1415 H24MPP Lecture 11 - Conditions of Contract

7/25/2019 1415 H24MPP Lecture 11 - Conditions of Contract

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Ioannes Tang

Senior University Teaching Fellow

Department of Civil Engineering

Faculty of Engineering

Room: B1C16, Telephone: 03-8924 8346

Email: [email protected]

Based on original notes by

W H Askew

H24MPP Lecture 11

Conditions of Contract


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Introduction

Construction projects involve a number of companies

(parties) doing work they are responsible for

Links between parties identify the roles and

responsibilities and have a legal context

Explicit links are contracts or agreements

Some legal rights exist when no contract exists

Contracts often use standard clauses and terms

expressed in standard forms of contract

The contract must fit into the prevailing legal system

We will look at two standard contracts

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Parties to Contract

The key parties to a main construction

contract are:

client (or Employer)

contractor

Other parties may be named, or exist in

other contracts:

Consultants (or Engineer)

sub-contractors

suppliers

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Key Topics in Clauses

Roles and responsibilities (relationships)

Procedures for execution of project

Dealing with money and time

Dealing with changes

Dealing with disputes and their avoidance

RISK ALLOCATION

Contracts evolve and create/follow trends. Consider

the following clause from 80-100 years ago:

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Example of Early Contract Clause

In the event of anything reasonably necessary or proper to the

due and complete performance of the work (of which the

Engineer shall be the sole judge) being omitted to be shown or

describedin the said drawings or schedules the contractor shall

notwithstanding execute and provide all such omitted worksand things as if they had been severally shown and described

without any extra charge and according to the directions of the

Engineer and to his satisfaction.

What are the concerns?

Who carries the risks?

Would it be a good clause now?

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Conditions of Contract I

Particular clauses will be examined in:

New Engineering ContractEngineering and

Construction Contract Edition 3 (NEC ECC)

ICE Conditions of Contract (7th ed) (ICE 7)

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Conditions of Contract II

Others include:

JCT,

FIDIC,

Design and Construct,

Small Works,

Subcontracts,

Framework contracts,

Terms of engagement

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ICE7 Clauses

71 specific clauses

5-7 Contract documents

8-35 General obligations

12 Adverse physical conditions and artificial obstructions

14 Programme to be furnished 17 Setting out

32 Fossils etc

41-46 Commencement time and delays

51-53 Alterations additions and omissions

55-57 Measurement system

60-61 Certification and payment

66 Avoidance and settlement of disputes

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13 - Work to be to satisfaction of

Engineer

13(1)

Save insofar as it is legally or physically impossible

Contractor shall construct and complete in strict

accordance with the Contract to the satisfaction of the

Engineer (whether mentioned in the Contract or not).

13(3) covers Delay and extra cost and in addition to the

above refers to clauses 5, 44, 51, 53, 60

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44 - Extensions of time

Deals with possible extensions of time for:

any variation ordered under clause 51(1)

any increased quantities under clause 51(4)

any cause of delay in any of the clauses

exceptional adverse weather conditions

any delay impediment prevention or default by

the Employer other special circumstances of any kind

whatsoever which may occur

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51-53Variations

51 - allows for any variation necessary with a

variation defined as additions, omissions,

substitutions, alterations to quality, form,

character, kind, position, dimension, level orline

52 - covers the valuation of ordered variations

53 - covers procedure for additional payments

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12 - Adverse physical conditions and

artificial obstructions

excludes weather conditions and conditions

due to weather conditions

acknowledges risks with could not in his

opinion reasonably have been foreseen by anexperienced contractor

and shall as early as practicable give written

notice

allows consideration with if the Contractor

intends to make any claim for additional

payment or extension of time arising from such

condition 12


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66Disputes

66(2) - If the Contractor or Employer are dissatisfied

with anything the matter shall be referred to the

Engineer who shall notify his decision to the

Employer and Contractor within one month

66(3)&(4) - mentions decision of Engineer and/or

adjudicator

66(5) - covers conciliation procedure

66(6)-(8) - cover adjudication procedure66(7)-(11) - covers arbitration procedure

