Critically examine and evaluate how contracts safeguard the interest of the parties involved in construction and explain the mechanisms found in standard forms of contract.
Construction law is involved with the dynamic construction sector of the economy that relies on interconnected contractual relationships to carry out the complexity of modern building. It involves the trading of labour, plant, materials, and services, under a variety of contract arrangements. The sectors in-built competitiveness and predisposition to contractual claims presents a challenging commercial environment.
Law is a commercial tool used to achieve economic objectives. This assignment focus is on how contracts are used to safeguard the interests of the parties involved and identify and apply key contract procedures when using standard forms of contract.
Learning Outcomes
On successful completion of the module, the student should be able to:
Critically examine and evaluate how contracts safeguard the interest of the parties involved in construction and explain the mechanisms found in standard forms of contract.
The BRIEF
All parts of the question (parts 1-7 inclusive) and answer all of the 9 questions that are set
PART 1 OF THE ASSIGNMENT
Vinnie Jones a young quantity surveyor who is employed by Clayton Construction Ltd is asked to work on the tender being submitted for the building of a local community centre.
It is anticipated this project will be around circa £800,000 and that it is to be priced on the terms of the JCT SBC/XQ 2016 standard building contract.
Vinnie is given the tasks of pricing up some preliminary resources and some groundworks and has been told that the contract construction period is anticipated to be 38 weeks long.
Question 1
Using the following information, you (acting as Vinnie) are required to undertake the pricing of the following underlined preliminary resources for this project.
Discuss and undertaken these tasks.
[10 Marks]
The Site Manager: It is anticipated this member of staff will be on-site from start to finish. This member of staff has an all-in rate of £1,000 per (40 hrs. e.g. 8 hours per day) week.
The Quantity Surveyor: It is anticipated they will visit site ten days per month and will have fourteen days’ work in the office per month. This member of staff has an all-in rate of £900.00 per (40 hrs. e.g. 8 hours per day) week.
Scaffolding Externally: The estimators have a scaffolding subcontractor quote for erecting, hire, maintenance and dismantle of the scaffold for the 14 weeks the scaffolding is required. The quote received indicates the cost of the scaffolding will be £12,000 plus £550.00 for each week the scaffolding is on hire.
Crain usage: The estimator has established 10 visits are required for cranes to lift in heavy mechanical plant and isolation steel beams etc. The estimator has obtained a crane quote of £750.00 per visit but there is an imminent price increase of 10%.
All the above rates are to have 10% over head and profit added to them.
Question 2
Using the following information, you (acting as Vinnie) are required undertake the pricing of excavating trenches, backfilling, and removing the excavated material.
Also using the following information, you (acting as Vinnie) are required to price up the supply and install concrete to the excavated trenches.
Discuss and undertake these tasks.
[10 Marks]
The builder’s quantities that have been prepared have measured the excavate trenches at 450m³ and the cart away excavated material at 410m³ with 40m³ of excavated material being used as backfill. The builder’s quantities prepared measure the concrete to be laid in the trenches at 220m³.
A quote has been obtained from a bulk muck shifter (labour and plant only) subcontractor who has supplied “all in” rates of £27.00 per m³ (for excavating trenches), £35.00 per m³ (for carting away excavated material) and £12.00 per m³ (for backfilling surplus excavated material).
A ready-mix supply only quotes for concrete delivered to site is priced at £130.00 per m³.
Wastage on concrete poured into the ground is anticipated to be 5%.
Operatives “all in rate” is £26.00 per hour for this type of work.
2 Nr. operatives can lay 5m³ of concrete in the trenches per hour.
Plant equipment, tools etc. required for laying the concrete has been calculated to cost a lump sum of £380.00.
All the above measured work rates are to have a 10% overhead and profit added to them.
PART 2 OF THE ASSIGNMENT
The Clayton Construction Ltd tender for the community centre is submitted to the client.
The tender offer is to complete the works in a 38 week period for the lump sum of £800,000 but this tender contained clarifications and qualifications.
The tender submission stated it did not include for any drainage work beyond the boundary of the site, and that the retention amount was 3% and that the liquidated damages figure would only be £500 per week.
After the tender was submitted the employer had a very pleasant discussion with Clayton Construction Ltd.’s top management when they discussed the terms of the contract.
Following these discussions, a contract document was prepared and executed under deed by both parties. Vinnie noticed when he received the contract document that the expressed terms stated that it included for all the drainage beyond the boundary of the site, that the retention amount was 5% and that the liquidated damages figure was £3,000 per week.
He also noted that there was a preliminary break down for the 38 weeks contract period amounting to £108,000 and that there were express statements in the contractual text that £72,000 of that figure was stated to be time dependent.
Question 3
You are required to explain by reference to legal authority what needs to be proved for a court to conclude a construction contract has been formed.
[10 Marks]
Question 4
You are required using the information above to reason that Clayton Construction Ltd have entered into a construction contract and discuss what are some of the terms of the contract. Ensure your answer refers to retention, liquidated damages and how long this contract will be enforceable in the courts.
[10 Marks]
PART 3 OF THE ASSIGNMENT
Clayton Construction Ltd top management asked Vinnie to review the JCT SBC/XQ 2016 standard building contract that they had just signed in respect of building the community centre for £800,000.
The top management wanted Vinnie to give a presentation to the site staff.
The top management wanted Vinnie to discuss what would constitute a good strategy for Clayton Construction Ltd to adopt; so that they can minimize the risk of incurring liquidated damages and maximising their opportunities of recovering extra prolongation costs if the project fell into delay.
