Index:
·
Limitation
Periods
·
Content
of Contract
·
Collateral
Warranties
·
Building
Regs and Control
·
Building
Notice
·
Full
Plans Submission
·
Novation
·
Valuing
of Site Materials
·
Provisional
Sums
·
Prime
Cost Sums
·
Employers
Requirements and Contractors Proposals
·
Insurance
Options
·
Extension
of Time
·
Retentions
·
Liquidated
damages
·
Architects
Instruction
·
Variations
·
Relevant
Matters
·
Relevant
Events
·
Loss
and Expense
·
Payment
and non payment
·
Practical
Completion
·
Partial
Possession
·
Certificate
of Non-Completion
·
Rectification
Period
·
Final
Certificate
·
Latent
and Patent Defects
·
Termination
·
Role
of Contract Administrator
Glossary
Limitation Periods
·
A
limitation period is a time period after which liability is extinguished and
court action cannot be taken.
·
In
a negligence claim, time will usually run for 6 years from the date when the
negligent act or omission caused damage to occur
·
In
a claim based on a contract executed under hand, the limitation period is 6
years, running from the date when the contract was breached. The period is extended to 12 years if the contract
was executed as a deed and the limitation period runs from the date when the
contract breach happened.
·
The
Limitation Act 1980 makes it is possible to bring a claim outside the 6-year
limitation period for latent damage (damage which was not reasonably discovered
before the expiry of the basic 6-year limitation period). In these circumstances the limitation period
is 3 years from the date on which the claimant had knowledge of the damage to a
maximum of 15 years.
·
Under
clause 2.19.1 of SBC11, the Contractors liability for the contract’s design
portion is equivalent to that of the Architects design portion. If the design
is found to have failed within the liability period then the Contractor can be
sued for Negligence if it can be proven that the contractor failed to design
this portion using reasonable skill and care.
·
Professional
indemnity Insurance – the Contractor is required to carry PP! (clause 6.12),
the level and amount of cover must be inserted in the contract
particulars. Default Limitation period
is 6 years but is usually changed to 12 years from Practical completion.
·
Example: Limitation periods are
relevant to the Cancer Treatment job as they will be a condition of the
Architects appointment. The architect
must ensure they have appropriate PII insurance to protect the firm against any
potential claims of negligence or breaches in contract for the full liability
period. If, for example, if 3 years
after practical completion cracking and subsidence is discovered in a corner of
the building. After further
investigation it is discovered that the design of the foundations were
insufficient, the architect could still be sued for the fault of the design as
a negligent act as it is within the 6 year liability period.
Content of a Contract
·
The
rights and obligations of parties to a contract are defined by its terms.
·
Express
terms are those that have been explicitly agreed by both parties and can be
oral or in writing.
·
However,
the express terms do not always constitute all the relevant terms of the
agreement. In certain circumstances, Implied terms exist and can be upheld by
the courts if the implied terms are necessary to give business efficacy to the
agreement.
·
Ie.
Implied term implied by previous course of dealings between the parties.
·
Implied
by statue ie. Goods and services Act, if not agreed, it will be implied that
s.13 services will be provided with reasonable skill and care /reasonable time
/ reasonable price paid.
Collateral Warrenties
·
Due
to privity of contract, only parties to a contract are bound by its terms. This means that the terms of the contract can
not generally be enforced by or against someone who is not party to it.
Construction projects often require a network of Collateral Warrenties to be
put in place, which extend terms set out in a contract to third parties who
have a vested interest in successful execution of the contract.
·
A
Collateral Warrenty is affectively a separate contract between the relevant
member of the project team and an third party (for example 3rd party
funder) including them the same rights to make claims under the contract.
·
In
architectural appointments, Architects should avoid collateral warranties where
possible and if required should never agree to greater liability under the
collateral warranty than in their appointment in scope, quantum or duration.
·
Similar
to the effects of a Collateral Warrenty, another way that the terms of a
contract can be passed on to a third party not privy to the original contract
is through a specific term written into the contract which has been allowed
through the Contracts (Rights of Third Parties) Act 1999. This Act allows for the naming of a group or
specified third parties which the terms of the agreement are extended to.
