CONTRACT PRACTICE

&
CONTRACT ADMINISTRATION

Delivered by

ASMY SHERIFF
MRICS, AIQS, LLM, CCMP, MBA, MCIOB, BSc(Eng)
 CHECKLIST
Valuing change –
Sectional Completion/Partial variations/compensation
Principles of contract law
Possession events
Dispute avoidance and
2 Legislation Determination /Termination
resolution
Roles & responsibilities of parties Defects liability/rectification period Final Accounts
Third party rights –
Extensions of time Liquidated/delay damages
Legislation/Collateral Warranties
Letters of intent – Comfort
Change procedures
letters/Consent to spend Claims/Loss and Expense
/Recognition of contract
Performance security – Named/Nominated
Materials on/off site
Bonds/Parent Company Guarantees subcontractors
Insurances Advance payments Completion
Standard forms of main and Retention – retention bonds Defects liability/rectification
subcontract period
Interim valuations and payment
Assignment/Novation provisions

Advance payments Fluctuations

Contract Practice - Principles of contract law

Contract Key different between

Tender and Contract
A binding agreement between two or more persons which creates mutual 3
rights and duties, and which are enforceable at law. All the tender documents
will be added under
ṏ There must be an intention to create a legal relationship
ṏ Main object of a contract is legal consequences and; contract and contract will
ṏ Contract can be writing or oral be singed.

ȍ Offer - Details on what will be provided - by one party.

Essential elements
of a Contract to be

ȍ Acceptance - Unqualified acceptance by the other party.

valid contract

ȍ Consideration – As an outcome for the agreement – Ex: Money

or any other exchange
ȍ Capacity - Age and mentality
ȍ Intention -To create a legal relationship – Ex: carry out the
promises
ȍ Genuine consent - Ex: there must be no force involved.
ȍ Must be possible - By the parties
ȍ Must be legal - Ex: an agreement to defraud
Q
Contract Practice - Principles of contract law

Construction contract documents should address

following important areas;
4
ȍ Responsibilities of each party
ȍ Contract management procedures
ȍ Scope of work, standards, spec, quality
ȍ Time frame, EOT provisions
ȍ Payment mechanism (interim & final)
ȍ Dispute resolution mechanism
ȍ Mechanism for dealing with changes
ȍ Mechanism for handling default and termination Q
Terms of contracts
Express Term - those which have been explicitly communicated between the
parties orally or in writing
Implied Terms - Terms may be implied by custom, the courts, or by statue
Contract Practice – Standard forms of Contract

Three aspects of Procurement which direct to Contract

Working arrangement
5
ȍ Traditional Contract
ȍ D&B Contract
The selection of contract shall depend on
ȍ Management Contract
ȍ Partnering Contract ȍ Employer’s Requirements (Time , Cost, and Quality requirements)
ȍ Risk allocation ( design and other)
ȍ Complexity
Form of Contractor
ȍ Role of the parties
ȍ Value of the work
FIDIC,
JCT,
NEC,
any others
FIDIC other publications Q
ö Subcontract agreement
ö Model service agreement
Tendering process ö Representative agreement
Open
Selective
Negotiation
Contract Practice - Standard forms of Contract

FIDIC Form or Contract

ȍ Green - Short form of Contract (Condition , Value <500000 USD and Duration < 6 months )
ȍ Red Book - Construction Contract
ȍ Yellow Book - Design and Build Agreement 6
Silver Book - EPC- Engineering, Procurement and Construction(Turnkey)
ȍ
ȍ Gold Book - Design, Build and Operate Q
Why standard form of Contract How to choose FIDIC
Advantages Disadvantage
ȍ Proper risk allocation ȍ Sometimes legal advices
between parties required.
ȍ Avoid cost and time to
negotiate each and every
clauses
ȍ Tender comparison made
easy Q
ȍ Parties can assume risk
allocation earlier and well
know to them
ȍ Ready to use
ȍ Familiarized by all the parties
Contract Practice - Standard forms of Contract

Comparison between FIDIC 1987 and 1999

FIDIC 1999 FIDIC 1987
7
Engineer is employer’s agent Engineer is impartial
Disputes shall be referred to the DAB Disputes shall be referred to the Engineer

Provision for advance payment No provision for advance payment

provision for Value Engineering No Provision
Time for payment is counted from the Time for payment is starting from the date
contractor’s interim valuation submission of delivery of the payment certificate by the
date Engineer.

