Level 3 - Contract Practice

Question 1

1. What is a contract?

Answer 1

A legally binding agreement (between two parties) to provide goods and services within a specified timeframe.

Question 2

2. What is necessary to form a contract?

Answer 2

Offer Acceptance (or counter offer) Consideration Intention (to be legally bound) Capacity (to make agreement) (e.g. power of attorney on behalf of a company)

Question 3

3. How is a contract executed?

Answer 3

• Under hand, signed by both parties, 6 year limitation period. Means that a party must bring about any claim for breach of contract within 6 years of the breach taking place. Any later and the claim will be time-barred. - Under Seal (as a deed), signed and witnessed, 12 year limitation period. Valuable consideration not required,

Question 4

4. What are common contract documents?

Answer 4

• The Contract (with any amendments) - Preliminaries - Contract sum analysis/Pricing Schedule - Drawings - Specification - Planning conditions/agreements - Contractors Proposals

Question 5

38. What are the main contract suites?

Answer 5

• JCT (Joint Contract Tribunal) - NEC (New engineering contract) - FIDIC (International federation of Consulting engineers) - ICE (Institution of Civil Engineers)

Question 6

43. How did you try to mitigate a delay on one of your projects?

Answer 6

Coventry demolition - Liasing with Main contractor to overlap the works, early survey work can begin on site whilst last section of demolition taking place.

Question 7

N 1. Why use standard forms of contract?

Answer 7

• They are cheaper than getting a bespoke contract drawn up - Offer a level of familiarity between the parties - Tried and tested contracts in court, therefore you should be able to predict the outcome in the courts.

Question 8

N 2. Why wouldnt you use a bespoke contract?

Answer 8

• They are costly to produce and time consuming - Contractors do not like them, as they regularly put alot of the risk onto the contractor - They are not tried and tested like a standard form

Question 9

N 3. What is required to form a contract?

Answer 9

Offer Acceptance Consideration Capacity Intention Legality?

Question 10

N 4. What should you consider when selecting the contract?

Answer 10

• The criteria of the client - The procurement method you are going to use - Nature of the works - Timings, are the works required to start quickly or do you have time to produce robust set of docs

Question 11

N 7. What standard forms of contract do you know that are offered by JCT?

Answer 11

• SBC 2011/2016 - Intermediate building contract 2011/2016 - Minor works Building contract 2011/2016 - Major Projects building contract 2011/2016 - Design and build contract 2011/2016 - Management Building contract 2011/2016 - Construction management contract 2011/2016 - Prime cost building contract 2011/2016

Question 12

N 8. Can you name some NEC standard contract forms?

Answer 12

NEC - Engineering and Construction Contract (ECC) - Option A, Priced contract w/ Activity Schedule - Option B, Priced contract w/ BoQ - Option C, Target contract w/ Activity Schedule - Option D, Target contract w/ BoQ - Option E, Cost reimbursable - Option F, Management contract

Question 13

N 12. When is a JCT Minor Works contract NOT suitable?

Answer 13

• Complex projects - Detailed control procedures - Where there are named Sub-Contractors

Question 14

N 13. Can you provide more information on the JCT Major project construction contract?

Answer 14

• Used on large , complex project by experienced clients - They place most of the risk on the contractor - Has sub-contract derivatives - All derivatives/versions have a yellow and purple cover

Question 15

N 14. Can you provide more information on the JCT Design and Build Contract 2011?

Answer 15

• They are used by all types of clients, create a single point of responsibility for the design and construction with the contractor - Can be used on projects of all sizes - Client must produce the Employers Requirements - Has a sub-contract derivative broken into two parts: JCT DB11 Sub-contract Agreement, JCT DB11 Sub-contract Conditions - All derivatives have a Yellow and pink cover

Question 16

N 15. Can you provide more information on the JCT Management Building Contract?

Answer 16

• Used then a management contracting route is chosen - Used by experienced clients who understand the construction costs - No real cost certainty until all packages are let - Works are completed by a number of ‘Works Contractors’ who are placed under a management works contract. - Works Contractors are contracted to the Management Contractor - Management Contractor is a fee earning professional onto the the final construction costs. - All derivatives have a yellow and brown cover

Question 17

N 16. Can you provide more information on the JCT Construction management contract?