However, this act has to be included into the contract terms and is not a
universal right. Many contracts exclude
the Act, for example the RIBA Standard Conditions of Appointment (clause 7.8)
·
A
typical example would be where an architect of a new office development owes a
duty of care to an occupier of the development in so far as any subsequent
defects which may arise are concerned. Privity of contract rules would prevent
any liability arising between the architect and occupier without the existence
of a collateral warranty.
Building Regulations
+ Control
·
Under
the Building Act 1984, building control has been delegated as a function to the
local authorities, through either building controlled officers or approved
inspectors.
·
They
are delegated to make sure buildings which fall under the Act are in line with
this legislation and the Building Regulations 2010.
·
The
building Regulations 2010 is a form of Building Approval Legislation. The
documents exist to secure the safety, sustainability and durability of
design. They also check the suitability
of building methods and materials used.
·
EXAMPLE: When planning the internal
layout of the large new-build office building, it was important that fire
safety should be considered to coincide with Part B of the Building Regs
2010. Part B1 says that the building
shall be designed and constructed so that there are appropriate provisions for
the early warning of fires and appropriate means of escape from the building to
a place of safety.
Novation
·
A
novation is a three-way agreement made by the original employer, an incoming
employer and the architect (or other service provided) under which the
architect appointment is transferred from the original employer to the new
employer so that after the novation the architect carries out their duties for
the benefit of the new employment and is paid by the new employer. This is usually undertaken through a deed of
novation.
·
A
novation agreement is not possible without consent. If novation and the form of
novation agreement were not agreed when the consultant’s was initially
appointed, they are under no obligation to agree to be novated. It is essential
therefore that the principal contracts between client and consultants and
between client and contractors contain express terms obliging the contractor
and the consultant to enter into the novation agreement.
·
Example: This is relevant to the
Cancer Treatment Center appointment, especially if the client chooses a Design
and Build procurement route. If the
architect is aware that this procurement route is favourable to the client,
they should ensure that the terms of the novation are discussed and agreed to
at the outset, and what the terms of any on-going agreement to provide service
to the client will be. There are two
types of novation – a basic switch from client to contractor and a “ab initio”
where the new employer is deemed to have been the architect client from the
outset. The second type of novation
should be avoided. If there is a
significant risk that the party to whom the architect will be novated does not
have a sufficiently strong financial covenant to pay the architects fees then
the architect should not go through with the novation.
Building notice
·
On small projects, or when changes are made to an
existing building, approval may be sought by giving a 'building notice'. In
this case, a building inspector will approve the works as they are carried out
by a process of inspection.
·
A building notice application can be made with a
simple application form, a site plan (if an extension is involved) and the
appropriate fee (calculations may also be required for certain aspects
depending on the complexity of the project). This means that work can begin
very quickly, and need not necessarily involve design consultants.
·
However, a building notice application leaves the
client at risk that completed works might not be approved, resulting in
remedial costs.
Full plans submission
·
Generally on larger, new-build projects, a 'full
plans' application will be made, meaning that full details of the proposed
building works are submitted for approval before the works are carried out.
·
Full plans approvals are also subject to inspection
during the course of the works, but as long as the work is carried out in
accordance with the approved design, the risk of problems is very much lower
than for a building notice application.
Valuing Off-Site
Materials
·
In
clause 4.16.1.3 of JCT SBC11 allows for Listed items to be included in Interim
Payment Certificates. This means that if
the contractor intents to purchase material in advance and store them off site,
the cost of these items can only be claimed in interim certificates if the
items were named in the Contract by means of a list attached to the bill of
quantities. The Contractor must provide
proof that the items are insured and are set apart or clearly marked and identified
(cl4.17.3).
·
Other
than items that are listed, the CA has no power to approve payment to any
off-site materials. This clause is in
place to protect the interests of the Employer in the event that the Contractor
becomes insolvent
Provisional Sums
·
A
provisional sum is an allowance, usually estimated by the cost consultant,
which is inserted into tender documents for a specific element of the works
that is not yet defined in enough detail for tenderers to price. This, together with a brief description,
allows tenderers to apply mark up and attendance costs within their overall
tender price and make allowance for the work in the contract programme.
·
An
example of a situation where a provisional sum might be appropriate is when
work is required below an existing structure, where the ground conditions
cannot be determined until the existing structure is demolished and the ground
opened up.
