Contract types
1. Briefly describe each of the following types of contract and discuss their application to building projects. From the list, nominate the contracts you as the builder, would utilise for the construction of the house in Project 1, contracting to ‘homeowners’. Justify your selection.
Contract types:
- Lump sum contract
- Lump sum subject to rise and fall
- Cost plus a percentage
- Project management
- Schedule of rates
- Sub-contract
2. Briefly define and explain each of the following terms in relation to the administration of a building project.
Contract terms:
- Variation
- Prime cost item
- Provisional sum
- Extension of time
- Liquidated damages
- Possession of the site
- Cooling off period
- Defects liability period
- Retention
- Progress claims
3. List and explain the five (5) essential features of a building contract
4.
1.Nominate and discuss three (3) most possible causes of breach of contract by the client which could lead to the termination of the contract.
2.Nominate and discuss three (3) most possible causes of breach of contract by you, the builder, which could lead to the termination of the contract.
5. List and describe all the possible documents that could form a building contract.
6. Select an appropriate contract for the administration of project 1 and obtain a full copy of the document. Complete the contract in readiness for it to be executed (signed) by the client.
You may select a contract from your ‘home’ State or Territory.
Detailed below is information to be used in the preparation of the contract. Where additional information is required, you should use your knowledge and initiative to include relevant information which will maintain the integrity and context of the contract for the construction of the cottage. In other words, the contract should be consistent with industry standards.
Details for completion of the contract:
Contract sum: $275,000.00
Time for completion: 26 weeks
Note: the contract can be handwritten but MUST be well presented and legible i.e. easily read, understood and present your business in a good light.
7.
In the table below, the trade breakdown for Project 1 has been given to you. These values are gross values i.e. they have the builder’s margin (nominated at 12% for this project) and GST included. You are required to complete the VALUE OF MARGIN AND GST, NET VALUE, AND % OF NET CONTRACT for each trade area.
|
TRADE AREA |
GROSS VALUE ($) |
VALUE OF MARGIN AND GST ($) |
NET VALUE ($) |
% OF CONTRACT SUM |
|
Preliminaries |
25000 |
|||
|
Excavator |
5000 |
|||
|
Concreter |
19000 |
|||
|
Bricklayer |
24000 |
|||
|
Carpenter |
43000 |
|||
|
Joiner |
15000 |
|||
|
Doors and Windows |
26000 |
|||
|
Roofer |
16000 |
|||
|
Linings/Insulation |
20000 |
|||
|
Electrician (Provisional Sum) |
24000 |
|||
|
Plumber and Drainer (Provisional sum) |
24000 |
|||
|
Tiler |
12000 |
|||
|
Painter |
10000 |
|||
|
Landscaper (Provisional sum) |
12000 |
|||
|
CONTRACT SUM |
275000 |
2. Prepare a progress claim schedule based on monthly progress claims. This schedule is required to be attached to your chosen contract and shown as the terms of payment. The schedule should be presented in table format and include a payment for the number of months the project will be running as stated in the contract under ‘Time for Completion’.
You have been given the % of work completed for each trade in each month. You are required to calculate the value complete for each trade area and the total monthly claim amount in order to calculate the monthly progress claim. Remember, the values that you will calculate for each month will be the cumulative value of the work complete for the project at that point in time.
You are also required to show retention taken from your claims, even if the contract you have chosen to use does not have a retention clause. Retention is to be taken at 10% of each progress claim until the maximum of 5% of the contract sum is reached. 50% of the retention is to be released at Practical Completion and the other 50% to be released at the end of the defects liability period (DLP). The DLP is commonly 13 weeks for a residential project.