Answer 17

• Used where a CM procurement route is chosen - Used by experienced clients who understand the construction costs - No real cost certainty until all packages are let - Works are completed by a number of ‘Trade Contractors’, who are placed under a ‘Construction Management Trade Contract’. - Trade contractors are contracted directly with the client - The Construction Manager is only responsible for looking after the programme and construction. - All derivatives have a Yellow and Brown cover.

Question 18

N 17. Can you provide more information on the JCT Prime Cost Building Contract?

Answer 18

• Used on projects which require an early/quick start - Usually on a cost plus basis, as the extent of the works are not known until the project is underway - Has sub-contract forms - All derivatives have a yellow and pink cover

Question 19

N 18. Can you provide more information on the NEC Option A contract?

Answer 19

Priced Contract with an Activity Schedule - For all types of clients, the balance of risk is mainly with the contractor - It comes with/requires an activity schedule, containing a list of activities the contract expects is required to complete construction. - Lump sum

Question 20

N 19. Can you provide further information on the NEC Option B contract?

Answer 20

Priced Contract with a Bill of Quantities - For all types of clients, the risk is mainly with the contractor - Comes with a detailed BoQ, which can either be produced by the client or Contractor, which is a detailed statement of all the works that will be undertaken. - Lump sum

Question 21

N 20. Can you provide further information on NEC Option C contract?

Answer 21

See revision sheet

Question 22

N 21. Can you provide further information on NEC Option D contract?

Answer 22

See revision sheet

Question 23

N 22. Can you provide further information on NEC Option E contract?

Answer 23

See revision sheet

Question 24

N 23. Can you provide further information on NEC Option F contract?

Answer 24

See revision sheet

Question 25

N 24. When was NEC3 published?

Answer 25

2005 Used by both the ICE and Government

Question 26

N 25. What are the perceived problems with NEC3 Contracts?

Answer 26

- Very admin heavy - Requires alot of expertise to operate effectively - Focuses too much on Project Management - Cost information in relation to compensation events can take a long time. PM regularly has to decide how to proceed based on a cost estimate from the QS, which then gets replaced by the actual costs.

Question 27

N 26. What are the specialities with NEC?

Answer 27

- No Contract Administrator required, replaced by a Project Manager - Compensation Events as opposed to variations, extensions of time, loss and expense etc.

Question 28

N 27. What is a compensation event?

Answer 28

Events that occur during the course of the works that cause the completion date to be changed, or additional cost to the contractor as a result to the client

Question 29

N 28. What might a Compensation Event include?

Answer 29

- Variations - Instructions to changes contracted services - Failure to provide access - Late issue of information from client - Failure by client to supply materials - Instruction to halt/delay works - Conditions that can't have been reasonably foreseen - Exceptionally adverse weather - Acts of god.

Question 30

N 29. What is the process for a compensation event?

Answer 30

1. Contractor must notify the project manager within 8 weeks of the event becoming apparent with an EARLY WARNING NOTICE, if not notified in this period then it will not be considered. 2. PM has 1 week to review claim and respond 3. Contractor has 3 weeks to provide quotation 4. PM has 2 weeks to respond to quotation 5. Final costs of works calculated on a cosy reimbursable basis

Question 31

N 30. What is the Project Managers role under NEC contracts?

Answer 31

- Manage programme - Operate early warning mechanism - Issue instructions - Issue outcomes for compensation events - Determine when practical completion has been achieved - Assess defects

Question 32

N 31. What is the Contract Administrators/Employers Agent role under JCT?

Answer 32

- Issue instructions - Certify payment - Issue Extensions of time - Consider all Variations, Loss and expense claims, interim applications - Assess when practical completion has been achieved.

Question 33

N 32. Who is the Employers Agent?

Answer 33

Typically used in Design and Build contracts, they are there to ensure the clients best interests are met.

Question 34

N 33. What is the Main Contractor responsible for?