·
In
a JCT SBC11, under SMM7, Provisional sums can be 'defined' or 'undefined':
·
Defined
provisional sums are considered to have been accounted for within the
contractor's price and programme. In effect the contractor is taking the risk
that their estimate will be sufficient.
·
Undefined
provisional sums are not accounted for in the contractor's price and programme.
This means that the client is taking the risk for the works and the contractor
may be entitled to an extension of time and additional payments.
·
Provisional
sums place either the contractor or the client at risk of unexpected costs or
delays. Agreeing the cost of such work or extensions of time that might be
claimed can result in tension between the contractor and client. For this
reason, they should only be used as a last resort, they should not be an easy
fall-back position for consultants (who are not bearing any of the risk) when
designs are incomplete or information is difficult to obtain.
Prime Cost Sum
·
A
prime cost sum is an allowance usually calculated by the cost consultant for
the supply of work or materials to be provided by a contractor or supplier that
will be nominated by the client. The allowance is exclusive of any profit mark
up or attendance (such as material handling, scaffolding and rubbish clearance
etc) by the main contractor.
·
JCT
SBC11 Clause 3.8 allows for – listed sub-contractor
·
JCT
intermediate contract allows for Named Specialists.
Employers
Requirements and Contractors Proposals
·
Employer's
requirements are typically used on design and build projects (such as Joint
Contracts Tribunal (JCT) BD 05) or on a traditional contract where the
contractor is to design discrete parts of the works. They provide a description
of the client's requirements, including; the specification for the building,
the scope of services required from the contractor and an allocation of risk
for unknown items. Contractor's proposals are then prepared in response to the
employer's requirements. These present the contractor's suggested approach for
designing and constructing the building, along with their price.
·
In
a traditional contract, for example JCT SBC11, employers requirements are
prepared if it there are elements of the design that require specialist contractor
input. The contractors design
obligations are set out under clause 2.2 (JCTSBC11- with quantities). In contractor will submit a proposal
containing a design solution with its tender (the contractors proposals,
eleventh recital). The Contractor is
liable for designs under the contractors proposals and should maintain suitable
PII to cover this design work.
·
The
level of detail in the employer's requirements and the extent of design
required from the contractor is very variable. Employer's requirements can
range from a very simple specification to a fully developed performance
specification and concept design.
·
The
employer's requirements is a very important document as, although it is
prepared early in the project, it defines the success of the outcome. The
better prepared they are, the keener the price from the contractor and the less
likely there will be disputes. If the employer's requirements are not properly
developed, the client can incur significant additional costs, as any
requirements which are not properly specified, or are changed, will require the
issue of instructions for which the client will be charged by the contractor.
Insurance Options
·
On
a construction site it is important that liability for losses resulting from
personal injury or damage to any property or to the works are allocated to a
party, and that the liability is backed up by insurance.
·
The
under clause 6.1-6.3 the contractor is responsible to indemnify against the
risk of injury to persons and damage to property other than the works, which
are the result of the works. The minimum
cover is entered into the contract particulars.
·
There
are 3 options for covering insurance in the works and are set out in schedule
3:
·
Option
A – insurance is taken out by the contract and is for the full reinstatement of
the Contract works, including professional fees
·
Option
B- insurance is taken out by the Employer, and if for the full re-instalment
values of the works including professional fees
·
Option
C – applicable when the work is being carried out to an existing building. It includes two insurances, both taken out by
the Employer. The existing structure and
contents must be insured against “specified perils” as defined in Clause
6.8. New works in, or extensions to,
existing buildings must be covered by an “All Risks” insurance policy.
·
Options
A and B are for insuring new building work and require “All risks” cover under
joint names policies.
Extension of Time
·
Many
construction contracts allow the construction period to be extended where there
are delays that are not the contractor's fault. This is described as an
extension of time (EOT).
·
Under
JCT SBC11, the granting of extensions of time are set out under clause
2.26-2.29. When it becomes apparent that
there is a delay that could merit an extension of time, the contractor must
give written notice to the CA. This
notice should set out the circumstances and cuase of the dealy and identify any
relevant events for the cause. The CA
must respond within 12 weeks, with a decision either fixing a new completion
date or notifying the contractor that no extension of time is due (cl 2.28.2)
Relevant
events may include:
·
Variations.
·
Exceptionally
adverse weather.
