ice contract

7/30/2019 ICE Contract

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ICE Law and Contract Management Examinations

Examiners Report 2012


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ICE Law and Contract Management Examinations

Contents

Title Page

Moderators Report

Pass marks

2

3

Module 1

Module 2

Module 3

4

6

13

Module 1 Question Paper

Module 1 Points for Answer

16

23



28

38



49

59


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Moderators Report

The results this year were in line with long term averages, with module 2 restored after a couple of years of less good results. Module 3 continues to have a relatively low passrate, although it is not intended to be an easy exam. It requires candidates to haveconsiderable professional experience and good knowledge of two forms of contract.

It may come as a surprise that most examiners are willing the candidates to succeed. Awell written answer that covers all the points makes the work of examiners andmoderators much easier than a less than tidy page on which correct points must besought assiduously in order to award marks.

The examiners make useful comments in their reports that bear repetition.

Few of us these days have good handwriting but those reading exam scripts are onlyhuman and appreciate any effort to set out the answer tidily and coherently.

The marking structure usually allows a number of marks for identifying the principlesand the remainder for correctly applying them. The only reason for repeating parts of the question or quoting contractual clauses is to reach a conclusion. It is the conclusionthat gets the mark.It is usually easier to obtain the first mark than the last. It is disappointing to see acandidate provide a good answer to three questions and not answer a fourth at all; easymarks have been wasted. It may be worth spending valuable time providing at least ashort answer to the last question.

One examiner points out the importance of terminology in the context of the NEC. Thisis a helpful point for all of us whatever form of contact applies. Practising the correct useof instruct, award or notify in our professional activities, will lead to clearer thinkingand more precise correspondence. The writer struggles with the verb early warn andlooks to the authors of the NEC for assistance.

It is worth again reminding candidates to read and answer the question. Someinteresting dissertations on the wrong topic are sometimes provided; often because theprinciple has been misconstrued or a fact in the question missed.

The examiners give a considerable amount of time to set and mark papers for a smallhonorarium and deserve our grateful thanks. The candidates evidently make aconsiderable effort to assimilate all the material and present commendable scriptswhether they pass or not.

Those involved in promoting these examinations are motivated by the wish to see thecivil engineering profession (primarily) improve its standing and maintain a reputation for competent project administration and management. It is hoped that all those who satthis years examinations will have gained something useful to take into their

professional life.


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Examiners Report

Pass marks

The pass marks were set at 40% for Module 1, 50% for Module 2 and 65% for Module3.

Total Number of Candidates taking each Module and % Passing each Module

Module 1 Module 2ICEModule 2

NEC Module 3

Nr % Nr % Nr % Nr %

2012 36 83 - - 42 82 6 33

2011 43 81% 2 50 41 53 2 50

2010 34 83 1 100 36 67 7 292009 46 83 2 100 44 80 2 0

2008 45 84 2 100 43 83 2 0

2007 28 74 1 0 25 52 5 20

2006 47 74 21 100 25 76 3 33

2005 57 60 14 86 37 73 5 0

2004 51 98 40 70 9 78 3 33

2003 51 80 32 65 7 85 9 67

2002 42 93 30 63 7 71 10 10

2001 40 83 24 55 N/A N/A 12 42

A certificate is issued to a candidate who passes Module 1, 2, or 3

Copies of the current curriculum, the two case lists and a revised reading list are all

available on the ICE website www.ice.org.uk/ law or contact the ManagementProcurement and Law Department, Institution of Civil Engineers, One Great GeorgeStreet, London SW1P 3AA t +44 (0)20 7665 2116, or [email protected]

The following pages are general comments on how the questions were answered andwhat the examiner was expecting. Each section of each module has a differentexaminer. Each exam script is then moderated by the Sub-Committee on Law andContract Procedure (SCOLCOP) to ensure there is consistency between the examiners.
http://www.ice.org.uk/mailto:[email protected]:[email protected]://www.ice.org.uk/


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Module 1

Section 1

General comments

The majority of candidates obtained a pass in this section, although the standard of

answers was slightly lower than last year.Marks were lost mainly as a result of a failure to fully consider the relevant issues and afailure to properly apply relevant case law to those issues.