Answer 34

The construction of the project, through either direct labour or sub-contracted labour Health and safety, if they are the principle contractor then CDM regs apply; - Construction phase plan - Prepare, develop and implement written site plans - Provide welfare facilities - Ensure all workers have site inductions - Provide all relevant information required for H&S plan to the Principle Designer

Question 35

N 34. What is Novation?

Answer 35

Where the contractual benefits and burdens of a contract are passed from one party to another. Commonly used in Design and Build for Design Team

Question 36

N 35. Is the contractor responsible for the Novated party's design prior to Novation?

Answer 36

No, unless they state they have adopted the design.

Question 37

N 36. What is Assignment?

Answer 37

Where the contractual benefits of a contract are passed from one party to another. Such as the assignment of a collateral warranty from one tenant/operator to another.

Question 38

N 37. When can Assignment take place

Answer 38

Any time, as it is a statutory right, however it can be limited within a contract

Question 39

N 38. Give an example of how Assignment can be restricted?

Answer 39

Restricting the assignment of a collateral warranty to one time only, without the written consent of the warranter.

Question 40

N 39. What is the aim of Assignment?

Answer 40

They give the assignee the same rights as the assignor under the contract

Question 41

N 40. What is a Collateral warranty?

Answer 41

A way of forming a direct contractual link between two parties which otherwise wouldn't have a link, such as between a sub-contractor and a client.

Question 42

N 41. What case law do you know that relates to Collateral Warranties?

Answer 42

Parkwood Leisure v Laing O'Rourke

Question 43

N 42. What happened in the case of 'Parkwood Leisure v Laing O'Rourke'?

Answer 43

It was found that Collateral Warranties can be considered to be a construction contract, and are therefore subject to the same provisions as the construction act

Question 44

N 43. What Collateral Warranties do you know of?

Answer 44

- Collateral warranty for a Purchaser/Tenant - Collateral warranty for an Employer - Collateral warranty for a funder

Question 45

N 44. What are third party rights?

Answer 45

- An alternative to Collateral Warranties - They allow a third party to be written into a contract Introduced as part of the Contracts (third party rights) act 1999.

Question 46

N 45. What is the aim of Third Party Rights?

Answer 46

To give the Third party the benefits of the contract only, not the burdens. I.e Writing in the tenant as a the third party will ensure that they receive the contract benefits

Question 47

N 46. What is a Letter of Intent?

Answer 47

- A document outlining an agreement between two parties, before a formal contract has been created - Each letter of intent is different, with each being assessed based on it meaning

Question 48

N 47. What can a Letter of intent be based on its wording?

Answer 48

- An expression of the intention to enter into a contract at a future date, which doesn't give rise to any legal obligation. - An expression of the intention to enter into a contract at a future date, which does not exclude the right to recover costs on a quantum merit basis. - The creation of a interim contract - The creation of a legally binding contract, whereby the letter can be offered and accepted.

Question 49

N 48. What can be included within a letter of intent?

Answer 49

- Spending caps - Expiry dates

Question 50

N 49. What is a title retention clause?

Answer 50

Where the good and services remain the property of the seller until a certain obligation is undertaken, i.e. payment.

Question 51

N 50. What is a Performance Bond?

Answer 51

A form of financial Security, used to cover the client against the contractor failing to fulfil their contractual obligations.

Question 52

N 51. What are the typical values of a Performance bond?

Answer 52

Typically work approximately 10% of the Contract Value to the client

Question 53

N 52. What are the problems with bonds?

Answer 53

They will come at the clients cost.

Question 54

N 53. What are the two types of bond?

Answer 54

- Default bond - On demand bond

Question 55

N 54. What is the difference between a Default Bond and an On demand bond?

Answer 55

- A default bond can be called in when the contractor defaults on their contractual obligations however the client will have to prove that the contractor has defaulted. - An on demand bond can be called in at any time, without having to satisfy any of the pre-conditions.

Question 56

N 55. What types of Bonds do you know of?