·
Civil
commotion or terrorism.
·
Failure
to provide information.
·
Delay
on the part of a nominated sub-contractor.
·
Statutory
undertaker’s work.
·
Delay
in giving the contractor possession of the site.
·
Force
majeure (such as an epidemic or an 'act of God').
·
Loss
from a specified peril such as flood.
·
The
supply of materials and goods by the client.
·
Strikes.
·
Changes
in statutory requirements.
·
If
the works are not completed by the completion date set out in the contract and
no extension of time claims are yet to be settled, the CA is required to issue
a certificate of non-completion, and the client can advice the Contractor that
they will claim for liquidated damages, at the rate set out in the contract.
·
Delays
in receiving permissions that the contractor has taken reasonable steps to
avoid.
·
The
contractor is required to prevent or mitigate the delay and any resulting loss,
even where the fault is not their own.
·
All
claims should be judged against the progress of the works and not the programme
and must demonstrate the link between the breach (cause) and the delay.
·
Mechanisms
allowing extensions of time are not simply for the contractor's benefit. If
there was no such mechanism and a delay occurred which was not the contractor’s
fault, then the contractor would no longer be required to complete the works by
the completion date and would only then have to complete the works in a
'reasonable' time. The client would lose any right to liquidated damages.
Retentions
·
Retention
is a percentage (default is 3% but standard requested by clients is now 5%) of
the amount certified as due to the contractor on an interim certificate, that
is deducted from the amount due and retained by the client. The purpose of
retention is to ensure that the contractor properly completes the activities
required of them under the contract. Retention can also be applied to nominated
sub-contractors, and the main contractor may also apply retention to domestic
sub-contractors.
·
Half
of the amount retained is released on certification of practical completion and
the remainder is released upon certification of making good defects (or 'final
statement' for design and build contracts such as Joint Contracts Tribunal
(JCT) DB 05).
·
Interim
certificates should make clear the amount of retention and a statement should
also be prepared showing retention for nominated sub-contractors.
·
In
some cases, it may be agreed that a bond is held by the Employer in lieu of retentions, JCT SBC11 makes provision for this in clause
4.19. The bond has a similar effect by
giving the Employer insurance that the contractor will properly complete their
requirements under the contract. When
clause 4.19 is applied, retentions is not deducted from amounts on the certificate.
·
NB.
On construction management contracts, a separate certificate of practical
completion must be issued for each trade contract and so there are a number of
defects liability periods. This means that retention must be released as
required for each individual trade contract. The same is true on management
contracts, where each works contract must be certified individually.
Liquidated Damages
·
Contracts
generally include a provision for the contractor to pay liquidated damages (or
liquidated and ascertained damages, sometimes referred to as LAD's) to the
client in the event that the contract is breached.
·
In
JCT SBC11 the agreed rate of liquidated and ascertained damages for the works
is set out in the contract particulars.
This is normally expressed as a specific sum per week of delay, to be
owed by the Contractor in the event of failure to complete the works by the
completion date. In this event, the CA
is required to certify the non-completion by means of a Non-Completion
Certificate (set out in clause 2.31)
.
·
Under
Clause 2.32.2 the Employer must notify the Contractor before the date of final
Certificate that he may require payment of liquated damages if the completion
date is not achieved. Once the
non-completion certificate has been issued, the contractor is said to be in
‘culpable delay’ and the Employer can advice the Contactor to their intent to
deduct liquidated damages from the next interim certificate.
·
Liquidated
damages are not penalties, they are pre-determined damages set at the time that
a contract is entered into, based on a calculation of the actual loss the
client is likely to incur if the contractor fails to meet the completion date.
They might include, rent on temporary accommodation, removal costs, extra
running costs and so on.
·
If
the project is delayed by an event that impacts on the completion date, but is
not the fault of the contractor, then this may constitute a 'relevant event'
for which the contractor may be granted an extension of time (ie the completion
date in the contract is adjusted), A relevant event might be a delay that is
caused by the client, or a neutral event such as exceptionally adverse weather.
Under Clause Under JCT SBC11, the
granting of extensions of time are set out under clause 2.26-2.29. If an extension of time claim is accepted by
the CA, the completion date will be pushed out accordingly and liquidated
damages can not be claimed unless the works are not completed by the new date
set.