Question 5
Prepare notes that explain what you consider Vinnie should emphasise in his presentation to the site staff; who will be communicating with the client’s representatives as the works progresses.
[10 Marks]
PART 4 OF THE ASSIGNMENT
The works on the community centre commenced and three weeks into the contract bad ground was discovered in all the trenches that were being excavated.
The architect issued a variation instruction that required additional ground to be excavated in the foundation trenches.
The extra excavation comprised of 120m³ between the depth of 1.5m – 3.00m below the original trenches that were shown on the tender drawings as 0.80m wide and 1.00m deep. After the extra trench excavation was excavated, they were then fully filled up with concrete.
The instruction of this variation ground works delayed the completion date of the contract by 4 weeks.
Question 6
Write a basic formal notice letter requesting an extension of time for this variation which mentions Clayton Construction Ltd intends to claim loss and expense.
[5 Marks]
Question 7
There is an agreement between the parties to use the contract rates and adjusted contract rates to value the additional excavation and concrete works in the ground. Set out and explain the correct way of valuing this variation work.
[10 Marks]
PART 5 OF THE ASSIGNMENT
When practical completion is reached in respect of the community centre Clayton Construction Ltd top management sat down and prepared a wish list of monies they want the client to pay them for building the community centre.
This wish list is set out below with Clayton Construction Ltd.’s top management notes on what they demand that Vinnie persuades the client’s representatives to pay.
a) Contract Sum all the work is 100% complete [The full contract sum should be paid].
Clayton Construction Ltd claims £800,000 for this matter.
b) Add the value of the drainage work outside the site boundary shown on the tender drawings. [A fully priced day-work sheet has been submitted for this work amounting to the monies claimed, this day-work claim should be paid in full].
Clayton Construction Ltd claims £10,250 for this matter.
c) Add the value of the drainage work outside the site boundary not shown on the tender drawings, but shown on the construction drawings that were issued to be built to after the works commenced. [A fully priced day-work sheet has been submitted for this work amounting to the monies claimed and therefore this day-work claim should be paid in full].
Clayton Construction Ltd claims £15,750 for this matter.
d) Add prolongation costs for the full period the works were delayed. The works were 12 weeks late being completed. A bundle of evidence had been submitted to the client that shows all the actual costs of the additional prolongation resources amounts to a total cost of £3,000 per week. [The claim of 12 weeks @ £3,000 per week should be paid in full].
Clayton Construction Ltd claims £36,000 for this matter.
e) Note: retention deduction should be 0%
Clayton Construction Ltd asserts £0.00 for this matter.
f) Add the extra value of the additional variation to the groundworks that is discussed in part 4 of the question. [Clayton Construction Ltd top management are determined that a very big number is to be claimed for this work of £280,000.
They settled on this excessive number so as to maximize their profit and they are adamant that this amount of money should be paid in full].
Clayton Construction Ltd claims £280,000 for this matter.
g) Note: Liquidated damages adjustment. The fact that the project finished 12 weeks late with only 4 weeks extension of time requested and granted is an inconvenient fact.
[Clayton Construction Ltd top management are of the view that this fact should not be highlighted to the client in settlement discussions and this matter should play no part in the discussions to reach a settlement and there should be no liquidated damages paid to the client].
Clayton Construction Ltd assert £0.00 for this matter.
Question 8
Imagine you are the clients quantity surveyor representing the their interest [as well as administering the contract valuation rules in a professional and fair manner] who has met with Vinnie when he eloquently set out Clayton Construction Ltd top manager’s views on what moneys the client should certify for payment.
Explain what you would recommend the contract administrator/architect should certify and pay Clayton Construction Ltd as a valuation figure (that is to be valued just after the works reached practical completion)
Base your advice on all the information on this project that is set out in this assignment.
[20 Marks]
PART 6 OF THE ASSIGNMENT
During the construction of the community centre Clayton Construction Ltd operative (Fred Dibner) drives the companies 5 tonne dumper onto the road to fetch his sandwich from the local sandwich shop every dinner time. Due to the poor maintenance of the dumper one day it crashes into the sandwich shop because the brakes don’t work. Happily, no one is hurt, albeit the front of the sandwich shop was caved in.
The sandwich shop owner is now suing Clayton Construction Ltd in the tort of negligence for the £20,500 it has cost the shop owner to repair the front of the sandwich shop.
Question 9
By reference to legal authority discuss whether Clayton Construction Ltd will be held liable in the tort of negligence for the trip that their operative (Fred Dibner) took to the sandwich shop that resulted in caving in the front of the shop.
[15 Marks]
[Total Marks 100]
Resources & Reference Materials
Module lecture support notes.
Paul Richards (2011) Law of Contract 10th Edition
John Uff (2009) Construction Law; 10th Edition, Sweet and Maxwell.
Treitel (2007) The Law of Contract, 12th Edition, Thomson, Sweet & Maxwell.
Allan Ashworth (2005) Contractual Procedures in the construction industry, 5th Edition, Pearson Prentice Hall.
John Adriaanse (2010) Construction Contract Law The Essentials; 3rd Edition, Palgrove Macmillan.
Issaka Ndekugri, Michael Rycroft (2009) The JCT 05 Standard Building Contract Law and Administration, 2nd Edition, Butterworth-Heinemann.
The Joint Contract Tribunal Ltd, JCT JCT Intermediate Building Contract with contractors design 2016, Thompson Reuters.
Submission Requirements
Word Limit: 2,500 words
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