Answer 56

- Advanced payment bonds - Retention bonds - Materials off site bond - Tender Bond

Question 57

N 56. What is an Advanced Payment Bond?

Answer 57

A financial surety to the client that if an advanced payment is made, then the bond will pay out if the contractor defaults.

Question 58

N 57. Why would you use an Advanced payment bond?

Answer 58

If a contract had high upfront costs, and the contractor wanted advanced payment to ease the upfront cost.

Question 59

N 58. What is a Retention Bond?

Answer 59

A Bond taken out instead of taking retention from interim valuations, improving contractor cash flow.

Question 60

N 59. Why would you use a Retention Bond?

Answer 60

If a Contractor had poor cashflow, a retention bond means that no retention is taken from interim payments, improving cashflow.

Question 61

N 60. What happens with variations to a Contract in relation to a retention bond?

Answer 61

The bond value will need to be updated to suit, or the additional retention can be deducted as usual from interim payments.

Question 62

N 61. What if a Contractor doesn't maintain a Retention bond? (or other bond)

Answer 62

Then the client is entitled to take the retention out the next interim application.

Question 63

N 62. What is a Parent Company Guarantee?

Answer 63

A parent company guarantee is an alternative form of surety for the client, whereby a parent company to the subsidiary company will warrant the subsidiary's companies work, and will remedy any breaches by the subsidiary company, by either stepping in to complete the works, paying damages etc.

Question 64

N 63. What is Professional Indemnity Insurance?

Answer 64

A form of insurance that covers professional negligence

Question 65

N 64. What is Employers Liability Insurance?

Answer 65

A form of insurance that covers the injury and death arising from business activities

Question 66

N 65. What is Contractors All Risk Insurance?

Answer 66

A form of insurance that covers for subsequent loss or damage

Question 67

N 66. What types of payment method are there?

Answer 67

- Stage Payments - Milestone payments - Payment based off activity schedule - Third party certification

Question 68

N 67. What are Stage Payments?

Answer 68

Whereby a predetermined amount is paid on a pre-determined date. They are time accurate but not necessarily value accurate.

Question 69

N 68. What are Milestone Payments?

Answer 69

Whereby a value is paid when a certain Milestone is reached, i.e. completion of the footings. They are fairly time and value accurate.

Question 70

N 69. What are Payments based on an Activity Schedule?

Answer 70

- Payments are made against activities that have been completed at pre-determined times. - They are reasonably value and time accurate.

Question 71

N 70. What is Third Party Certification?

Answer 71

- Traditional form of valuing the works complete to a certain date. - Low form of predictability, but high accuracy of the value of works complete.

Question 72

N 71. What is the real name for the construction act?

Answer 72

The housing Grants, Construction and Regeneration Act 1996

Question 73

N 72. What is the name of the Act which amended the Construction Act?

Answer 73

The Local Democracy Economic Development Act 2009

Question 74

N 73. What provisions did the Construction Act introduce?

Answer 74

- No paid when paid clauses - The statutory right to adjudication - The right to interim payments on contracts over 45 day duration - The right to suspend performance - The right to be informed of the amount due, and any amounts withheld.

Question 75

N 74. What are the payment provisions under the construction act?

Answer 75

7 days from application date = due date 5 days after the due date = contractor can issue a default notice 17 days from due date = final date for payment 7 days prior to final date for payment = the last day a payless notice can be issued Overall payment terms of 24 calendar days

Question 76

N 75. What is a payless notice?

Answer 76

A notice which is issued stating how much less you intend to pay than the contractors application

Question 77

N 76. Does a contractor have to issue a Default notice if they issue interim valuations?

Answer 77

No, the interim valuation becomes the default notice

Question 78

N 77. What happens if the final date for payment is missed and no payment made?

Answer 78

Then the contractor is entitled to issue a 7 day notice of their intention to withdraw from site unless payment is received in full

Question 79

N 78. What is a 7-day notice?

Answer 79

- A contractual notice which advises a party of another parties intention to withdraw from site until payment is made - A notice for terminating a contract if a certain remedy of breach is not met.

Question 80

N 79. What are the payment provisions under NEC?