·
Mechanisms
allowing extensions of time are not simply for the contractor's benefit. If
there was no such mechanism and a delay occurred which was not the contractor’s
fault, then the contractor could no longer be required to complete the works by
the completion date and would only have to complete the works in a 'reasonable'
time. With no enforceable completion date, the client would lose any ability to
claim liquidated damages.
Architects Instruction
·
JCT
SBC11 clause 3.10 gives the contract administrator the power to issue
instructions to the contractor. These instructions can be called ‘contract
administrator’s instructions’ or ‘architect’s instructions’ (AI's).
Broadly
speaking, an AI may be given for the following reasons:
·
To
vary the works.
·
To
postpone the works.
·
To
remedy workmanship, goods or materials which are not in accordance with the
contract.
·
To
sanction a variation made by the contractor.
·
In
relation to the expenditure of provisional sums.
·
To
open up work for inspection.
·
To
carry out tests.
·
To
exclude persons from the site.
Provisions for Variations
·
A
variation is an alteration to the scope of works in a construction contract in
the form of an addition, substitution or omission from the original scope of
works.
A variation
may include:
·
Alterations
to the design.
·
Alterations
to quantities.
·
Alterations
to quality.
·
Alterations
to working conditions.
·
Alterations
to the sequence of work.
·
Variations
may also need to be made when the contract documents do not properly describe
the works actually required.
·
In
JCT SBC11, the Contract Administrator has the power to order specific
variations under clause 3.14.1, and the scope of what constitutes a variation
is set out in clause 5.1.
·
All
variations under clause 3.14.1 may result in an adjustment of the contract sum
(Clause 4.3.1) and could result in a claim for extension of time (cl2.29.1) or
direct loss and/or expense (cl.4.24.1).
·
The
CA cannot issue variations after practical completion.
Relevant
Matters
·
A
relevant matter is a matter that the client is responsible that effects the
progress of the works. This may enable the contractor to claim direct loss and
/ or expense that has been incurred.
·
Clause
4.24 sets out 5 situations when a claim can be made caused by relevant matters
Relevant
matters might include:
·
Failure
to give the contractor possession of the site.
·
Failure
to give the contractor access to and from the site.
·
Delays
in receiving instructions.
·
Opening
up works or testing works that then prove to have been carried out in
accordance with the contract.
·
Discrepancies
in the contract documents.
·
Disruption
caused by works being carried out by the client.
·
Failure
by the client to supply goods or materials.
·
Instructions
relating to variations and expenditure of provisional sums.
·
Inaccurate
forecasting of works described by approximate quantities.
·
Issues
relating to CDM.
·
A
relevant matter need not necessarily result in a delay to the completion date,
and so may not always entitle the contractor to an extension of time
Relevant Events
·
Relevant
event is an event that causes a delay to the completion date, which is caused
by the client, or is a neutral event not caused by either party.
·
Clause
2.29 sets out 14 situations when a claim can be made caused by relevant events
·
Examples
include: Variations, late possession of site, expectional adverse weather.
·
Relevant
events entitle the contractor to claim an extension of time; that is for the
completion date to be moved. A relevant event does not necessarily entitle the
contractor to claim loss and expense.
Loss and
Expense
·
Clause
4.23 gives provision for the contractor to claim direct loss and / or expense
as a result of the progress of the works being by relevant matters which the
client is responsible, such as:
·
Failure
to give the contractor possession of the site.
·
Failure
to give the contractor access to and from the site.
·
Delays
in receiving instructions.
·
Opening
up works or testing works that then prove to have been carried out in
accordance with the contract.
·
Discrepancies
in the contract documents.
·
Disruption
caused by works being carried out by the client.
·
Failure
by the client to supply goods or materials.
·
Instructions
relating to variations and expenditure of provisional sums.
·
Inaccurate
forecasting of works described by approximate quantities.
·
Issues
relating to CDM.
·
Claims
may comprise costs resulting from disruption to the works or from delays to the
works (prolongation).
·
The
contractor must give written notice of a claim as soon as it becomes reasonably
apparent that the regular progress of the works is being materially affected.
·
Direct
losses are those that 'flow naturally' from the breach of contract.
