Unit 4: Principle of Contract Administration under JCT 05 SBC/Q

Lecture by:

Mr. Tee

The “Traditional Contract” separates construction from design.

A construction contract will be

defined as a contract for carrying out of construction operations

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Parties in a building contract

Numbers & identity of persons varies depending on nature & complexity of project

Employer (The term used in JCT)

Architect (Agent of Employer)

Quantity Surveyor

Engineer (Civil & Structural)

Specialist consultant (M&E)

Project Manager

Clerks of Works

Contractor / Subcontractors (DSC, NSC)

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Types of construction contracts :-

Lump sum contract (pre-agreed price, adjustment by variation of works & cost fluctuations)

Measurement contract (measurement of work done upon completion using Schedule of Rates)

Cost reimbursed contract – cost plus fixed fee, cost plus variable fee, cost plus percentage) – fee cover profit & management fee

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Types of construction contracts :-

Design and build contract (Contractor involve in both design & build)

Package deals (design, build functions, may take on also architect, engineer, surveyor’s roles)

Turnkey contracts –similar to design & build, may even include procurement of site, interior furnishing, fittings, furniture & equipment

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Types of construction contracts :-

Management contract – a project manager coordinate and organise the works (commonly for large projects) – there are 2 different approaches :

1. Management contracting – Employer engage a Management Contractor to co-ordinate the completion of a series of work packages

2. Construction management – Employer engage a series of Works Contractors (Employer’s Direct Contractors) who are responsible for coordinating and managing the completion of a series of work packages

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Types of construction contracts :-

Joint venture or partnering – can be a landowner & a developer; two or more parties

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JCT 05 standard form of building contract (JCT : Joint Contracts Tribunal)

Current edition of the standard conditions of contract is JCT05

SBCC (Scottish Building Contract Committee) updates after each JCT editions

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Contract Structure – JCT (Please refer to Appendix 3.1)

Articles of agreement

Recitals

Articles

Contract Particulars

Attestation

Conditions

Schedules

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Principle of Contract Administration

Letters of intent – document expresses an intention to enter a legal relationship subject to the subsequent resolution of a condition.

Such letters are intended to fall short of establishing a legal relationship and at the same time provide comfort to the recipient

Under Scots law – is a legally enforceable

promise; but not under English law

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Principle of Contract Administration

Employers’ obligations

Implied Obligations to Contractor Not to hinder/prevent the

Contractor’s progress of work To cooperate with the Contractor

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Employers’ obligations

Expressed Obligations to Contractor 1. Duties require the client to perform certain actions: To describe the work scope in the contract (Sixth

Recital) To pay the contract sum (Article 2) To give site possession to Contractor (Clause 2.4) To provide contract documents for reference by the

Contractor (Clause 2.8.1) Not to divulge any rates or prices in the Bills, except

for contract purposes (Clause 2.8.4)

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Employers’ obligations

2. Rights endow the client with the

expectation that other parties will perform tasks for them:

To receive design proposals from the Contractor (for Contractor’s Design Portion) (Ninth Recital)

To refer dispute to adjudication (Article 7) To own materials sorted on & off site

before installation to the building structure (Clause 2.24 & 2.25)

To retain a portion of the contract sum until Defects Liability Period is ended (Clause 4.18)

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Employers’ obligations

Expressed Obligations to Contractor 3. Liabilities are placed on the client by the

contract and expose them to risks like: Liability arising from the omission of

relevant information from the contract documents (Clause 2.29.6)

Liability arising from inadequate descriptions of their requirements (Clause 2.13.2)

Liability arising from failure to pay the Contractor following earlier withholding on money from interim valuations (Clause 4.14)

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Employers’ obligations Possession of the site Date of possession (in contract particulars) Otherwise possession must be given within a

reasonable time Delay in giving possession, employer must grant EOT,

otherwise unable to apply LD Full possession, unless stated otherwise Employer has no right to access to site after site

possession by Contractor

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Employers’ obligations Possession of the site

Other employer’s direct contractors’ access to site is subject to consent of the contractor

At practical completion, the employer regains possession, contractor ceases to have possession

Sectional completion

Contract termination

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Contract administration Employer to administer the site to ensure that the contractor

can meet their obligations under the contract

SBCC requires the appointment of an architect or contract administrator, together with a quantity surveyor

Architect is an agent of the Employer Employer owes a duty to ensure that the architect executes his

obligations properly

Employer is under an implied obligation not to interfere with the architect’s certification process; otherwise may be open to a claim for damages

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Agents under the contract In JCT 2005, Architect, Clerk of Works & Quantity

Surveyors are Agents of the Employer

An agent is a person exercising contractual powers

on behalf of someone else Employer is bound by the act of his Agents whom

he employed

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The Architect as an agent The architect as the Employer’s agent, has 4 duties and

responsibilities :- 1. He may not profit from his appointment other than by

his fee 2. He may not delegate except as defined by the contract 3. He must act in his principal’s interest, and does not

enjoy the protection given by an arbitrator 4. He owes a duty of care, i.e. To use the reasonable care

& skill of such persons of ordinary competence measured by the professional standard of the time.