The very lowest marks were scored by candidates who either simply restated the factswithout applying the law, or failed to focus on the key issues and therefore ran out of time.

However, such answers were the exception, rather than the rule and most candidatesdemonstrated a good understanding of the legal issues.

Question 1

This was the most popular question of the section, with over 80% of candidatesobtaining a pass.

a) Generally, this was answered well. Better candidates considered the application of the parole evidence rule to the statement made by Greg as to the importance of deliveryand the effect of time being of the essence.

b) The majority of candidates answered this question very strongly. Better candidates considered and applied Alfred McAlpine and Tile Box in relation to thequestion of whether the liquidated damages were a genuine pre-estimate of loss.

c) This proved the most difficult section of the question for candidates. A surprisingnumber of candidates did not consider the test in Hadley v Baxendale and then apply itto each of the scenarios. Better candidates gave reasoned consideration to item (iii)and the extent to which loss of future profit can be recoverable and appreciated that (iv)was an attempt at mitigation.

Question 2

This proved to be the least popular question and was answered very poorly, with onlyapproximately 40% of candidates obtaining a pass.

a) Few candidates appreciated that this question focussed on misrepresentation.Many candidates considered whether the two statements made were terms of thecontract or representations (and received marks for doing so), but did not then go on toapply the law of misrepresentation. Very few candidates considered the significance of the fact that at the time the second statement was made Tom believed it was accuratebut that this was no longer the case when the contract was entered.

b) This section was the main reason for the poor marks achieved on this question,with few candidates appreciating that it focussed on the HGCRA, despite the inclusionof a relatively similar question last year. Those candidates that did consider theprovisions of the HGCRA and applied it to the question tended to score highly, withbetter candidates also considering the right to suspend (and disregarding it) and theapplication of the Scheme.

c) Again, this question concerned the application of the HGCRA and candidates whofared poorly on part b) tended to achieve low marks on this question too. Better

candidates considered both the fact that Tom might now be the employer and the factthat the right to adjudicate may no longer arise.


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Question 3

This question was answered adequately and approximately 50% of those thatattempted it achieved a pass. A general area of weakness was a failure to apply thecorrect cases to the correct facts; for example a number of candidates confused theprinciples in relation to past consideration with those applying to part payment of a debt.

a) Generally, this part was answered well, although some candidates failed toconsider the basic principles before applying them to the facts or to appreciate that thefocus of the question was consideration. The best candidates ran through the case lawin relation to past consideration and concluded with Williams v Roffey Bros and appliedit all to the facts .

b) This was answered less successfully than part a), with some candidates simplyrepeating the same answer or failing to consider the relevant case law (which wasresponsible for over 50% of the marks).

c) A number of candidates failed to consider all of the applicable facts in relationto this question (lack of time may well have been an issue). Very few candidates applied

the doctrine of equitable estoppel in relation to this question, although those who onlyapplied it to part b) did receive some of the marks allocated to this part.


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Module 1

Section 2

General comments

The overall performance in Section 2 was reasonably good, with the majority of candidates achieving marks over 50%. It was almost invariably the case that candidatesachieved a significantly higher mark for their first question. In a number of cases, thiswas inevitable, as they found they did not have sufficient time to complete their secondquestion fully or at all. Further, as explained below, candidates evidently found certainquestions more challenging than others and this was reflected in the marks achieved.

Question 4

This was comfortably the most popular question, and the vast majority of candidateschose to answer it. This question was also the best answered of all three, with manycandidates achieving marks of 15 or more.Candidates generally scored well on the first part of the question, correctly identifyingthat the question involved the tort of negligence and setting out the elements of negligence. The best candidates went on to apply those elements to the factualscenario. A number of candidates also made an effort to discuss the authorities onnegligence.

Nearly all of the candidates were able to identify at least one of the potential defenceshinted at in the scenario. The best candidates were able to identify all three possibledefences, included a discussion of those defences and reached a conclusion onwhether they would succeed in the circumstances.

The vast majority of the candidates identified that the claim would be for loss of earnings, but a number failed to identify the claim for part of the hospital treatment,applying the egg shell skull principle.