Provisions for payment and non-payment
·
One
of the most important duties of the CA under SBC11 is the issuing of
certificates of payment
·
In
JCT SBC11, the contractor is entitled to periodic payments through the issuing
of interim certificates. The “due dates”
are defined in the contract particulars the (first one entered then subsequent
on a one-month basis). In clause 4.10.1,
Interim certificates are required to be issued within 5 days of the due date
and payment made within 14 days of the due date (Clause 4.12.1).
·
The
valuation of interim certificates can be made by two methods, acceptance of the
Contractors application for payment, or valuation by the QS.
·
The
CA should only certify interim certificates after having carried out an
inspection, and should not include work that appears not to have been properly
executed. If work is included and then
is later found to the defective, the value can be taken off the next
certificate.
·
A
percentage (3% as default but standard 5%) of the money owing is deducted from
the interim certificate as a Retention.
·
In
clause 4.12.5, If the employer intends to withhold an amount from the sum
certified in the certificate, then the contractor must be given notice before
the final date of payment in the form of a ‘Pay Less Notice’ which will set out
the sum and the basis which that sum has been calculated.
·
Refer
diagram Page 110 – guide to SBC11.
Practical
Competition
·
The
contract administrator certifies practical completion when all the works
described in the contract have been carried out as per clause 2.30 of JCT SBC11.
This
certificate should be issued only when, in the CA’s opinion, the following
three things have been done:
·
Practical
completion of the works
·
Contractor
has supplied as-built drawings for the CPD section of works (as per clause
2.40)
·
The
contractor has supplied all information for the health and safety file (as per
clause 3.23.4)
Certifying
practical completion has the effect of:
·
Releasing
half of the retention (an amount retained from payments due to the contractor
to ensure that they complete the works).
·
Ending
the contractor's liability for liquidated damages (damages that become payable
to the client in the event that there is a breach of contract by the contractor
- generally by failing to complete the works by the completion date).
·
Signifying
the beginning of the defects liability period.
Partial
Possession
·
It
is possible for the Employer to gain possession of a portion of the project
with the agreement of the Contractor.
Partial Possession is set out in Clause 2.33-2.37 of the JCT SBC11.
·
When
practical completion is deeded to have occurred for the relevant part of the
works, the rectification period for that part of the works starts and the
certification of making food defects has to be issued for that part
separately.
·
Under
clause 2.37 Liquidated damages are reduced by the proportion the valuation of
the possessed past of the works to the contract sum and half the retention for
that portion of the works is released.
·
A
drawing should be used to identify the relevant part of possession.
Certificate
of Non-Completion
·
The
date for completion of construction works (or dates for completion of sections
of the works) will agreed and set out in the contract particulars. However, it
is not uncommon for delays to cause the completion date to be missed, that is,
the works are not complete, and so a certificate of practical completion cannot
issued by the date for completion.
·
Where
the client is responsible for the delay, an extension of time may be granted,
the completion date adjusted, and the contractor may be entitled to claim loss
and expense.
·
Where
the contractor is responsible for the delay, the client may be entitled to
claim liquidated and ascertained damages (at a rate set out in the contract
particulars).
·
In
JCT SBC11 the contract administrator must issue the Contractor with a
certificate of non-completion as a pre-requisite to claiming liquidated and
ascertained damages. The certificate of non-completion gives formal written
notice to the contractor that they have failed to complete the works described
in the contract by the completion date that was last agreed (the original
completion date may have been adjusted during the course of the works).
·
The
contract administrator consider applications for extension of time before
issuing a certificate of non-completion, and if there are subsequent extensions
of time that result in the completion date being adjusted, and the contractor
then fails to meet this adjusted date, a new certificate of non-completion must
be issued
Rectification
Period
·
The
rectification period begins upon certification of practical completion and
typically lasts six to twelve months.
·
During
this period, the client reports any defects that arise to the contract
administrator who decides whether they are defects in the works, or whether
they are in fact maintenance issues.
·
Under
clause 2.38.2, If the contract administrator considers that they are defects,
then they may issue instructions to the contractor to make good the defects
within a reasonable time.