MONTHLY PROGRESS CLAIM SCHEDULE
|
TRADE |
VALUE ($) |
MONTH 1 % COMPLETE |
MONTH 2 % COMPLETE |
MONTH 3 % COMPLETE |
MONTH 4 % COMPLETE |
MONTH 5 % COMPLETE |
MONTH 6 % COMPLETE |
MONTH 7 % COMPLETE |
|
Preliminaries |
25000 |
35 |
45 |
60 |
75 |
90 |
95 |
100 |
|
Excavator |
5000 |
100 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Concreter |
19000 |
60 |
100 |
100 |
100 |
100 |
100 |
100 |
|
Bricklayer |
24000 |
20 |
70 |
100 |
100 |
100 |
100 |
100 |
|
Carpenter |
43000 |
0 |
30 |
75 |
100 |
100 |
100 |
100 |
|
Joiner |
15000 |
0 |
0 |
0 |
20 |
50 |
95 |
100 |
|
Doors and Windows |
26000 |
10 |
60 |
80 |
100 |
100 |
100 |
100 |
|
Roofer |
16000 |
0 |
0 |
70 |
95 |
100 |
100 |
100 |
|
Linings/Insulation |
20000 |
5 |
5 |
10 |
60 |
100 |
100 |
100 |
|
Electrician (Provisional Sum) |
24000 |
10 |
18 |
28 |
60 |
75 |
85 |
100 |
|
Plumber and Drainer (Provisional sum) |
24000 |
0 |
18 |
18 |
60 |
75 |
85 |
100 |
|
Tiler |
12000 |
0 |
0 |
0 |
15 |
50 |
100 |
100 |
|
Painter |
10000 |
0 |
0 |
0 |
0 |
30 |
75 |
100 |
|
Landscaper (Provisional sum) |
12000 |
0 |
0 |
0 |
0 |
0 |
10 |
100 |
|
CONTRACT SUM |
275000 |
Contract types
1. Contract types:
Lump sum contract – this contract involves fixed price of all related construction activities. It is only preferred when clear scope of work is defined with defined schedule.
Lump sum subject to rise and fall – this is a contract with fixed price but the specific items are subject to rise and fall to allow increases and decreases in the cost factors to enable sharing of the cost between the builders and clients.
Cost plus a percentage – the contract involves payment of the costs, purchases or any expenses which are directly generated from the construction activities. Usually have specific information on pre-negotiated amount.
Project management – is a contract signed to deal with management of the specific items of the related project.
Schedule of rates – is a contract which is prepared in relation to the contract drawings and specification for the materials and rates.
Sub-contract – this is a contract entered between the main contractor and another contractor. The other contractor (sub contractor) is able to carry some specific works meant for the main contractor.
2. Contract terms:
Variation – this is simply an alteration to the scope of work and may include addition, subtraction or omission of some entities in the contract and work scope.
Prime cost item – this is the set budget for an item. It is usually the budget set for purchasing or carrying out specific tasks.
Provisional sum – it is an estimated sum in the builder’s contract specifying the estimated sum to complete some task. It is provided where the builder is unable to provide the exact sum for the work required
Extension of time – this is the additional time provided once the initial time for completing the specific tasks elapses.
Liquidated damages – this is the cost of damages which the contractor is able to pay the client for breach of contract such as failure to honour practical completion of project.
Possession of the site-this is a state under which the contractor is given exclusive ownership of site until practical completion and handover are done.
Cooling off period – these are five business days provided to the client to review or change his r her mind on the details of building contract.
Defects liability period – is the timeline set aside after the construction of a structure whereby the contractor can return to site to rectify any defects. It is usually 12 months.
Contract terms
Retention – this the amount which is deducted from the payment claims filed by the contractor and held until the completion of work is done. Usually 5% of the total contract sum.
Progress claims – this is the request of payment of partial work which has been done by the contractor.
3.Full Name, Address, and Signatures of Both Parties- building contracts are usually between real parties and they are required to provide their clear information. The contract is usually a commitment where it is biding to the parties who have signed it
Scope of work – the contract must be able to provide the details of what need to be done and to what level it should be done. This section includes the services to be provided, material description, their quality, grade, schedule of work and all details relating to the building construction.
Project costs and payment terms – this section is able to offer the monetary compensation which will be provided once the work is done. It is able to provide the duration under which the compensation will be done and terms and conditions which payment should be requested.
Schedule of work – this part of the contract provides the duration of work. It has the start date and completion dates. In addition, the schedule of work shows when specific activities should be completed to avoid delays.
Authority – these are the personnel who are responsible in making decisions on the building construction. Different people have different roles and their responsibilities and decisions they can make are stated in this section.
4.