Question 5

This was the second most popular question and all but 5 candidates opted to answer it.The standard of answers was variable. There were a number of candidates whoachieved scores above 15, but a similar number who achieved scores below 10.

The majority of candidates were able to identify at least some of the elements of Rylands v Fletcher . The best candidates set out each element, included some

discussion of those elements (referencing other authorities) and applied Rylands to thescenario.

Although the majority of candidates were able to identify at least one of the two potentialdefences to the claim, the answers generally lacked discussion of those defences. Inparticular, a number of candidates simply referenced the lightning bolt constituting anact of god without going on to state the features of a defence of act of god. The samesort of discussion was lacking with respect to acts of third parties.

Candidates generally found the alternative claims of nuisance and negligence moredifficult to identify. In particular, a number of candidates incorrectly relied on analternative claim under Occupiers Liability Act (OLA). Further, where nuisance and/or negligence were identified, the answers generally did not go on to apply the potentialalternative claim to the factual scenario (e.g. a negl igence claim for Roberts failure to


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guard against that which he ought reasonably to have foreseen) and did not identifyrelevant authorities (e.g. Sedleigh-Denfield in respect of nuisance).

Most of the candidates correctly identified the Rylands claim as preferable. However,few candidates identified strict liability as the reason for preferring Rylands .

Question 6

This question was answered by just 7 candidates and those candidates clearly found itchallenging, as only 1 candidate achieved a mark above 10.

The principal reason for the low scores was failing to identify that the question involvednegligent misstatement. In particular, a number of candidates incorrectly analysed thequestion as involving misrepresentation. Further, those candidates who did identifynegligent misstatement as the claim generally did not go on to set out the principles inany great detail.

All of the candidates struggled to identify the defence of novus actus interveniens and

apply that defence to the factual scenario. In most cases, this appears to have been adirect consequence of the failure to identify negligent misstatement as the relevantclaim.

A number of candidates correctly identified the quantum of any potential claims andmade an attempt to apportion damages between Martin and Tony. However, economicloss was not explicitly identified, nor were the relevant principles when consideringeconomic loss. This was similarly the case with the final part of the question, ascandidates correctly advised Tony to pull out the investment, but the reasoning did notdeal with the underlying principles for mitigation of loss.


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Module 2

Section 1

General comments

A marked improvement on the previous year with 83% of candidates achieving over

50% in section 1.To echo an observation from a previous examiners report; many candidates are stillincorporating clauses verbatim into their answers. This may in part add some structureto the answers, but largely remains unnecessary. Similarly, repeating at length extractsfrom the question is unnecessary.

In contrast some candidates relied entirely on loose statements such as reference toclause ., or under the procedure covered in clause with limited or no further explanation. Candidates need to provide suitable points of answer; the mark schemeprovides a guide to required level of detail. Answers must comprise enough narrative todemonstrate understanding of the contract procedures and how to operate them.

The length of answers ranged from inadequately brief to verbose. Those candidateswho clearly knew NEC well answered concisely, gaining a mark for each shortsentence. Whilst unfortunately attracting no further marks, their answers oftenconcluded with a useful summary as to practicalities and links back to NEC principlesand intentions.

Several candidates wrongly felt they had to make assumptions in order to proceed withthe question. This is rarely necessary. If making material assumptions, candidateswould be wise to read through the remainder of the question to ensure it still makessense.

Finally a general plea to all candidates; practitioners should be pedantic in their use of defined and identified terms, but also in the verbs and actions the contract prescribes. I

largely ignored the inappropriate use of requestedagreedalertedinformed butfound it jarring and uncomfortable to read. My plea use instruct, accept, notify etc. asappropriate. Mirror what the clauses say and use clause 13.1 as a starting point.

Question 1

About half the candidates (22 out of 42) answered this question with marks rangingfrom 6 to 23. Question 1 had the lowest average mark compared to the other 3questions, due to how Part (b) was answered.

In general Part (a) was answered well with good appreciation of the Project Manage rs responsibility, the Contractors options and the 8-week time bar not applying.

Part (b) was only answered correctly by 7 candidates. The other 15 who attempted thisquestion answered incorrectly, believing the Contractor was correct to refuse to startwork until his quotation was accepted. Several answers attempted to justify this byintroducing the concept of compensation event implementation; incorrectly citing as thepoint when the works are to be undertaken and linking this to quotation acceptanceunder clause 65.1.