The Contractor has right to inquire No Provision

employers' financial arrangement
No Provision Provision to adjust overheads recovery
Q
The Employer can terminate the Contract No Provision
for his convenience
Contract Practice - Standard forms of Contract

Comparison between FIDIC 1987 and 1999

8
1987
1999 Q
Contract Practice - Third party rights /Collateral Warranties

Privity of contract
ȍ Means the terms and conditions of a contract cannot be enforced to a person who is
not part of that contract 9

ȍ This mechanism would prevent any liability arising between the contractor and
occupier without the existence of a collateral warranty, so collateral warranty
mechanism mainly being used to overcome the privity to the contract.

Collateral warranties
ȍ Are agreements which are associated with another 'primary' contract.
ȍ They provide for a duty of care to be extended by one of the contracting parties to a
third party who is not party to the original contract.
Q
Contract Practice - Roles & responsibilities of parties

The party's Major role & responsibilities

Client / Employer (ER) Contractor (CO) 10

ȍ Appointment of consultant ȍ Execute the scope of work
ȍ Setting out the budget ȍ Provide resources
ȍ Provide or develop a brief to the project ȍ HSE provision
ȍ Take responsibility to Develop design ( ȍ Identify suitable method statement
if required) ȍ Liable for errors or any other of his
ȍ Pay the parties responsibility

Project Management consultant / PMC Supervision consultant (SC) /

ȍ Programming resident engineer (RE)
ȍ Master plan development
ȍ Make sure the design
ȍ Advise to the employer on project
implementation
matters
ȍ HSE monitoring
ȍ Assist in appointment of designers, QS,
ȍ Inspection of work
etc
Contract Practice - Roles & responsibilities of parties

Engineer/Contract Administrator/ Employer’s Agent (CA)

ȍ Vital role which is the process of managing a contract according to the contract’s
11
terms and conditions.
ȍ Starts at the point of appointing any consultant/ Contractor by the Employer for
any project
ȍ Normally in order to develop a project brief the Client needs a consultant/Contract
Admin.
ȍ Major objective of CA is to deliver the project within cost, time and quality by
maintaining good relationship with parties

For good contract administration, Notices,

Letters,
the administration should keep Variation orders,
logs and registers for things Changes,
including but not limited to Payment, etc.
Contract Practice - Roles & responsibilities of parties- CA Cont

Pre contract CA role Post award CA Role

ȍ Take part in appointing consultants ȍ Monitor contract performance 12
ȍ Determining the contract management ȍ Fulfil the contractual requirements as CA
approach ȍ Change management
ȍ Take part in valuation ȍ Dispute management
ȍ Contract process and establishment ȍ Payment and other entailment
ȍ Establish time cost quality priority management
ȍ Prepare consultant agreement ȍ Contract finalization or close-out
ȍ Review Professional Indemnity Insurance
ȍ Advise on cost proposal

CA should not perform the below without concern Q

ȍ Instruct the contractor to commence the work before contract finalize
ȍ Change the scope of work (SOW) without contractual procedure
ȍ EOT without execution of amendment
ȍ Instruct any works which are different in nature.
Contract Practice – Material On/Off site

Material onsite Material off site

In general, the contractor buys the materials for Off site materials, It can sometimes
construction projects, and the client pays the be appropriate for the client to pay for 13
contractor after the materials are delivered to items even though they remain ‘off-
the site. The ownership of materials passes from site’,
the contractor to the client at the time of
delivery, irrespective of whether payment has For example,
been made or not ȍ Where a contractor made a large
payment
Payment for Material onsite shall be released ȍ If the client wishes to ‘reserve’ key
only after items in order to protect the
ṏ According to the list included as an appendix to the programme.
tender
ṏ Invoices and delivery orders (verify quantity
ȍ Or the items is long lead items.
Q
physically)
ṏ Approved Material Inspection Request (MIR) Such items should be agreed in
ṏ Quantity that doesn't go over what's needed and will advance and listed in an annex to the
be used in the project contract bills
ṏ % of invoice value as stated in the appendix to the
tender
Contract Practice – Material On/Off site

