Contractual Risk Assessment and Scenario-Based Assignment Question

Contractual Risk Assessment

1. Contractual risk assessment

 

Select two construction contract forms. You can use either:

 

i. Standard contract forms; or

ii. Bespoke contract forms; or

iii. A combination of standard contract form and bespoke contract form.

 

Perform contractual risk assessments on clauses that may relate to the effects of COVID-19 in construction projects. Compare the risk distributions between both the client and the contractor in both forms.

 

You MUST cite the number and the title of the clauses that you referred to in your risk assessment. Please do not copy and paste the whole clause in your assessment.

 

You MUST attach the assessed clauses in the appendix. Minimum word count (excluding references) = 2,000 words.
[50 marks]

 

 

2. Scenario-based assignment question

 

Scenario:

 

This is a project to construct a hotel in Auckland, New Zealand. The contract is a lump sum traditional. Below are the chronology of events in this scenario.

On 15 April 2020, the contractor issued a default notice to the client for two pending payments with a total amount of $300,000.

 

 

According to clause 14.3.3 of the contract, the client must rectify this default within 10 working days, and failure to rectify this will give the contractor a right to request the contract administrator to suspend the progress of the whole works.

 

Clause 14.3.3 of the contract also provides that following such suspension, the contractor would be entitled to terminate the contract by giving notice in writing to the client.

 

To preclude the contractor from invoking their rights under clause 14.3.3, the client must make the payments before 30 April 2019. Unfortunately, neither the client nor the contract administrator responded to the default notice, and no payment was made until 30 April 2019.

 

On 25 April 2020, the contract administrator issued a work suspension order to the contractor on the basis of site safety breaches. The contractor was not operating on the site in any event, but the contract administrator advised that “all work on site other than that required to make the site safe is suspended”. The suspension was to remain in place “until we are satisfied that you can provide a safe working environment”.

 

On 30 April 2020 at 5.00 pm, the contractor wrote an email to the contract administrator requesting the work to be suspended following clause 14.3.3.

 

On 1 May 2020, at 10.30 am, the contractor emailed the contract administrator about their intention to proceed with contract termination. A termination notice was attached to an email shortly after. At 3.45 pm the same day, the client paid the outstanding amounts of $300,000 to the contractor.

 

On 15 May 2020, the client challenged the validity of the contractor’s termination notice and alleged that the contractor had abandoned the contract by persistently, flagrantly or wilfully neglected to carry out their obligations under the contract.

 

On 30 May 2020, the client terminated the contract on the grounds of breach of contract by the contractor and sought to call on their Performance Bond.

 

Based on the facts above, discuss the issues in the administration of this contract in respect of:

1. The effect of the work suspension order by the contract administrator;

2. The validity of actions and termination by the contractor;

3. The validity of actions and termination by the client.

4. Propose actions or best-practices that could have been employed by the contract administrator to handle the situation above better.