Several of the 7 candidates who answered correctly demonstrated deep understandingof the relation between clauses 14.3, 20.1, 27.3. It is not surprising these samecandidates then went on to answer Part (c) well.

Some of the remaining candidates also correctly cited the assumption under 63.7.

Many discussed a perceived lack of fairness and risk burdened by the Contractor .


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For Part (d) some candidates sat on the fence and did not answer the question.Relatively few mentioned clause 10. Some candidates thought the wait and seeapproach was acceptable, whilst most acknowledged it wasnt although struggled toargue against the bullet points under clause 63.1; I strongly suspect the samecandidates had not read the sentence beneath explaining how to separate work donefrom work not yet done for the purposes of the assessment.

Part (e) confirmed a general feeling that many of the candidates had a greater awareness of the timings and process for administering the sanctions, than the actualcompensation event procedure itself.

Question 2

This was the least popular question, answered by just 12 candidates with a wide rangeof marks. Several candidates dropped easy marks on Part (a) of the question by notoutlining the importance of the programme, emphasising the retention of 25% under clause 50.3.

Some candidates correctly mentioned the Activity Schedule, whilst a couple gotconfused between Activity Schedule and Programme submissions for acceptance.

Part (b) uncovered a range of misconceptions, the majority of which did not costcandidates any marks as they were given supplementary to the answer. These rangedfrom 24 th December being invalid as it is close to a public holiday, through to confusionbetween defined terms; Completion and Completion Date.

Part (c) was answered correctly by the vast majority who achieved full marks for thispart.

Part (d) was answered with a range of possible contractual provision cited as potentiallyhelping the Employer to coordinate Contractors . The question was purposely worded to

draw out Key Dates and the majority of marks were won by candidates who spottedthis. Part (e) was in general answered well with most candidates correctly stating theProject Manager should perform his own assessment of the compensation event. Theinitial notification and timings where also well understood and explained.

Question 3

Question 3 was attempted by 24 of the 42 candidates with scores ranging from 10 to24, with the highest average mark.

Under Part (a) most candidates answered the question with a few solid points, but fewgave the top three together (cash-flow, risk of pricing errors, stifled innovation).Frustratingly some candidates clearly did not read the question and turned it around toexplain the disadvantages of the Contractor compiling.

Most candidates answered Part (b) correctly in suitable depth, explaining how thedefined terms flowed through into the main options and what this meant under option Ain terms of its impact on the cash-flow. Most answered part (c) correctly also, those thatdidnt become confused between price and cost. Candidates should note apreliminary assessment of the Contractors share is made by the Project Manager atCompletion of the whole of the works; not at completion of each activity or compensation event.

For Part (d) most candidates correctly cited the procedure and explained when theprocess of Activity Schedule revision would be relevant. In doing so candidates pickedup the majority of marks. Whilst the answer was the PM should reject, some candidates

explained how a Project Manager, keeping the Employer informed (some suggestingrisk reduction meetings) might accept the revision in preference to termination,bankruptcy etc


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Most candidates correctly thought no compensation event was due under Part (e).Some went on to show deep understanding of the relationship between 14.3, 20.1,Defects, Activity Schedules not being Works Information (WI) and the limitations of acceptances with respect to 14.1.

Question 4

This question, attempted by 26 candidates, had the widest range of scores from 4 to 24.It had the second highest average score and was generally answered well but for onekey point regarding non-acceptance.

Part (a) was answered well by the majority of candidates with most picking up fullmarks. A few candidates missed easy marks by not detailing how the Project Manager manages the matter (risk reduction meeting, proposals/solutions/actions), despiteexplaining the notification process well.

In Part (b) several candidates did not appreciate that the Project Manager can reject for any reason; that he must give a reason; and that rejecting for a reason in the contractwould not trigger a compensation event.Part (c) was answered poorly by the majority in that most missed the wording of thequestion that asked candidates to put themselves in the position of advising theContractor . Far too many did not consider advising the Contractor to notify acompensation event, preferring instead to notify an early warning for the impacts of latereply to design submission.