It can be helpful to pay for goods or materials that are not on-site. But it does put the client
at risk, like if the contractor goes bankrupt and the items aren't delivered even though
payment has been made. 14

In order to protect the Client :

ṏ Financial status of the contractor to assess the likelihood of insolvency.
ṏ Vesting Certificate - Should require proof that the property is vested to the contractor
before payment is made. (certifying that property has passed to the contractor and that the materials will be
properly identified, stored and insured)
ṏ Set aside, item should be clearly marked with the client’s details.
ṏ The material should be 'ready for incorporation’.
ṏ Insurance Proof- against specified perils for the period they remain off site.
ṏ Guarantee - If the contractor is part of a larger group, then a guarantee might be required from the holding
company.
ṏ An on-demand bond - might be required up to the value of the off-site items, with the value of the bond
reducing as deliveries to site are made. Q
ṏ Direct Contract - The client might enter into a contract direct with the supplier.
Contract Practice – Retention – Retention bonds

Retention fund or Retention

monies or Retention Bond Q
15
A sum or sums of money held by the
employer as safeguard against defective Defects
work ( against patent defects).
Patent defect - A defect which is
ṏ 50% of total retention shall be released discoverable by reasonable inspection.
upon TOC and other 50% upon completion (this is contractor’s obligation to rectify this , all these
defects shall be recorded under snagging list or punch
of DLP. list and shall be completed throughout the DLP or agreed
ṏ Retention should not include loss & period. )
expense claim, statuary fee, testing works
& fluctuation Latent defect - which may subsequently
develop and the contractor’s possible
Retention bond – if the Contractor wants failure to complete the contract.
the retention money earlier
The parties can release 100% of the retention
money upon TOC and retention bond shall cover
the 50% of the retention until DLP. Or the parties
can agree to cover all retention money through
retention bond.
Contract Practice – Change Procedure

Change procedure
In typical construction work the Employer or the
16
contractor itself shall provide the change procedures
to be followed. This shall be agreed by the parties.

Reason for changes in scope

Uncertainty can come from things like design,
specifications, laws, changes in the environment, etc.

Simplified change management process ( check project finance competency for detailed one)
ṏ Identify changes
ṏ Change order
ṏ Client approval
ṏ Issue instruction for changes
ṏ If these changes affect the contractor's cash flow or if the amount of the change is very Q
large, the engineer can release the money on account.
Contract Practice – Delay

What is Critical path

longest activity link / path of a project’s program
without break, the critical path (or paths) is the 17
longest path (in time) from Start to Finish; it indicates
the minimum time necessary to complete the entire
project.

Free float - A term Project float- The

used in programming, duration in which the given
the amount of task is delayed before it
duration in which the affects the deadline for the
scheduled activity can project
be deferred without
postponing the
subsequent scheduled
activities.

Example of Critical path

Contract Practice – Delay

Claims Prolongation cost

The contractor wants to claim additional A claim made by the contractor

compensation that is not included in the contract. for financial reimbursement 18
because the contract period has
A claims provision compensates the contractor for unanticipated occurrences or
discoveries that the contract states are the employer's responsibility.
been extended as a result of the
default of the Employer

This will include actual costs such as

preliminary cost, actual cost and profit
Loss and Expense claim of the contractor , the cost shall be
included for site maintenance ,
Loss- Loss of opportunity to make profit else ware insurance extension cost, Overhead,
financial impact, management impact
Expense – Additional cost to maintain the facilities

