Flashcards
NEC4 Revision
Cards in this deck (68)
- 1Option A?Priced contract based on an activity schedule.
Most risk with contractor.
Interim payments are made up of COMPLETED activities only.
+easy to work out what money is owed.
+greater cost certainty for clients.
- If there is an issue with completing an activity the contractor won't be paid for it. - 2Option B?Priced contract based on a BoQ.
Most risk is with the contractor.
Interim payments based on the works done so far with rates calculated using the BoQ.
+greater flexibility for both parties regarding cash flow
+easy to work out costs when things change / get remeasured.
- can be difficult to assess the % of works completed therefore interim payments can be hard to calculate. - 3Option C?Target contract based on an activity schedule.
Risk is shared
Interim payments submitted monthly to PM (defined cost + fee - disallowed costs) and is accepted or rejected.
Once the works are complete, the difference between the defined cost + fee and the the target cost is shared (pain/gain).
+makes parties work collaboratively (fewer disputes, accelerates innovation)
- Contractor can get a bad share of pain or gain depending on the contract. - 4Option D?Target contract based on a BoQ
Risk is shared
Pain and gain is shared
BoQ is used to calculate the price of works done. - 5Option E?Reimbursable contract (Cost +)
Client is most at risk.
Contractors are paud for their defined cost + overheads + profit.
+good for emergency works or works that can't be defined at the start.
-less cost certainty for client
-tricky for either party to plan cashflow. - 6Option F?Management Contract
Client most at risk.
Tailored towards management contractor procurement route.
Works done by subbies who are directly employed by the MC.
+ good for new developers as MC is responsible for procuring and managing.
-client has almost all the financial risk. - 7What are the seven components of a contract?1. Core Clauses: times, CEs, quality management, payment, title, termination.
2. Main Options: specific focussed clauses for a particular payment mechanism.
3. Secondary Options: extras you can pick and choose.
4. Option W1, W2, W3: Does the construction act apply and will there be use of a dispute adjudication board?
5. Contract data I and II: lists specific requirements such as who the adjudicator is.
6. Project Scope: Works information / what is required of the contractor.
7. Project site information. - 8What are the contractor's IMPLIED obligations?Exercise proper care and skill.
To complete works on time and in accordance with the contract provisions.
Warrant that the materials supplied are of satisfactory quality. - 9What are the contractor's EXPRESS obligations?Standard of work,
Cooperation with others,
Coordination and management,
Transfer of title to unfixed materials. - 10What is a vesting clause?When the transfer of materials, plant and equipment from the contractor to client happens. So everyone knows who owns what.
- 11What are the client's IMPLIED obligations?Cooperate with the contractor (to make the contract workable).
- 12What are the client's EXPRESS obligations?Pay the contractor as per the contract.
Appoint the necessary people (PM and supervisor).
Grant access to and use of the site. - 13What are the general remedies for contract breach?Assessment of damages: money should be paid to cover the costs to ensure the party is un the same situation as if the contract was completed.
Mitigation of loss: the claimant must try to mitigate losses to reduce impacts. - 14What are the contractor's entitlements if the client breaches the contract?Loss of profit on uncompleted work,
Work done at contract prices,
Delay/ disruption claims for inflation, overheads, loss of productivity etc. - 15What are the client's entitlements if the contractor breaches the contractCost of completion,
cost of rectification,
damages for delay,
compensation for inconvenience and stress suffered. - 16What are the PM's duties?issuing and receiving information (e.g. EWN).
Coordinating meetings for risk reduction.
Acting as an impartial certifier.
Suspending or postponing the works.
Working in the best interests of the client.
Interim, final payment, completion and defects correction certifier. - 17What are the supervisor's duties?Works inspector and certifier,
works superintendent,
works supervisor for client's directly employed workers.
record keeper. - 18What are the types of suretyships?Bonds (conditional and unconditional)
Guarantee (conditional)
Sometimes provided by a parent company. - 19What is a guarantee?A promise to answer for the debt, performance default or miscarriage of another party.
- 20What is a bond?A promise by deed where the bondsman promises to pay the other party a sum of money (with a financial limit).