·
It
is the contractor's responsibility to identify and rectify defects, not the
clients, so if the client does bring defects to the contractor's notice, they
should make clear that this is not a comprehensive list of all defects
·
At
the end of the defects liability period, the contract administrator prepares a
schedule of defects, listing those defects that have not yet been rectified,
and agrees with the contractor the date by which they will be rectified. The
contractor must in any event rectify defects within a reasonable time
·
When
the contract administrator considers that all items on the schedule of defects
have been rectified, under clause 2.39 the CA will issue a certificate of
making good defects. This has the effect of releasing the remainder of any
retention and results in the final certificate being issued.
Final Certificate
·
The
final certificate is certification by the contract administrator that the
contract has been fully completed. It must be issued at the end of the defects
liability period (set out in clause 4.15.1) and has the effect of releasing all
remaining money due to the contractor, including any remaining retention.
·
The
value of the final certificate will be based on the final account agreed by the
cost consultant and the contractor. This means that all defects must have been remedied,
all adjustments to the contract sum must have been agreed and all claims
settled.
By
final certificate stage the following certificates should have been issued:
·
Interim
certificates at monthly intervals (Clause 4.9.1)
·
Practical
Completion Certificate (Clause 2.30)
·
Certificate
of Making Good (Clause 2.39)
·
The
Final certificate must state the contract sum as adjusted under clause 4.3,
which sets out all the deductions and additions to the contract sum. The remaining half of the Retentions (the first
half released at Practical completion) will be released at this stage.
·
Refer
diagram Page 121 of Guide to SBC
Latent
and Patent Defects
·
Latent
defects are defects that do not become apparent until many years after the
defects liability period has ended (as opposed to patent defects which are
apparent).
Examples of
common latent defects include:
·
Defective
basement tanking allowing water penetration.
·
Inadequate
wind-posts or wall ties causing movement damage to walls.
·
Under-strength
concrete or misplaced reinforcement allowing movement damage to the structure.
·
Inadequate
foundations causing subsidence of the building.
·
After
the end of the rectification periods the building owner does not have a
contractual right to insist that the contractor rectifies defects not notified
during that period. Instead the employer must instead seek damages, for breach
of contract, or for negligence. Limitation to liability 6 years or 12 years if
signed as a deed.
Termination
·
Most
forms of contract will include termination clauses, setting out the
circumstances under which a contract may be terminated. When a contract is
terminated, the parties to the contract are no longer obliged to perform their
obligations under the contract.
·
In
JCT SBC11, both the Contractor and Employer have a mechanism for terminating
the contract under specific circumstances (listed under clause 8.4). The termination can be initiated by the
Employer in the event of specified defaults by the Contractor occurring prior
to Practical Completion, insolvency of the Contractor or corruption.
·
Under
clause 8.4.1, If a default occurs the CA should issue a warning notice. And if
the default continues for longer than 14 days from the notice, the employer may
terminate the employment of the Contractor by issue of a further notice within
21 days from the expiry of the 14 days (Clause 8.4.2)
·
All
notices must be delivered by hand, sent by recorded signed for or Special
delivery post.
·
Under
contract clause 8.5.2 the contractor must notify the employer in writing in the
event of liquidation or insolvency. In this event the Employer is given the
option to terminate.
·
The
contractor has a reciprocal right to terminate its own employment under clause
8.9.1 in the event of specified defaults of the employer.
Role of Contract Administrator
·
The
role of the Contract Administrator is to administer the contract between the
Employer and Contractor impartially. This role is often taken by the Architect,
agreed in their appointment, however; it could also be taken by a Lead or Cost
Consultant or Client Representative.
·
Contract
administrators are appointed by the client and usually act as the client's
agent. When certifying or giving an assessment or decision, the administrator
has to act honestly and reasonably and their decisions are open to challenge
via the dispute resolution procedure unless the contract makes their decisions
final and conclusive.
Role
includes:
·
Inviting
and processing tenders.
·
Preparing
contract documents for execution.
·
Administrating
change control procedures.
·
Issuing
instructions such as variations, or relating to prime cost sums or making good
defects.
·
Considering
claims.
·
Preparing
and issuing construction progress reports.
·
Co-ordinating
and instructing site inspectors.
·
Agreeing
commissioning and testing procedures.
·
Agreeing
defects reporting procedures.
·
Ensuring
that project documentation is issued to the client.
·
Issuing
certificates of practical completion and interim certificates.
·
Collating
and issuing schedules of defects.
·
Issuing
the certificate of making good defects.
·
Issuing
the final certificate.