For more details check project finance competency

Heading in L & E Claim
and see SCL protocol edition 2017 as additional
reading ( will be provided through relevant email) ṏ Contemporary records
ṏ Prolongation of site overhead
ṏ
ṏ
Additional finance charges
Loss of productivity Q
ṏ Loss of profit
Contract Practice – Write your SOE

19
 CONTRACT PRACTICE
&
CONTRACT ADMINISTRATION

Delivered by

ASMY SHERIFF
MRICS, AIQS, LLM, CCMP, MBA, MCIOB, BSc(Eng)
Contract Practice – Delay

Under FIDIC 1999- Time bar clause

A time bar clause (also called a condition
precedent) says that the contractor can't 21
ask for more time or more money if they
don't give the required notice within the
time limit. This notice must be in line with
the contract's requirements.

Benefits of time bar clause

ȍ To alert the employer early on the cost and time impact
of the event
EXAMPLE

ȍ To know the final contract, amount likely to be incur

ȍ Not to bring unknown issues at the end of the project

period

ȍ Secure the Contractor’s entitlement

Q
In common, the purpose of this is to give certainty through delivery
rate than a surprise at final Account
Contract Practice – Delay

Delay
The term 'delay' is used in the context of construction contracts to suggest that
the works are not progressing as expected and, as a result, completion may not be 22
completed by the completion date indicated in the contract terms.

Types of delay The delay can be

ȍ Contractor’s delay
ȍ Excusable none excusable
ȍ Employer’s delay
ȍ Compensable none compensable
ȍ Neutral delay
ȍ Critical none critical
ȍ Concurrent delay - two or more
ȍ Concurrent none concurrent
delays happen at the same time or
effect felt at the same time
Contract Practice – Delay

Disruption Concurrent Delay

Interruption to the flow, continuity or sequence of Concurrent delay, or
planned work; a bringing of disorder to an activity or concurrency, is defined as a 23
project. delay event that occurs in an
overlapping fashion or
Disruption be a cause of delay, and delay may be a cause of concurrently with another
disruption. Disruption is often measured in terms of decreased
productivity or loss of efficiency.
delay event.

This may or may not have Specifically, each party of

contractual agreement (owner and
the

contractor) causes a delay either of

ȍ Delay to the completion which alone would have delayed the
ȍ Reduced productivity project’s critical path
ȍ Idle resources
ȍ Demobilization may occur
ȍ Unproductive overtime
Contract Practice – Delay

Extension of Time - adjustment of the contract completion date in defined circumstances.

Time at large
24
Because of no contractual or operable
mechanism under the terms and conditions,
Time for completion will become ‘at large’ if a
contractor has been prevented from completing
works by the contractually specified date(s). This
is mainly because of clients' actions or variations
Why we need EOT clause
ȍ Less risk so the tender price shall
be reduced
ȍ Client can instruct additional work
and execute work under same
contract
ȍ Client shall loss the chances to
apply Liquidated damage Check your contract for EOT and procedures that
ȍ Can avoid time at large to be followed by the parties
Q
Contract Practice – Delay

Extension of Time claim should provide

Contemporary records – such as but not limited to; 25
ȍ Signed RFI,
ȍ Timesheets,
ȍ Logbooks,
ȍ Labour histogram,
ȍ Productivity
ȍ Pictures,
ȍ Monthly progress records, etc.
ȍ Interim Claim
ȍ Final claim with detailed particulars
ȍ Time impact from planners
ȍ Cost related analysis –prolongation cost
Q
Contract Practice – Claims

Types of claims in construction industry

ṏ Contractual claim- breach of express term – ( EOT, Cost and Time)
26
ṏ Claims by law ( extra contractual claim) – Claims by legal consequences – change of Law

ṏ Quantum meruit claim - This expression means fair remuneration The owner of a building who has
.
been unjustly enriched by work undertaken by a builder on its property may be obliged to pay a quantum meruit for this work.

ṏ Ex-gratia claim – when no contractual provision allows for such entitlement the employer pays
because of sympathy. Ex: No clause for fluctuation buy paying out of sympathy.