Conditional: when there must be proof of default.
Unconditional: payable on demand with no proof needed (except when its obviously fraud). - 21What are the uses of suretyship?Security for contractor's promise to perform.
Collateral to contract performance (X13).
Other obligations such as retention payment (X16), tenders and advance payments (X14). - 22What is indemnificationThe transfer of risk from one party to another. (Doesn't reduce net risk)
- 23Clients's indemnities?Loss/ damage to contractor's plant and materials in transit that they're responsible for.
Loss / damage to works or materials due to a specified peril.
Loss / damage to defect free works handed over to the client. - 24Contractor's indemnities?Claims from third parties.
Loss or damage to works/ plant/ materials.
Loss / damage to client property.
Injury/ death of employee. - 25What is liability insurance?Insurer will indemnify the insured against any damages and legal costs arising from a third party.
- Public Liability
- Professional Indemnity
- Employee Compensation - 26Professional Indemnity?PI is required by consultants and contractors with design responsibilities in case of professional negligence. Subject to a financial limit - if exceeded the person's own money is at risk (and then their employer's).
- 27Loss Insurance?Instead of risking suffering a large loss, the insured party incurs a smaller cost in return for coverage. More effective if the insurer's right of subrogation is waived. Used for terrorism cover, specified perils and construction 'all risks'.
- 28What is the right of subrogation?The legal right of an insurer to recover costs from a third party (when the third party caused the policyholder's loss).
- 29What is a joint names insurance policy?When the contractor and client share a policy. Means they can't sue each other. It's cheaper.
- 30What are liquidated damages?A cost estimate of otherwise intangible losses to one party. The breaches and their costs are decided in the contract and the money is paid out upon a specified breach.
e.g. Delay damages. - 31What is a collateral warranty?Used to create direct contractual relationships between third parties (funders, tenants, purchasers) and the project team where there is not already a contract in place.
- 32What is the Contracts Act 1999 (Rights of third parties)?A statutory right of a third party to enforce contractual term. An alternative to a collateral warranty.
- 33What leads to an EWN being submitted?Delay of completion.
Increase in price.
Delay meeting a key date.
Impair the performance of the works in use. - 34When must a EWN be raised?Contractor must notify client within 8 weeks of becoming aware of it. If they don't they lose their right to more money and time. EWN must be sent to the correct address and not with any other communication.
- 35What happens after an EWN has been raised?PM adds EWN to the risk register.
PM instructs necessary people to attend a risk reduction meeting.
Outcomes of this meeting are noted in the risk register.
The PM assess claims for CE and awards if deemed necessary. - 36What is considered in the CE assessment?Effect on cost +
risk allowance +
effect of prolonged time on site+
effect of disrupted working+
time to be extended+
direct fee. - 37What is a quantum meruit claim?Parties agree that the contractor can carry out works before the contract is finalised. If the contract fails, the contractor still gets paid what the works cost.
- 38Exgratia ClaimsPlea to good conscience to make a fair payment if the other party made a mistake in pricing.
- 39What is the order of the payment process?Contractor must submit payment application no less than 7 days before the due date for works to be valued.
Interim certificate must be issued no more than 5 days after the due date.
Pay less notice must be issued at least 7 days before the final date for payment.
There can be up to 14 days between the due date and the final payment. - 40What is an Escrow AccountAn account set up at a bank for a stated number of beneficiaries. Money to be paid to the contractor (and then subbies) is held in trust.
It shortens the time between the main contractor and subbies getting paid so stops people going out of business. - 41How much does the contractor get paid?PWDD
+other amounts such as taxes
- retention
-money owed to client.
(25% of PWDD is withheld until a program has been submitted to PM). - 42Amount of payment based on NEC4 tpye?A&C: lump sum for each of the activities on the schedule.
B&D: lump sum and amounts obtained by multiplying rates by quantities for BoQ items.
E&F: Defined cost plus the fee. - 43What are the defined costs for each option?A&B: cost of components excluding the cost for preparing CEs.
C,D,&E: payments due to subbies + cost of components - disallowed costs.