1
Adding scope of work apart from what is stated in the contract documents. This is where the client is not willing to pay for the additional scope which is included while executing the works
Failure to honour payment agreement. This is when the client fails to honour the provisional payment agreement as stated on the contract documents
Failure for the builder to allow access to the site may lead to breach of site ownership under the contract and may lead to termination of the contract.
2
Poor work executed at the beginning of the work. Failure to follow the work scope and standards may lead to contract breach.
Abandoning the site, which may lead to delays, is a breach of contract which may lead to contract termination.
Employing others to carry out the work without agreement with the client is a breach of contract and may lead to termination of the contract.
5.
Statement of work – this is a document having the scope of work and useful during bidding process and construction stage. It has the amount of work to be done.
Essential features of a building contract
Contract agreement forms – these documents shows that the different parties have an agreement and contract.
General conditions of contract – this document has the obligations on the execution of work for each party.
Special conditions – is an extension of the contract general conditions. Has special instructions which are needed on the contract.
Bill of Quantities (BoQ) – it is a document composing of trades and materials with their costs.
Drawings – these are documents having the job to be done. Should be latest and be received by the contractor before the work commences.
Construction schedule – is a document showing the timeline the different activities should be completed. It also shows the progress of work at different period.
List of common types of insurances – these are documents having the insurances taken to cover different risks in the construction process.
Shop drawings – these are drawings, diagrams, illustrations and schedules provided to aid the completion of work.
6.
CONTRACT TO BUILD A HOUSE AT ST. JAMES STREET
- Contract Parties
Now comes Jameson Construction Inl. of 10890 and Claire Mayweather of 23090 to hereby agree to build a house on property located at St. James street plot 2451 and legally described as JCB-0078-2018.
Contract Documents
The terms of this contract include all the documents specifically listed below, and constitute the entire terms of the agreement between the parties. The terms of this contract shall prevail over any conflicting provision in the documents incorporated by reference.
- Architectural Plans and Drawings dated 17/11/2017with number 40 of pages is hereby incorporated into this document.
- Specifications dated 10/12/2017 with number of 22 pages is hereby incorporated into this document.
- Schedule of Allowance Items dated 23/01/2018 with number 15 of pages is hereby incorporated into this document.
- The Bill of Quantities dated 29/1/2018 with number 28 of pages is hereby incorporated into this document.
Completion Time
Assuming all conditions are satisfied and weather permits, the work to be performed under the contract shall be substantially completed no later than 26 weeks after the work commences. The work shall commence within 18 days after the permits necessary to start work have been issued, the buyer has supplied the builder with a written notice of financing as described in paragraph V. Financing, and the buyer shall have supplied the builder with a correct statement of the recorded legal title of the property and the buyer’s interest in the property.
Any time lost by reason of changes to the contract or changes in plans by the buyer, other acts of the buyer, strikes, weather conditions not reasonably anticipated, or any other condition not within the builder’s control shall be added to the specified time for completion. For any delays which are not the builder’s responsibility, the contract price shall increase by any increase in the builder’s costs caused by the delay.
Causes of breach of contract
A claim for an increase in time for the performance of the contract, or an increase in the contract cost shall be made within 7 days after the builder first recognizes the condition giving rise to the claim.
Financing
This contract is contingent upon the buyer obtaining a construction loan in the amount of $275,000.00 dollars. All fees and expenses of obtaining a loan shall be borne by the buyer. The builder is not required to begin construction until the buyer provides the builder with written notice from the lender confirming the loan.
CONTRACT: FIXED PRICE CONTRACT
The buyer agrees to pay a total price of $275,000.00 dollars to the builder for construction of the house, and the builder agrees to provide all the labor, materials, equipment, tools, and other services necessary to construct the house.
Upon the signing of this contract, the buyer agrees to pay $27,500.00 dollars to the builder as a deposit. The buyer will make the 7 interim payments.
The buyer agrees to make a final payment in the amount of $12,000.00 within days of the buyer’s final inspection and acceptance of the property. The buyer is not entitled to possession until after final payment.