Any Claim’s elements shall be divided as below

ṏ Facts /event/cause– provides contemporary records or witness
statement required
ṏ Legal basis / effect – contractual and legal provision application for this
claim
ṏ Liability/ entitlement –who is liable for the time and cost incurred.
ṏ Quantum / substantiation – quantification
Q
Contract Practice – Claims

Acceleration Claim
In general, the architect has no power to instruct the contractor to accelerate work.
The contractor’s obligation is to complete the work within the time specified. 27

Instructed Acceleration Constructive Acceleration

In other circumstances, if the employer After reviewing the amended

wants the task finished sooner, a program, if the Engineer or the
separate arrangement must be arranged, approved consultant determines
which would usually include extra that the Contractor will not meet the
money. completion date due to the
Contractor's fault, the Engineer may
The contractor may be entitled to reasonable request that the work be expedited.
remuneration on the agreed-upon basis. If the employer
authorized the instruction, the contractor is likely to be
The contractor has the right to speed the work in
successful in making a claim.
this regard in order to avoid incurring liquidated
damages.
ö Voluntary Acceleration

ö Directed Acceleration
Contract Practice – Claims

Liquidated damages (LD) /liquidated Penalty

and ascertained damages (LAD)
A sum inserted in the tender and not
A sum of money stated in a contract as the necessarily actual losses 28
damages payable in the event of a specified
breach. The sum must be a genuine pre-
estimate of the loss likely to be caused by the
breach or a lesser sum.
The genuine purpose must be to compensate the employer
Q
rather than punish the contractor. Without determination to any
existing claims from the contractor the Client cannot imply LD.
LD for sectional completion

Check the total delay as a

consequence of sectional completion
delay and calculate it with
consultation. Then make a
recommendation to the client on it
and if the Employer wishes to apply,
he shall apply or not.
Contract Practice – Notes

Entire Agreement
29
The Contract incorporates the entire agreement between the parties and replaces all
former conversations, representations, undertakings, and agreements. No other
documents can be considered as a related to the contract.
Contract Practice – Security / Guarantee

Difference between Guarantee and Bond

Default bond ( Guarantee) On demand Bonds ( bond)
30
Conditional- Contractor must first Unconditional – they don’t require any proof
commit a default under the contract of default for the employer to make demand
with proof for payment.

ö Performance guarantee ṏ Tender bonds – if the selected contract refused to

enter into the contract this will be used to call for
ö Parent company guarantee retendering
ṏ Advance payment bonds – in order to protect
and recover the paid advance payment in any critical
situation
ṏ Retention bond – if the contract wants all the
retention amount or the parties agreed to keep Retention
bond

In guarantee, the first obligation is for the contractor to fulfil its obligations.
Q
But in a bond, bank has an obligation to pay without waiting contractor’s action
Contract Practice – Security / Guarantee

Professional Indemnity Workmen's Third party liability

Insurance Compensation Insurance insurance

In order to indemnify the Protects the employer's Third-party liability

obligation for insurance is meant to 31
insured party against
negligence or error in compensation as a provide specialized
connection with the consequence of the protection against third-
professional services Contractor’s employees party claims
rendered to client . In suffering physical
construction this shall damage or death
be provided for design,
and all other
consultancy services.

If any claims related to Insurance claim

• Inform insurance company Q
• Take police reports + photos
• Prepare incident report
• Loss adjusters visit
• Submit claim with substantiations (quotations etc)
Contract Practice – Security / Guarantee

Contractor’s All Risk Insurance (CAR)

CAR insurance covers two main hazards such as property damage and third-
party injury. Property damage includes poor construction, rehabilitation 32
damage, and temporary work harm. Q

Deductible
Amount of claim not covered - Deductibles are how risk is shared between
you, the policyholder, and your insurer. This amount will be deducted from
your insurance entitlement.

