Hong Kong: The Contractors' Experience

Appendix - Conditions of Contract

Appendix Conditions of Contract The following is a brief indication of the major provisions which are to be found in the conditions of contract of most standard forms of contract: Contract documents A statement of what constitutes the contract documents. Powers of the engineer or architect] The power of the engineer or architect to issue instructions to the contractor are covered together with the responsibility of the contractor to respond. Assignment and sub-letting The degree to which subcontracting is allowed. Labour, materials and workmanship The general treatment of labour in terms of fair wages, provIsIOn of sanitary conditions and the supply of labour. Testing materials and workmanship. Commencement, completion and delay To commence work on the official commencement date and the employer has to give possession of the site to the contractor. To complete in the time specified but there are detailed clauses which specify the conditions under which the contractor can claim for an extension of the time for completion. Clauses also deal with the circumstances in which the contractor may be compensated for delays. Conversely clauses will deal with situations in which the contractor fails to complete on time and the compensation (liquidated damages) that the contractor is required to pay to the employer. Archjtect is referred to in buildjng contracts and engineer in engineering contracts or the term superintending officer is used. 210 Appendix Variations and payments for disturbance to the progress of the works The architect/engineer may issue instructions which vary the amount, type or quality of the work described in the contract documents. The contractor will be paid for any additional work he may be required to carry out and the employer will not have to pay for work which does not have to be performed. Rules are provided for how to measure and price changes so that the amount can be added to or deducted from the contract sum. For design and build contracts special clauses are required to define what constitutes a variation and how to deal with those from the engineer/architect and those proposed by the contractor. Prime cost, provisional and contingency sums Prime cost, provisional and contingency sums may be included within the contract (in the bills of quantities or specification) and hence in the contract sum. Such sums are allowances for specific items of work but are not accurately calculated and will need adjustment when the actual costs are known during construction. A contingency sum is usually included in the contract sum to cover unexpected costs which arise during construction. Prime cost sums (P.C. sums) are for work to be undertaken by nominated subcontractors or suppliers. That is subcontractors and suppliers nominated by the employer. Fluctuations Contracts are often described as with or without fluctuations. When described as 'with fluctuations' the conditions of contract contain a clause which allows the contractor to be reimbursed by the employer for all or part of any increases in the cost of labour (e.g. wage rises) and sometimes some materials which occur during the course of construction. The absence of a fluctuations clause means that there is no reimbursement and the contractor has to bear the risk of increases in costs during construction . Certificates and payments The contractor is usually paid by the employer each month during construction for the work executed during the previous month. The statement of the amount due to the contractor is called a certificate. Appendix 211 Certificates are issued by the architect/engineer but the valuation of work completed and entered on them is often calculated by the quantity surveyor and agreed by the contractor. The contractor is not paid the full amount for the work undertaken. Retention is held to guard against unsatisfactory work being included in the certificate and to ensure maintenance work is done after practical completion of the contract. A certificate (sometimes called a certificate of practical competition) is issued when the employer can occupy the project but before all defects have been repaired. Ultimately, a final certificate is issued which signifies the formal end of the contract although legal proceedings could follow. Maintenance and defects liability Specifies a liability period during which the contractor is responsible for maintenance of the works and rectifying defects which are notified to the contractor by the architect/engineer. Bonds Requires the contractor to obtain a guarantee from an insurance company or bank that the contractor will complete the contract satisfactorily. Liability...