Note: the contract can be handwritten but MUST be well presented and legible i.e. easily read, understood and present your business in a good light.
|
TRADE AREA |
GROSS VALUE ($) |
VALUE OF MARGIN AND GST ($) |
NET VALUE ($) |
% OF CONTRACT SUM |
|
Preliminaries |
25000 |
3000 |
22000 |
8 |
|
Excavator |
5000 |
600 |
4400 |
0.16 |
|
Concreter |
19000 |
2280 |
16720 |
6.08 |
|
Bricklayer |
24000 |
2880 |
21120 |
7.68 |
|
Carpenter |
43000 |
5160 |
37840 |
13.76 |
|
Joiner |
15000 |
1800 |
13200 |
4.8 |
|
Doors and Windows |
26000 |
3120 |
22880 |
8.32 |
|
Roofer |
16000 |
1920 |
14080 |
5.12 |
|
Linings/Insulation |
20000 |
2400 |
17600 |
6.4 |
|
Electrician (Provisional Sum) |
24000 |
2880 |
21120 |
7.68 |
|
Plumber and Drainer (Provisional sum) |
24000 |
2880 |
21120 |
7.68 |
|
Tiler |
12000 |
1440 |
10560 |
3.84 |
|
Painter |
10000 |
1200 |
8800 |
3.2 |
|
Landscaper (Provisional sum) |
12000 |
1440 |
10560 |
3.84 |
|
CONTRACT SUM |
275000 |
33000 |
242000 |
88 |
PROJECT TITLE CONTRACT NO……………
Monthly progress claim No…001 FOR MONTH/YEAR 02/2018
CONTRACTOR NAME
PAYMENT AMOUNT
Completed Works $
Add preliminary amount 8,750.00
Add own works completed excavator 5,000.00
Add conreter works completed works 11,400.00
Add bricklayer work 4,800.00
Add doors and windows completed work 2,600.00
Add linings/insulation completed work 1,000.00
Add electrician completed work 2,400.00
Total claim amount 35,950.00
Deduct 10% retention amount 3,595.00
Claim amount for payment 32,355.00
Certified……………… Submitted by…………….
Title/Position…………. Title/Position…………….
Date…………………… Date……………………..
PROJECT TITLE CONTRACT NO……………
Monthly progress claim No…002 FOR MONTH/YEAR 03/2018
CONTRACTOR NAME
PAYMENT AMOUNT
Completed Works $
Add preliminary amount 2,500.00
Add own works completed excavator 0.00
Add conreter works completed works 7,600.00
Add bricklayer work 12,000.00
Add carpenter works 12,900.00
Add doors and windows completed work 13,000.00
Add linings/insulation completed work 0.00
Add electrician completed work 1,920.00
Add plumber and drainer 4,320.00
Total claim amount 54,240.00
Deduct 10% retention amount 5,424.00
Claim amount for payment 48,816.00
Certified……………… Submitted by…………….
Title/Position…………. Title/Position…………….
Date…………………… Date…
PROJECT TITLE CONTRACT NO……………
Possible documents forming a building contract
Monthly progress claim No…003 FOR MONTH/YEAR 04/2018
CONTRACTOR NAME
PAYMENT AMOUNT
Completed Works $
Add preliminary amount 3,750.00
Add own works completed excavator 0.00
Add conreter works completed works 0.00
Add bricklayer work 0.00
Add carpenter works 17,200.00
Add doors and windows completed work 5,200.00
Add roofer work 11,200.00
Add linings/insulation completed work 1,000.00
Add electrician completed work 2,400.00
Add plumber and drainer 0.00
Total claim amount 40,750.00
Deduct 10% retention amount 4,075.00
Claim amount for payment 36,675.00
Certified……………… Submitted by…………….
Title/Position…………. Title/Position…………….
Date…………………… Date……………………..
PROJECT TITLE CONTRACT NO……………
Monthly progress claim No…004 FOR MONTH/YEAR 05/2018
CONTRACTOR NAME
PAYMENT AMOUNT
Completed Works $
Add preliminary amount 3,750.00
Add own works completed excavator 0.00
Add conreter works completed works 0.00
Add bricklayer work 0.00
Add carpenter works 0.00
Add joiner works 3,000.00
Add doors and windows completed work 5,200.00
Add roofer work 4,000.00
Add linings/insulation completed work 10,000.00
Add electrician completed work 7,680.00
Add plumber and drainer 10,080.00
Add tiler completed work 1,800.00
Total claim amount 45,510.00
Deduct remaining retention amount 656.00
Claim amount for payment 44,854.00
Certified……………… Submitted by…………….