Answer 80

- 21 day payment terms - Payless notice to be issued 7 days prior to final date for payment - Project manager must assess and certify the amount due within one week of the application.

Question 81

N 80. What are the payment provisions under JCT?

Answer 81

- 21 day payment terms - Payless notice upto 5 days prior to final date for payment

Question 82

N 81. What should be included within interim valuations?

Answer 82

- Measured works - Dayworks - Variations - Fluctuations - Loss and Expense - Preliminaries - Materials on/off site - Provisional sums - Prime cost sums

Question 83

N 82. How can you secure payment for materials off site?

Answer 83

By providing a materials off site bond

Question 84

N 83. What should you do when paying for materials off site?

Answer 84

Ensure a vesting certificate is issued for the materials, confirming your ownership

Question 85

N 84. What should you do when paying for materials on site?

Answer 85

Get the materials clearly separated and marked as being under the client's ownership

Question 86

N 85. What are fluctuations?

Answer 86

A was of dealing with inflation over long period contracts. They allow for the contractor to be reimbursed for the inflation of specific items within the contract.

Question 87

N 86. What are the three main types of Fluctuation Clauses?

Answer 87

- Changes to taxation - Change in the cost of labour, transport and materials - Change to office or administrative costs

Question 88

N 87. How can fluctuation clauses be calculated?

Answer 88

- Calculated in real times, i.e. actual cost increases - Or using a pricing index

Question 89

N 88. What are the three types of fluctuations considered under JCT ?

Answer 89

a. Changes to statutory contributions, levies and taxes b. Changes to labour, materials and statutory costs c. Changes to statutory contributions, levies and taxes calculated by formula.

Question 90

N 89. How do JCT Fluctuations clauses work with retention?

Answer 90

A and B do not have retention held, C does.

Question 91

N 90. What is excluded from retention?

Answer 91

- Dayworks - Loss and Expense

Question 92

N 91. What is retention?

Answer 92

A percentage of the amount certified for payment, retained by the client as a financial incentive for the contractor to complete the works, and also return to rectify and defects which may appear.

Question 93

N 92. What value is normally taken for Retention?

Answer 93

3 or 5%

Question 94

N 93. When does retention get released?

Answer 94

Typically half at PC and half once the Rectification period and completion of making good certificate has been issued.

Question 95

N 94. What can a contractor request to protect their retention money?

Answer 95

That it is held in a separate bank account, which they have regular access to regular updated statements.

Question 96

N 95. What items do not have retention taken on them?

Answer 96

- Loss and expense - Fluctuations - Opening up and testing fees - Statutory charges

Question 97

N 96. What is the definition of 'change'?

Answer 97

An alteration to: - The Scope of works - The design - The quantity - The quality - The working conditions - The sequence of works or The imposition of additional obligations on the contractor by the client.

Question 98

N 97. What change cannot be undertaken without the contractors consent?

Answer 98

- Omission of work - Changes to the fundamental nature of the work - Work that is instructed after Practical Completion

Question 99

N 98. Who instructs changes under JCT?

Answer 99

Contract administrator / Employers Agent

Question 100

N 99. Who instructs change under NEC?

Answer 100

The project manager

Question 101

N 100. How should change be valued under JCT?

Answer 101

1. Use the Method of Measurement used at tender. 2. Firstly using bill rates/rates from the activity schedule. 3. Pro-rata rates. 4. Rates from first principles. 5. Dayworks.

Question 102

N 101. How should change be valued under NEC?

Answer 102

1. Called a Compensation Event. 2. An approximate price should be provided to the Project Manager, which they can base their decision on. 3. The final price is calculated on a Cost Reimbursable basis, based off the actual cost for the Change.

Question 103

N 102. What is the reason for a Compensation event under NEC?

Answer 103

• To put the contractor back in the same position both financially and programme wise, prior to the variation occurring.

Question 104

N 103. What is an Extension of Time?

Answer 104

• An adjustment to the completion date, relieving the contractors liability to pay LADS for the period of additional time granted.

Question 105

N 104. What is the process for submitting and granting an Extension of time?

