7070EXQ Contract Management Practice and Law

a) Maddie & sons construction is currently considering undertaking design and build work for a major refurbishment job in Coventry, however, the works involve partial handover and completion. Because of this, the contractor dilly-dallies in signing the contract over a six-month period with the view to amending some of the clauses in the contract. During the same period, the client issues some changes to the design on the understanding that the contractor will carry out the work accordingly.

 

As a construction contracts specialist, comment on when a contract is valid. Explain to the contractor:

 

(i) the implications of undertaking work with no valid contract; and

 

(ii) if the client is liable to pay for the additional work because of a change in design.

 

b) Discuss the importance and purpose of the articles of agreement.

 

c) With reference to case law, explain when it is appropriate to use the letter of intent (LOI) and identify the key issues to be included in a valid LOI?

 

The Project Manager (PM – Paula Hammond) on a new build project in London (Mega Projects) has recently been informed by the ground works contractor (Sean Jon & Sons) that they have come across significant ornaments of considerable value. As the contractor’s site manager (Tom Dean), your role is to prepare an early warning notice to the client (‘London Borough of Hillcrest’). Explain to the client the nature of the problem and refer to the relevant clauses under the NEC and any entitlement for adjustment of the programme and cost under the NEC Option C. The format of the early warning notice must be a formal notice and include the names of the various stakeholders. 

Smith & Pauline Contractors (SPC) have recently signed a major contract to undertake enabling works for the upgrade and extension of Birmingham International Airport. The works require undertaking critical major highways works, associated utility diversions and construction of warehouses. Two contracts have been awarded to SPC. The highways works are based on the NEC Option A (Priced contract with activity schedule) and the associated utility diversions and construction of warehouses is based on Option E (Cost reimbursable).

 

a) During the early stage of construction, SPC propose a design change to enable easier access to the site from the A45. The proposed design changes include the installation of new traffic lights and access roads. Given that part of this work is associated to the highways works contract-Option A while the other part is related to Option E, the contract manager has asked you to explain the following: the implication of adopting either contract particularly when considering the payments due to the contractor for the completed works; and the implication of the design changes?

 

b) The Project Manager (PM) has recently noted that part of the work requires installation of a new gantry, in line with the ‘smart motorways’ provision on the M6. Having asked the contractor to provide a quotation, there seems to be a delay in issuing the quotation for some unknown reason. Explain to the PM what must be done to assess the compensation event in the absence of a quotation from the contractor. (10 marks) c) Discuss the assignment of risk in relation to Option A and Option E of the NEC contract.

 

 

 

Refer to Maeda Corporation v Bauer Hong Kong Ltd (2019), Maeda was engaged as the main contractor on a project for the Hong Kong Guangzhou Express Rail Link. The project involved the construction of cut and cover tunnels and Maeda engaged Bauer as the subcontractor for the diaphragm walls. During the construction, Bauer encountered unforeseen ground conditions which meant that additional quantities of rock had to be excavated. Bauer gave notice for its loss and expense entitlement, but its initial notice of claim referred specifically to the event as a variation. A dispute arose regarding the claim and in the subsequent arbitration proceedings, notwithstanding that he rejected their case for a variation, the arbitrator found for Bauer. Maeda appealed the arbitrator’s award.

 

As a newly qualified construction manager supporting the Contract Administrator (CA):

 

a) Discuss the difference between claims and variations in projects. 
 
b) Critically evaluate whether the subcontractor has the right to claim for the variation/loss and expense in the above case. You are required to support your answers with appropriate clauses.

 

c) Discuss the challenges surrounding the claim for loss and expense in both the JCT 2016 SBC and NEC4 contract.
 
d) Propose contractual advice that parties should follow/adhere to avoid such a dispute. 

Question 5: JCT completion and liquidated damages

 

a) In the JCT Standard Building Contract, what is the relationship between ‘Sectional Completion’ and ‘Partial Possession’ with regards to the rectification period?

b) Discuss problems associated with liquidated damages where provision has been made in the contract for partial possession. You are required to support your answer with case law. 

c) Construct an example to illustrate how the sum of money inserted into a typical construction contract as liquated damages is calculated.