Title/Position…………. Title/Position…………….
Date…………………… Date……………………..
PROJECT TITLE CONTRACT NO……………
Monthly progress claim No…005 FOR MONTH/YEAR 06/2018
CONTRACTOR NAME
PAYMENT AMOUNT
Completed Works $
Add preliminary amount 3,750.00
Add own works completed excavator 0.00
Add conreter works completed works 0.00
Add bricklayer work 0.00
Add carpenter works 0.00
Add joiner works 4,500.00
Add doors and windows completed work 0.00
Add roofer work 800.00
Add linings/insulation completed work 8,000.00
Add electrician completed work 3,600.00
Add plumber and drainer 3,600.00
Add tiler completed work 4,200.00
Add painters completed work 3,000.00
Total claim amount 31,450.00
Certified……………… Submitted by…………….
Title/Position…………. Title/Position…………….
Date…………………… Date……………………..
PROJECT TITLE CONTRACT NO……………
Monthly progress claim No…006 FOR MONTH/YEAR 07/2018
CONTRACTOR NAME
PAYMENT AMOUNT
Completed Works $
Add preliminary amount 1,250.00
Add own works completed excavator 0.00
Add conreter works completed works 0.00
Add bricklayer work 0.00
Add carpenter works 0.00
Add joiner works 6,750.00
Add doors and windows completed work 0.00
Add roofer work 0.00
Add linings/insulation completed work 0.00
Add electrician completed work 2,400.00
Add plumber and drainer 2,400.00
Add tiler completed work 6,000.00
Add painters completed work 4,500.00
Add landscapers sum 1,200.00
Total claim amount 24,500.00
Certified……………… Submitted by…………….
Title/Position…………. Title/Position…………….
Date…………………… Date……………………..
PROJECT TITLE CONTRACT NO……………
Monthly progress claim No…007 FOR MONTH/YEAR 08/2018
CONTRACTOR NAME
PAYMENT AMOUNT
Completed Works $
Add preliminary amount 1,250.00
Add own works completed excavator 0.00
Add conreter works completed works 0.00
Add bricklayer work 0.00
Add carpenter works 0.00
Add joiner works 750.00
Add doors and windows completed work 0.00
Add roofer work 0.00
Add linings/insulation completed work 0.00
Add electrician completed work 3,600.00
Add plumber and drainer 3,600.00
Add tiler completed work 0.00
Add painters completed work 1,500.00
Add landscapers sum 10,800.00
Total claim amount 21,500.00
Add 5% retention amount 6,875.00
Claim amount for payment 28,375.00
Certified……………… Submitted by…………….
Title/Position…………. Title/Position…………….
Date…………………… Date……………………..
References
Brooks, Hugh, and J.P Anderson. Encyclopedia of Building and Construction Terms: The Language of the Construction Industry and Directory of Resources. (Newport Beach, CA: HBA publications, 2017).
Federal Publication Seminars., & National Contract Management Association (U.S.). Contract types. (United States: Federal Publication Seminars, 2010).
Jeter, Derek, and Paul Mantell. The Contract.(New York, NY: Jeter Children's, Simon & Schuster Books for Young Readers, 2014).
Manuel, Kate M. Contract Types: A Legal Overview. (Washington, DC: Congressional Research Service, Library of Congress, 2012).
Kate Manuel, M. Contract Types: A Legal Overview. (Washington, DC: Congressional Research Service, Library of Congress, 2012). 102
Hugh, Brooks, and P Anderson Joseph. Encyclopedia of Building and Construction Terms: The Language of the Construction Industry and Directory of Resources. (Newport Beach, CA: HBA publications, 2017) 59-83
Federal Publication Seminars., & National Contract Management Association (U.S.). Contract types. (United States: Federal Publication Seminars, 2010) 39-52
Derek, Jeter, and Mantell Paul. The Contract.(New York, NY: Jeter Children's, Simon & Schuster Books for Young Readers, 2014) 23-89
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