What is an umbrella policy

Umbrella insurance gives you more protection if you have a big claim that
goes over the limits of your insurance. So, if you have a claim that costs SAR
2 million, but your insurance only covers SAR 1 million, an umbrella policy
can cover the other SAR 1 million. Umbrella policies can save contractors
money on large claims.
Contract Practice – Security / Guarantee

Parent company guarantee(PCG) Performance Bond

Is a form of security that may be required by Is an undertaking given by an 33
clients to protect them in the event of insurance company, bank or other
default on a contract by a contractor that is surety to indemnify the beneficiary
controlled by a parent company (or holding against the contractor’s failure to
company). perform the contract.

Advantages Disadvantage Advantage Disadvantage

ȍ No financial Cap ( ȍ Insolvency of

ȍ Independent ȍ Charges to
it is advisable to agree parent
on the cap for financial so any the developer
company may
liable) insolvency of or client
impact
group of ȍ 10% contract
ȍ No time limit company will sum only can
(until completion) not impact if be covers
no parent
ȍ No cost to the company this
ȍ Expires
practical
at
Q
developer is well useful completion
Contract Practice – Security / Guarantee

Subrogation
Right of the insurance company to sue whoever is responsible for
causing loss to the insured 34
Contract Practice – Security / Guarantee

EXAMPLE FOR PCG

35

Contractor failed to provide performance bond ( but the client wants

to continue with that contractor)
ȍ Explain the client about the risk of this failure and the benefits of performance bond
ȍ Encourage the contractor to submit performance bond
ȍ Encourage the contractor to complete 10% of work and Client can get bond Q
ȍ Suggestion to the Client to agree with the contractor to have more retention amount
ȍ Request for parent company guarantee
Contract Practice – Contract

Letter of Intent (LOI)

A document sent before entering into a contract.
It often expresses a firm intention to enter into a 36
contract, sometimes requiring work to be put in
hand. Usually, a letter of intent merely expresses an
intention to enter into a contract in the future. Q
LOI is mostly not a legally
binding documents
Advantages of LOI
If the contractor executed any
ȍ Provide breathing time for both parties to works based on the LOI and
arrange resources and fund incurred expenses, those expenses
ȍ Provide time to identify and arrange long lead to be paid to the Contractor based
and delaying items on the schedules if any attached to
ȍ While pre preparing to execute the scope this LOI.
provides time for parties to obtain authorities
approval If not, the Contractor shall be
ȍ Employer’s intention to bring the contractor to compensated based on the
site as soon as possible. Quantum merit basis
Contract Practice – Advance payment

Advance payment
Generally, there is a negative cash flow for most part of the project, reduce finance
cost to Contractor If the employer and the contractor agree that the employer should 37
make an advance payment to the contractor, the amount agreed upon and the date for
payment must be included in the contract's appendix, together with a schedule
outlining the times and amounts of repayments. If a bond is necessary, one is
available.

For this process before issue AP, the CA should make sure that

ṏ Signing a promissory note (LOA) or a contract.

ṏ If needed, the Employer receives performance assurance from an accredited
institution in accordance with approved wording.
ṏ AP Bond, if necessary, is specified as shown above.
ṏ The Contractor is adequately deployed at the Work Site.
ṏ The applicant for AP is Contractor.
Q
Contract Practice – Named/Nominated Contractor

Domestic Contractor – Appointed by main contractor as per his own requirements subject
to approval
Named – Appointed by MC from the list provided by the Employer
Nominated – Appointed by the Emp but contract with MC 38
Q
When issuing nomination contract to Main Advance payment to the Nomination
contractor for any of the provisional sum contractor
provide with
ṏ Make sure that Main contractor
ṏ Nomination letter (MC)did not claim the portion of PS
ṏ Nomination subcontract's final offers within his advance payment of X%
ṏ All the tender documents issued to the ṏ If MC claimed that amount too
nomination subcontractor within its advance payment ,
ṏ Post tender clarification instruct the MC to pay accordingly
ṏ Negotiation records and MC should pay it
ṏ Discounts ṏ If MC did not claim this amount then
ṏ Drawings the relevant amount should be paid
ṏ Specifications to the MC and MC shall pay the
ṏ Any other documents
Q
relevant to the NS. For the purpose
of this the MC and Client should
Q
have supplementary agreement
Contract Practice – Interim Payment

When the client delaying interim payment

ȍ Send notice about payment clause
ȍ Continuous delay in payment – notice of 39
entitlement of any financial charges
ȍ Still delay – notice about slow rate of progress
under relevant clause
ȍ Further delay – Notify of your suspension of your
work
ȍ Finally- termination based on the contract.