It is acknowledged that early warning may be valid for the future uncertainty broughtabout by not having a reply and that risk reduction meetings are useful as a discussiontool. However candidates should remember that not notifying this compensation eventwithin 8 weeks can result in the Contractor's loss of entitlement.

The remaining parts of the question relating to Defects were on the whole answeredwell.

Finally a general observation with respect to early warnings: candidates often thoughtthat if the Project Manager failed to communicate when required, the Contractor mustnotify an early warning explaining the implications of the failure to reply. Often theProject Managers failure was in relation to compensation events/quotations replies.Early warning was cited in preference to the use of the reminder notification/sanctions.

Furthermore many considered the Contractor not notifying an early warning in suchcircumstances might impact on the assessment of a compensation event. Candidatesshould note that the Contractor is not required to use the early warning process toconstantly remind the Project Manager of his obligations.


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Module 2

Section 2

General comments

The average mark for this section went down from 12.7 last year to 11.6 this year. This

is quite disappointing and mainly due to a number of candidates scoring quite lowmarks.

In previous years, many candidates scored similar marks on both questions chosen,with the average marks from the 4 questions ranging from 10.7 to 13.9.

Most candidates seemed to have tried to actually answer the questions in front of them,which of course is good, as in previous years it appears this has simply not been thecase.

Question 5

27 of 42 candidates attempted this question, but the lowest average of 10.7 out of 25was achieved.

(a) Most candidates picked up that there was no contractual difference between thetenderers, others did not grasp the concept of listing matters within the Contract Data togo to the post-contract Risk Register.

(b) The question was reasonably well answered, candidates needing really to just lookat the definition of the Risk Register and answer from there.

(c) Most candidates looked at the contract to spot that the Project Manager upkeepsthe risk register and it is reviewed at risk reduction meetings.

(d) This question seemed not to be well answered by most candidates who, from (a),then formed the opinion that the Employer had bought the risk of vandalism from theContractor just because the matter was noted on Contract Data part one as somethingto go onto the Risk Register.

(e) The intricacies of payment, compensation events, Employers/Contractors risksand insurances seemed to catch a lot of candidates out here, with many suggestingwrongly that the Contractor could claim the 500.

Question 6

Only 12 attempted this question and the average mark was 13.9 out of 25, the highestaverage of the 4 questions.

(a) The question was designed to tease out candidates knowledge of the headline

differences between ECC and ECSC then apply it to the scenario in front of them.Some good answers were produced.

(b) Too many candidates believe that the pricing mechanism alone would drive costcertainty, so chose Option A ahead of Option C, without focusing on clear and coherentWorks Information being far more likely to deliver the certainty required.

(c) Candidates generally gave good answers here, briefly advising what eachsecondary Option provided for and whether they would recommend it or not given theparticular circumstances. It was good to see a definite yes or no being given torecommendations for each of the Options.


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Question 7

22 candidates attempted this question, achieving an average of 11.9 from 25 marksavailable.

(a) Most candidates picked up this was disappointing but also provided for in thecontract, assuming the Site Agent was a named key person.

(b) This question was designed to test candidates view of the moral dilemmapresented versus the successful completion of the project. Most drew in therequirements for the level of replacement person required.

(c) Nearly all candidates realised the replacement person was certainly not suitableand used the contract to produce the required response.

(d) A practical response was sought here as well as using the contract properly interms of delegation. Maybe a 2 week gap could be covered by delegation to someonealready on the job, what if it extended beyond this? Some candidates answered the mixof practicality/contract well.

(e) Many candidates did not spot the deliberate wrong use of the word approval nor pick up the relevance of clause 14.1; some commented let the Contractor go with it ashe is willing to take the risk of this, which is not correct. Otherwise, most picked up thatit would be a Contractor problem to sort out his design.

Question 8

28 candidates attempted this question achieving an average of 11.2 marks of the 25available.

(a) Most realised that the Works Information is the correct place to state such aprovision and this would require to be put right through an instruction by the ProjectManager.

(b) Completion is a defined term and candidates needed to comment on theimportance of the training and how it may or may not affect Completion.

