for assessing change against and must be revised necessary. Deductions are made if a contractor fails to submit first programme. In JCT contractor must submit a programme as soon as possible after contract is executed but there are no requirements as to what this should include and no requirement to submit revised programmes. Cost – JCT splits up time and cost separately and deals with them after the change occurs whereas NEC deals with effect of time and cost together through the Compensation Event process. In JCT variations/claims are dealt with in a reactive manner, in NEC compensation events are dealt with in a proactive manner.

Question 26

Can you name the NEC options?

Answer 26

Option A: Priced contract with activity schedule. Option B: Priced contract with bill of quantities. Option C: Target contract with activity schedule. Option D: Target contract with bill of quantities. Option E: Cost reimbursable contract. Option F: Management contract.

Question 27

Can you list the typcial types of certificates you may use under a JCT Contract?

Answer 27

Interim Payment Certificate – Payment certificate of some kind for the contractor. Certificate of Non-Completion – occurs at end of project when contractor does not achieve PC Practical Completion Certificate – occurs when PC is achieved Certificate of Making good – issued at the end of defects liability confirming contractor has addressed issues. Final Certificate – once final account has been agreed and within 2 months of end of rectification period.

Question 28

Can you explain the contractual mechanisms of sectional completion?

Question 29

Can you explain the Term Front Loading?

Answer 29

This could be a situation / sign where the contractor is claiming for works in advance / not physically carried out on site. This could suggest they are in financial trouble and are advancing their cash flow.

Question 30

What is your understanding of a Parent Company Guarantee (PCG)?

Answer 30

A parent company guarantee (PCG) is a guarantee given by one contracting party's ultimate or intermediate holding company in favour of the other contracting party to secure the performance of that party's obligations under the contract.

Question 31

When would a PCG be used?

Answer 31

In construction, parent companies most commonly give guarantees to bolster the financial credibility of their subsidiary companies.

Question 32

What is a Performance Bond?

Answer 32

A performance bond (or performance security) used in the construction industry is a means of insuring a client against the risk of a contractor failing to fulfil contractual obligations to the client. Performance bonds can also be required from other parties to a construction contract. Whether or not a performance bond is required will depend, in the main, on the perceived financial strength of the party bidding to win a contract, as the most common concern relates to a contractor becoming insolvent before completing the contract.

Question 33

What does the term Time at Large mean?

Answer 33

Construction contracts will usually include a date by which the works described in the contract should be completed. This is generally the date by which practical completion must be certified.

Question 34

What is a collateral warranty?

Answer 34

Collateral warranties are used as a supporting document to a primary contract where an agreement needs to be put in place with a third party outside of the primary contract.