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Architect also owes a duty of care to the contractor (Headley Byrne & Co Ltd v Heller & Partners Ltd, 1964 – If an architect gives information which proves false and negligent and the contractor suffers loss, then the contractor can sue the architect for that loss

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Architect or Contract Administrator? The Architect has 2 responsibilities on construction projects, namely: 1) To fully develop the design and provide solution to meet the

Employer’s needs

2) After the Contractor has been appointed, the Architect has to administer the contract to ensure that the design is successfully constructed

This administration role was traditionally allocated to the Architect

in previous versions of the JCT standard forms of contract. However, more recent editions have introduced the possibility of a non-architect to assume the “contract administrator” role. For examples: the QS, PM, CM or any suitable experience organisation.

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Architect’s instructions

- Power of the architect to issue instructions

May not vary the contract conditions, or the appendix

May not vary the scope of the works (from constructing 1000m2 to 2000m2 of office block)

May not instruct beyond the scope of the works – refer to the site boundary and the nature of the works defined

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Can the architect issue instructions for variations after the issue of the certificate of practical completion?

Clause 2.38 of JCT05 gives the right to issue for rectification of material and workmanship defects

Unclear on design defects

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Clause 3.13 gives the right to issue instructions within the meaning of the clauses of the contract; contractor may request the architect to specify in writing, which provision of the contract conditions

The architect shall comply immediately

Contractor may make a reasonable objection against

an architect’s instruction if it is outside the conditions of contract

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All instructions issued by the architect shall be in writing – Clause 3.12.1

Oral instruction will be of no immediate effect; must

be confirmed by architect in writing within 7 days, or confirmed by contractor within 7 days. If not disputed by architect within 7 days, contractor’s confirmation will become an architect’s instruction

If Contractor complies with an oral instruction, architect may confirm in writing at any time prior to the issue of the final certificate

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Clerk-of-Works as an agent

Functions defined by the contract

(Clause 3.4)

Appointment of a Clerk-of-Works by the Employer to inspect the works

Has no power to issue instructions to the contractor

May issue “directions” to the contractor

The directions has no effect to the contract, unless it is followed up and confirmed by an architect’s instruction within 2 days

Under Clause 5.7, the Clerk-of-Works may be appointed as the architect’s authorised representative to sign daywork sheets

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Information and instructions

JCT 05 Clause 2.8 provides that the Architect has to issue further drawings, information, details to enable the contractor to carry out and complete the Works

Otherwise entitles contractor to Extension of Time (Clause 2.26 to 2.29)

May be construed affecting progress of work, contractor is entitled to claim for loss and expense (Clause 4.23 to 4.26)

If employer fails to provide information and drawings to proceed, may entitle the contractor to rescind the contract

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Variations

Employer’s right to instruct variations – contractor is obliged to carry out

- employer is obligated to pay

- variations can be given any time up to completion of the works, subject to appropriate adjustments to the Completion Date and the Contract Sum (Clause 2.28 and 4.3 respectively)

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In JCT 05, the meanings of variation are :-

1. alteration or modification of design, quality or quantity of the works

2. employer imposing obligation or restriction as the four (4) defined matters :

Access to the site or use of specific parts of the site

Limitation of working space

Limitation of working hours

Execution/completion of the works in any specific order

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Other meanings of variation :-

1. to expand provisional sums in the contract

2. to expand provisional sums in any nominated sub-contract

Contractor is entitled to EOT if work is delayed by such instructions

Contractor is entitled to payment for the work carried out

Employer cannot vary a contract to the extent it alters the fundamental nature of the contract work

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Employer’s other obligations

To make payment for the works executed by the contractor under the contract

Payment is made upon the issue of certificates by the architect

Obligation to insure in respect of health and safety

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The Contractor’s obligations

Completing the Works

completing the works, in a good and workmanlike manner using skill and care to be expected of a builder of ordinary competence, in accordance with the contract documents (Clauses 2.1, 2.3 & 3.6)

Hand over to the Employer (Clause 2.38)

Remedy any defects, shrinkage or other faults during Defects Liability Period (Clause 2.39)

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The Contractor’s obligations

Quality of the Works

An implied term that completing the works to be fit for purpose

For remedying any defects, shrinkage or other faults during DLP

Obliged to use materials and workmanship of the quality and standard specified in the contract documents (Clauses 2.1 and 2.3)

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The Contractor’s obligations

Defective Works

Liable for latent defects for the duration of the specified period

During construction, have to complied with instruction to remove from the site any work, materials or goods not complying with the contract (Clause 3.18)

After practical completion, to make good the defects during Defects Liability Period (Clauses 2.38 & 2.39)

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The Contractor’s obligations

Progress of the Works

Must complete the works by a specified time, on or before completion date

Must use their best to endeavour and prevent delay in the progress

To prevent completion of the works being delayed

To do all may reasonably be required to the satisfaction of the architect to proceed and complete the works before the completion date

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The Contractor’s obligations

Insurance and indemnity – the contractor is obliged to take out and maintain insurance against personal injury or death in respect of damage to property

Health and safety – obligation to provide competent staff, adequate material, proper system of effective supervision, a safe place of work

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