Contract Practice - Interim Valuations & Payment Privisions

Contract Practice - Interim Valuations & Payment Privisions

1. Valuations

   • Purpose?
     • To provide recommendation to certifier on value to them 2 issue thier interim cert.
   • the Construction Act Relevant?

2. Retention

   • JCT Rules
     • rtn = certified amount retained by client
     • % stated in approx - usually 5%
     • Held on wrk executed
       • material off site, measured works, listed items, materials on site etc.
       • NOT:
         • restoration of loss or damage
         • statutory fees/ charges
         • L&E
         • Fluctuations
         • cost of emp. MG defects
         • opening up 4 inspection
     • PC 1/2 is relased
     • Emp. gains interest from retention & can keep it
     • must be placed into a seperate bank account if specified by MC
     • statement of retention must be issued to MC with each interim cert.
     • Balance of retention release on issue of certificate of Making Good
   • why?
     • provide degree of security 4 client
     • intended 2 provide funds should issues become apparent e.g. insolvency of MC
     • provide incentive to ensure defects are MG
   • Weaknesses?
     • cost easily be greater than 2.5% or 1.5%
     • sets precedence 2 accept defects & snagging
     • retention often not treated properly by emp.
   • Retention Bonds
     • What
       • some sectors such as lifts & piling will not accept costs feat. retention but offer bonds in lieu
       • form of on demand bond
       • inc consideration - in lieu of retention
       • remains in force until end of defects period
       • provided by bank/ guarantor
     • ADVANTAGES:
       • assignable
       • latham report = retention bonds are a better option than normal retention
       • can provide same level of security as interim retention
       • does not inflict cashflow problems
       • ease MC could b passed onto tender prices
     • DISADVANTAGES:
       • only advantage over suing if MC goes bust
       • not ready access 2 the money as with interim retention
     • Types
       • its conditional and to enforce you must;
         • prove MC default of obs
         • prove beneficiary has sustained damages
         • prove that damage has been reasonably sustained
     • Terms of bond
       • immediate in insolvency
       • payable if MC not performed obligations
       • expires after completion of rectification of defects