Answer 105

• When the delay becomes reasonably apparent, the contractor gives written notice to the client identifying the delay. • The client has 12 weeks to review and respond.

Question 106

N 105. What is a relevant event?

Answer 106

An event that entitles a contractor to an extension of time

Question 107

N 106. What can be considered as a relevant event?

Answer 107

• Variations. • Exceptionally adverse weather. • Delays in receiving possession. • Force Majure. • Terrorism/ civil commotion. • Failure by the client to issue materials. • Delays caused by a nominated sub-contractor. • Changes to statutory requirements. • Failure by the client to provide information.

Question 108

N 107. Do Extensions of Time benefit the client?

Answer 108

Yes, as they set a new contractual completion date the contractor must adhere to, otherwise they will have liquidated damages levied against the contractor

Question 109

N 108. What is a concurrent delay?

Answer 109

Where delays caused by both the contractor, client and unforeseeable events cause a delay.

Question 110

N 109. How do you assess concurrent delay?

Answer 110

Each delay should be assessed on its merits, to determine the root cause of the delay

Question 111

N 110. What is a relevant matter?

Answer 111

A delay caused by the client, entitling the contractor to an extension of time and loss and expense.

Question 112

N 111. How is a relevant event different to a relevant matter?

Answer 112

• A Relevant event is any delay caused by the client or a neutral event. • A Relevant matter is a delay typically caused by the client, which entitles the contractor the a claim for loss and expense.

Question 113

N 112. What is loss and expense?

Answer 113

• Usually associated with Extensions of Time/Relevant Matters, whereby the contractor is entitled to claim additional costs as the result of a delay.

Question 114

N 113. What are the Loss and Expense heads of claim?

Answer 114

• Preliminaries • Overheads • Loss of Profit. • Interest • Finance Charges

Question 115

N 114. When do most disputes in construction contracts occur?

Answer 115

• When there are discrepancies between tender and contract drawings or the information is poor, creating too much ambiguity.

Question 116

N 115. What types of dispute resolution are there?

Answer 116

• Negotiation • Mediation • Conciliation • Adjudication • Arbitration • Litigation • Expert Witness.

Question 117

N 116. How does Mediation work?

Answer 117

• An independent third party is appointed, with the intention of facilitating talks between he disputing parties, in aid of them reaching an amicable resolution without going legal.

Question 118

N 117. How does conciliation work?

Answer 118

• Same as mediation, however the conciliator will propose a settlement agreement at the end of proceedings.

Question 119

N 118. How does adjudication work?

Answer 119

• Notice of intention to adjudicate is served from one party to another. • Adjudicator must be appointed within 7 days of notice. • Decision is made with 28 days (can be extended to 42) • Confidential. • Statutory right.

Question 120

N 119. How does arbitration work?

Answer 120

• Third party arbitrator is appointed to decide on a dispute. • Parties will attend a hearing, where the arbitrator will listen to both sides and make their decision on a dispute. • Confidential.

Question 121

N 120. What is Litigation?

Answer 121

• The process of taking legal action, i.e. construction disputes will be taken to the Construction and Technology courts for settlement.

Question 122

N 121. What is expert determination?

Answer 122

Where a third party expert in a field is appointed to make a decision on a specific dispute.

Question 123

N 122. What is the Civil Procedure Rules 1998?

Answer 123

• They introduced the Alternative Dispute Methods of Resolution, Mediation, Conciliation, Adjudication and Arbitration to try speed up the legal process, along with making it cheaper and easier to understand.

Question 124

N 123. What is a named sub-contractor?

Answer 124

• A Sub-contractor recommended by the client, which doesn’t have to be used by the contractor and also doesn’t impose any form of repercussions to the client if the contractor uses the named sub-contractor.

Question 125

N 124. What are the benefits of naming a sub-contractor?

Answer 125

• It allows the client to influence the contractors decision, whilst taking no responsibility for the performance or cost of the named sub-contractor.

Question 126

N 125. What is nominating a sub-contractor?

Answer 126

• It allows the client to choose a particular sub-contractor, and impose them in the main contractor.