THIS IS A KEY RISK SHARING CLAUSE13


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ICE7 and NEC3 I

Note the fragmented structure of ICE 7

Many clauses refer to clauses 44, 51-53 which

allow consideration of extra time and money

Clauses refer to claims and disputes

Users attitude can be adversarial with disputes

arising too easily and taking too long to resolve

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ICE7 and NEC3 II

Nevertheless it has been the contract of choice

for many years and forms the basis of the

international FIDIC conditions

It has been extended to include a partneringaddendum

It is promoted by ICE and other

professional/industry groups

So too is its main rival and now arguably

preferred NEC3

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New Engineering Contract

Engineering and Construction Contract

Has a general spirit of co-operation

expressed in its aim to stimulate good

management and cover a wide variety of

work

It has many parts which can be selected

and bolted together as appropriate, whilst

being clear and simple to understand

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NEC3 Structure

Contains core clauses 1-9

And 6 option clauses A-F

And 18 secondary option clauses X-Z (X1-7, X12-18, X20,

Y(UK)2, Y(UK)3, Z

And dispute resolution clauses W1, W2 It includes a partnering option (X12)

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Choosing NEC3

Firstly choose either:

A priced contract (with activity schedule or bill of

quantities) (A or B)

A target contract (with activity schedule or bill ofquantities) (C or D)

A cost reimbursable contract (E)

A management contract (F)

Also choose either: Dispute Resolution Option (W1 or W2)

Then choose secondary options X (more

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NEC3 Core Clauses

1. General

2. Contractors main responsibilities

3. Time

4. Testing and defects

5. Payment

6. Compensation events

7. Title

8. Risks and insurance

9. Termination

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NEC3

Clause 1

10.1 shall act in a spirit of mutual trust and cooperation

States responsibilities for:

Employer

Contractor

Project Manager

SupervisorAdjudicator

[ICE 7 mentions only Employer, Contractor, Engineer,

Engineers Representative, Nominated Subcontractor]

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NEC3

Clause 3

31 Programme to be submitted [cf. ICE 7 clause 14]

Clause 550 Assessment of amount due [cf. ICE 7 clause 52, 55-57]

51 Payment of amount due [cf. ICE 7 clause 53, 60]

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NEC3

Clause 6

60 Compensation events [cf. several ICE 7 clauses]

61 Notification [cf. ICE 7 clauses 51-53]

62 Price quotations [ditto]63 Assessing [ditto]

64 Project managers assessments[ditto]

65 Implementing [ditto]

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Clause 60.1 Compensation events

1. Changes to the Works information

2. Revised site accessibility

3. Late provision of information

4. Timing changes5. Employer not working to times

6. Delay responding

7. Found valuable/historical objects

8. Changed decision

9. Withholding acceptance

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Clause 60.1 Compensation events

10. Defects not found

11. Delay caused by test/inspection

12. Adverse physical conditions

13. Unusual weather14. Employers risk event

15. Early take-over of works

16. Materials facilities not provided

17. Correction to assumption

18. Breach of contract

19. Unpreventable/unforeseeable event24


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Clause 60.1(12) Adverse physical

conditions

The Contractor encounters physical conditions which

Are within the Site

Are not weather conditions

An experienced contractor would have judged at theContract Date to have such a small chance of occurring

that it would have been unreasonable for him to have

allowed for them.

Only the difference between the physical conditions

encountered and those for which it would have been

reasonable to have allowed is taken into account in

assessing a compensation event.

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Clause 60.1(13) Unusual Weather

A weather measurement is recorded

within a calendar month

before the Completion Date for the whole of the works

and at the place stated in the Contract Data

the value of which, by comparison with the weather

data, is shown to occur on average less frequently than

once in ten years. Only the difference between the weather measurement

and the weather which the weather data show to occur

on average less frequently than once in ten years is

taken into account in assessing a compensation event.26

Documents

1415 H24MPP Lecture 11 - Conditions of Contract