Level 3 - Contract Practice (Part 2)

Question 1

What is the RICS black book?

Answer 1

The ‘Black Book’ is a suite of guidance notes that define good technical standards for quantity surveying and construction professionals. These standards are essential development tools for younger professionals working through their APC and useful guides to best practice for more experienced professionals.

Question 2

What types of bonds are available in Construction Contracts and when are they appropriate?

Answer 2

1. Performance bond - used as a means of insuring a client against the risk of a contractor failing to fulfil contractual obligations to the client
2. Advance payment bond - client agrees to make an advance payment to the contractor, (for example where the contractor incurs significant start up and procurement costs before construction begins)
3. Off site materials bond - where a contractor has made a large payment for plant or materials that have yet to be delivered to site
4. Retention bond - a bond is provided to secure the amount that would have been retained via retention. Helps with cash flow.
5. Defects liability bond - (used to ensure that the contractor continues to provide services, rectifying defects)

Question 3

What is a Collateral warranty and when are they used?

Answer 3

• Collateral warranties are agreements which are associated with another ‘primary’ contract. They provide for a duty of care to be extended by one of the contracting parties to a third party (tenant, purchaser, funder) who is not party to the original contract.
• For example the tenant of a residential property undertaken by a Housing Association or developer.
• May also contain ‘step-in’ rights in the case of a funder to take the role of the client if a developer becomes insolvent.