Question 127

N 126. What are the issues of nominating a sub-contractor for a client?

Answer 127

• It will leave them responsible for the nominated sub-contractors performance and price.

Question 128

N 127. How do nominated sub-contractors work financially with regards to the main contractor?

Answer 128

• They are on a prime cost sum, whereby the final value of the nominated contractors work is added to the contract sum, usually with an uplift for Overheads and profit for the main contractor.

Question 129

N 128. What is Sectional Completion?

Answer 129

• A similar method to Practical Completion, it is used on large project where the works can be broken down into sections, allowing the client to take possession of individual sections once they are complete.

Question 130

N 129. What is practical completion?

Answer 130

• Practical Completion is awarded when the works are considered to be ‘substantially complete’.

Question 131

N 130. What happens when Practical Completion is awarded?

Answer 131

• Half Retention is released. • Defects liability period commences. • Client is responsible for insuring the site. • Ends the Contractors liability to pay liquidated damages.

Question 132

N 131. What is Partial Possession?

Answer 132

• Similar to Sectional Completion, however it is used when the client wants to take possession of a particular part of the site early. It is granted at the contractor’s discretion.

Question 133

N 132. What happens when Partial Possession is awarded?

Answer 133

• Alleviates the contractor’s liability to pay LAD’s for that section partially taken over. Lads should decrease proportionally. • Half Retention is released proportionally. • End of defects period for that section commences. • Client is responsible for insuring that part of the site.

Question 134

N 133. When can it be used?

Answer 134

• Sectional Completion must be written into the contract. • Each section will come with it own Sectional Completion date, retention and liquidated and ascertained damages.

Question 135

N 135. What happens if Practical/Section Completion/Partial Possession is granted?

Answer 135

• Client becomes responsible for insuring the works. • Half retention released. • Alleviates contractors liability for LADS. • Contractors Defect liability period commences.

Question 136

N 136. Does the contractor have to accept partial possession?

Answer 136

• No, but they cannot reasonably refuse.

Question 137

N 137. What is the alternative to partial possession?

Answer 137

• Use or occupy, whereby the client uses the area even though its still in the contractor possession.

Question 138

N 138. What is a contractors design portion?

Answer 138

• Whereby the Contractor is required to design a portion of the works, as part of their contract. • What is to be designed by the contractor should be made clear within the tender documents.

Question 139

N 139. What is determination?

Answer 139

• Where both parties mutually agree to walk away from a contract.

Question 140

N 140. What is a final account?

Answer 140

• The final value of the works completed, inclusive of all adjustments to the contract sum.

Question 141

N 141. How is the final account shown?

Answer 141

• In the final certificate.

Question 142

N 142. What is included within the final account?

Answer 142

• Contract Sum. • Variations. • Provisional Sums. • Prime Cost Sums. • Retention. • Loss and Expense. • Contra Charges. • Liquidated Damages. • Payments to Nominated Sub-contractors. • Fluctuations.

Question 143

N 143. What is completion?

Answer 143

• When all works are completed, and the defects rectification period has ended and all defects have been made good. • The Certificate of Making good should be issued.

Question 144

N 144. What needs to happen if PC/SC is not achieved and the Client wants to levy liquidated damages?

Answer 144

• Certificate of Non-completion needs to be issued as a pre-requisite.

Question 145

N 145. When does the defects rectification period begin?

Answer 145

• When PC/SC is achieved, and usually last 6 – 12 months.

Question 146

N 146. What happens if defects are found?

Answer 146

• The Client notifies the CA, who will instruct the contractor to remedy the defects. • At the end of the Defects rectification period, a schedule of defects will be issued to the contractor for remedy.

Question 147

N 147. What are Liquidated Damages?

Answer 147

• An amount that can be levied by the client against the contractor if they fail to meet the contract practical/sectional completion dates. • They must be a genuine pre-estimate of the contractors loss and are usually fixed daily/monthly sums.

Question 148

N 148. What happens if they are construed as a penalty?

Answer 148

• They will be unenforceable in court.