F: payments due to subbies + price for works done by the contractors - disallowed costs. - 44What is the interim valuation?A valuation of the whole works done to date to give advice to PM on payment notices.
- 45What are the methods of calculating preliminaries in interim valuations of a delay project?1. (time elapsed - delay) * time related preliminaries/ total contract period
2. time elapsed * time related preliminaries/ (total contracted period + delay) - 46When does the contractor get the retained money?Half at completion / take over, half after the defects certificate has been issued.
- 47What is the Pari Passu Rule?If the client goes bust and is unable to pay the contractor, their property can be sold and the money used to pay everyone owed proportionally. This applies to the retained money not separated from the client's assets. Therefore the retained money often gets put into a trust fund account meaning they aren't assets of the client so they can't be used to play debts. The fund must be set up before insolvency proceedings begin.
- 48When is the final payment paid?Assessment of the final amount must be done 4 weeks after the defects certificate is issued, or 13 weeks after the termination certificate.
Any dispute is to be referred within 4 weeks.
Once the dispute is sorted, there is a 4 week period where the case can be taken to tribunal. - 49Reasons a client can terminate a contract?- Contractor breach of obligations or duties.
-Unforeseeable events means completion won't happen or it'll be delayed more than 13 weeks.
-Bankruptcy/insolvency of contractor.
-Discharge from contract by a court.
-Prolonged deferment of start or delay in works of more than 13 weeks for whatever reason. - 50Reasons a contractor can terminate a contract?-Employer 11 weeks late in making payment.
-Bankruptcy/insolvency of client.
-Discharge from contract by a court.
-Prolonged deferment of start or delay in works of more than 13 weeks for whatever reason. - 51What is a frustration of contract?When both parties agree to terminate the contract.
- 52What is repudiation?When the contract has been made null and boid by a major breach. The aggrieved party can claim damages and walk away.
- 53What is termination procedure P1?Client can complete the works and use any plant and material they have title to.
- 54What is termination procedure P2?Client instructs contractor to leave site and take the plant and materials with them.
- 55What is termination procedure P3?Client can use the contractors plant and equipment and can instruct them to remove it all from site when they want.
- 56What is termination procedure P4?Contractor leaves the working area and takes all equipment with them.
- 57What is the procedure for notifying termination?-Give notice to PM with reasons.
-PM promptly issues a termination certificate if the reason is within the contract terms.
-PM certifies the final amount due or recoverable from the contractor within 13 weeks of termination.
-Payment is made within three weeks of this. - 58What are the three insolvency methods?-Liquidation
-Administration
-Company Voluntary Arrangement. - 59Define DisputeWhen a claim is made and gets rejected. The length of silence from the other party before it becomes a dispute depends on the contract.
- 60What are the four methods of dispute resolution?Mediation
Adjudication
Arbitration
Litigation - 61What is mediation?A neutral third party facilitates talks without getting involved. Discussions are in confidence and are inadmissible in subsequent hearings.
- 62What is Adjudication?A third party considers the facts and decides the outcome (more time or money usually) and it is usually upheld in further proceedings. The adjudicator is decided in the contract and is someone impartial who knows the industry. The decision is binding until the contract completion.
- 63What is Arbitration?Arbitrator is mentioned in the contract. Their decision is binding with limited grounds for appeal. Happens after contract completion.
- 64What is litigation?In a public court before a judge.
- 65Pros and cons of mediation?+quick and economical
+win win solution with preservation of relationships.
-Doesn't always come to a solution. - 66Pros and cons of adjudication?+Formal proceedings but generally quick and economical.
+can happen while works continue so less time wasted.
-win lose outcome. - 67Pros and cons of arbitration?-legal representation needed - expensive and time consuming.
-Win lose, limited rights to appeal. - 68Pros and cons of litigation?-legal representation needed - expensive and time consuming.
-Win lose, limited rights to appeal.
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- Civil Engineering Y3 Law and Contracts CVC102 Flashcards on NEC4 Revision, created by Kiara Ballantyne on 23/05/2023.
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- Kiara Ballantyne
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