Q In suspension claim should include

ȍ Subcontractor’s claim,
ȍ additional plant cost,
ȍ demobilization cost,
ȍ manpower,
ȍ Actual cost
ȍ Any abortive work
ȍ Lost
ȍ Protection to the completed work ,etc
Contract Practice – Contract

Sectional Completion / Partial Possession

40
Sectional/partial completion Partial possession

The completion of any Section for Occupation or use of any

which a separate time for completion considerable portion of the
is specified in the Contract. The Permanent Works by the Employer
Client can take beneficial of using before or after completion to the
project for its intended purpose.
Contractor still liable to complete
satisfaction of the Engineer. In
either scenario, the Contractor may
Q
the project in its entirety but entitled request, and Engineer should
to receive TOC. provide TOC.
Contract Practice – Contract

Practical completion / Substantial completion

In an ordinary lump sum contract, when the works are substantially completed so as to
be fit for the purpose ( normally at this stage the parties shall agree on the snagging 41
list or punch list)

At this stage Documentation that should be issued

to the client on certification of
ȍ The defects liability period begins practical completion might include:
ȍ The contractor’s liability for insurance
ȍ A draft building owner's manual.
will be released except any other
ȍ A building user's guide.
contractual requirements.
ȍ The health and safety file.
ȍ Liability for liquidated damages ends.
ȍ The employer’s right to deduct full
ȍ
ȍ
The building log book.
A construction stage report.
Q
retention ends.
ȍ Warranties and guarantees
ȍ Half the retention and half (50%)
ȍ Valid insurances
percentage becomes due for release
ȍ Any other documents as per the
ȍ Regular interim certificates cease to be
contract
issued
Contract Practice – Contract

Defects liability period (DLP)

A period of time after the works are completed and during which the contractor must
make good any patent or other defects. The start of the period is signaled by the date
42
on which the consultant certifies the works.

Determination / Termination
Decision or, more commonly, the bringing to an end of the contract, for example, the Q
determination of a dispute. In the context of building contracts to refer to the ending
of the contractor’s employment. In some situations, ‘termination’ is used instead of
‘determination’ but the effect is same.
Contract Practice – Contract

Force majeure Frustration

which is all The release from contractual obligations of the parties to a
circumstances contract which, as a result of events completely outside the 43
independent of the control of the contracting parties. A building contract may be frustrated
will of man, and which if Government order prohibits or restricts the work, either party cannot complete
the work .
it is not in his power At this stage all the cost shall be considered (material onsite, offsite,
to control, it is act of demobilization, permeant & Temporary work cost to the date) Frustration is
GOD not force majeure

ȍ Performance: when both parties have fulfilled their obligations under the contract, e.g. the builder has completed the
Discharge of contract

building and the employer has paid for it.

Determination /

- Release from

obligations.
contractual

ȍ Mutula Agreement: where both parties agree to treat the contract as at an end Frustration
ȍ Breach : a breach committed by either party before termination of the contract or being discharged from the contract.
ȍ Operation of law: Ex: the contract falling under the Limitation Act, bankruptcy of one party or the object of the contract
becoming illegal during its currency.
ȍ Replacement of one contract by another: (novation) usually accompanied by a change in the identity of one of the parties
ȍ Frustration
Contract Practice – Provisional Sum

44
Provisional sums;

Defined provisional sums Undefined provisional sums

The quantity and kind of work Only the amount is provided, with no
are specified and must be indication of the sort of work. It is
included in the Contractor's merely a contingency and is not to be
schedule and preliminary included in the contractor's schedule
estimates. or preliminary work.

Q
Contract Practice – Write your SOE

45
THANK YOU
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