Question 149

N 149. What are Un-liquidated damages?

Answer 149

• Based on the actual loss of the employer, who will have to either negotiate with the contractor the value or refer the matter to legal proceedings.

Question 150

N 150. What is a Contra-Charge?

Answer 150

• A contra-charge is effectively a back charge, a way of off-setting payment for an item, i.e. for the supply of materials from the contract to a sub-contractor.

Question 151

N 151. When is the final certificate issued?

Answer 151

• It is issued at the end of the defects liability period, with it releasing the remaining half of the retention, along with ending the contractors liability for defects.

Question 152

N 152. What is acceleration?

Answer 152

• Whereby the completion dated is brought forward, requiring the works to be completed quicker.

Question 153

N 153. What are the methods of accelerating?

Answer 153

• Supplying the site with additional resources. • Re-sequencing the works. • Working Longer Hours. • Reduction in scope by the client. • Change of Specification.

Question 154

N 154. What are the issues with Acceleration?

Answer 154

• Constructive Acceleration can cause problems. • Most methods will usually come at additional cost to the Client.

Question 155

N 155. When is Acceleration Simple?

Answer 155

• When the Delay is client led, and the client issues a formal instruction to accelerate.

Question 156

N 156. What is Constructive Acceleration?

Answer 156

• Arises where the contractor believes they have a valid claim from an Extension of Time, but the Client disagrees. • The contractor will accelerate without instruction to mitigate their risk of Liquidated damages, and try recover costs from the Client. • Uninstructed Acceleration is not accepted by the courts however.

Question 157

N 157. CASE LAW QUESTION: DO YOU KNOW OF ANY CASE LAW RELATING TO THE OMISSION OF WORK?

Answer 157

• Yes, Abbey Developments Limited V PP Brickwork. • The case is essentially about whether Abbey Developments was able to omit the remainder of PP Brickwork’s Work. • Abbey Developments were unsatisfied with PP Brickworks progress. • They issued and instruction the omit the remaining works from their contract, and employ a new sub-contractor. • Abbey found to be in breach by the adjudicator, as the clauses in the contract did not allow for such an omission.

Question 158

N 158. CASE LAW QUESTION: DO YOU KNOW OF ANY CASE LAW RELATING TO A CONSTRUCTION CONTRACT?

Answer 158

• Yes, Parkwood Leisure v Laing O’rourke. • The case was about determining whether a Collateral Warranty is considered a Construction Contract under the Housing Grants, Construction and Regeneration Act 1996. • Due to wording of the Collateral Warranty, it was considered to be a Construction Contract, allowing Parkwood Leisure to Adjudicate.

Question 159

N 159. What is Subject to Contract?

Answer 159

• Creates a legal meaning that the parties do not wish to enter into contract until a form contract is signed.

Question 160

N 160. What is Without Prejudice?

Answer 160

• When using this term, it means that the document etc. cannot be used in court as evidence.

Question 161

N 161. CASE LAW QUESTION: DO YOU KNOW OF ANY CASE LAW RELATING TO A LETTER OF INTENT?

Answer 161

• Yes, Volkerfitzpatrick v Twintec Ltd. • Volkerfitxpatrick instructed twintec to proceed with the concrete slab on a LOI, including the clause: in accordance with the DOM/2 sub-contract. • Volker adjudicated against twintec for poor works. • Twintec refered the matter to court, to get an injunction on the adjudication because it was invalid. • Court ruled that because the Letter of Intent didn’t reference the dispute resolution method, that it was actually invalid and granted the injunction.

Question 162

N 162. What are the DOM 2 suite of contracts?

Answer 162

• A suite of sub-contracts published by the RICS

Question 163

What are the insurance options is JCT contracts?

Answer 163

Option A, which is where the Contractor takes out and maintains joint names all risks insurance of the works Option B, which is where the Employer takes out and maintains the joint names all risks insurance of the works Option C, which is the only option referring to renovations and involving existing structures. This is where the Employer takes out and maintains a joint name all risks insurance of the works and the policy also insures the existing structure and contents against ‘specified perils’.