(c) This was another test of candidates ability to apply the contract correctly and notgrab the poss ible bargain on offer. Some took the bargain even though the contractdoes not actually allow lump sums to be offered in this way.

(d) Some candidates spotted the wrong clause 64.4 was quoted by the Contractor andthen went on to refer to the correct clause and determine the correct next steps. Otherssimply wrongly assumed that deemed acceptance applied.

(e) Many candidates failed to appreciate that the additional works can take place,providing this was not a proposed quotation, and the compensation event would run inparallel. Others wrongly felt the cost would simply be disallowed.


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Module 3

Section 1

General comments

Six candidates sat the Module 3 Paper this year. The standard of answers wasextremely varied. In common with other years, the answers that followed the contractand were clearly rooted in the actual clauses scored well.

Question 1

This question was compulsory. It was a demanding question which was focused oncertain aspects of the compensation event process, the cashflow implications and theProject Managers duties. Many candidates answered parts well but few providedconsistently good answers across all three parts. Very few candidates structured their answer as advice to the Project Manager, which was what was asked for.

(a) This part was answered reasonably well by most candidates. It provided anopportunity for candidates to explain the Project Managers relatively straightforwardobligations to deal with quotations. Few candidates were as forthright as they couldhave been that the Pr oject Managers failure to assess the Compensation Event was abreach of his obligations. No one considered that this might be a breach of the ProjectManagers professional duty to the Employer and so make the Project Manger liable for increased costs which the Employer might suffer. Most candidates correctly identifiedthat the contractor could seek to have his quotation deemed to be accepted under Clause 62.6 or 64.4.

(b) Most candidates identified that the contractual processes for valuing compensationevents under Option A and C are very similar. Surprisingly few made the very obviouspoint that there is a very considerable practical difference. Under Option C theContractor continues to be paid for the instructed work even if the compensation eventis not implemented, whereas under Option A he will not.

(c) Many candidates struggled with this part of the question. It demanded a clear practical understanding of the difficult interrelationship between clause 50 and Y(UK)2,as well as the termination provisions. Most candidates identified that the Contractor hasa right to terminate under Clause 91.4 Reason 16 even if a valid withholding notice hasbeen issued. Some commented on the obligation of the Project Manager to incorporateit in certificates. Many candidates wasted a considerable amount of effort in discussingthe validity of the withholding notice and some even provided advice to the Contractor,rather than the Project Manager, on how the notice could be disputed.

Question 2

Only one candidate answered this question.

Question 3

Five of the six candidates answered this question. There was a very clear dividebetween those that answered it well and those whose answers were very poor. Thequestion was a relatively straight forward question about the Project Managers right toreject compensation events and the interrelation between the early warning system andthe assessment of compensation events. The key contractual clauses were Clauses61.4, 16.1, 61.5 and 63.5. Some candidates failed to mention any of these clauses. The


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best answers followed the chain of contractual obligations and made deductions fromthem with comment on the evidence available to establish the necessary facts to reachconclusions. The poorer answers were divorced from the contractual obligations and inthem candidates often leapt to conclusions without supporting logic.

Even the best answers failed to identify some relatively obvious points, such as the

failure by the Project Manager to early warn in the first and third scenario was a breachof Clause 16.1 or that the requirement to reduce the assessment is linked to the likelyactual effect of a risk reduction meeting rather than what the Project Manager wouldwish that effect to have been with hindsight.

Finally few of the candidates phrased their answer as advice to the Contractor. This is aperennial problem and invariably costs marks.

Question 4

No candidates answered this question.


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Module 3

Section 2

General Comments

The six candidates marks were closely grouped for Question 5, the compulsory question.

Four out of six had answered Question 7, where there was wide range of scores. Onecandidate answered Question 5 only. Higher scores were achieved by those candidateswho applied the contract to the facts in the questions and lower scores were achievedwhen the contract was quoted without reference to the facts. Most candidates stuck rigidlyto the contract and missed the opportunity to enhance their scores by failing to suggestthat the parties in dispute should talk to each other (with or without assistance) andattempt to reach agreement through negotiation. Some candidates used NEC terms intheir answers, for example, compensation events.

Question 5 compulsory

This question was about site investigation. The benefits and risks of accepting a tender for an alternative method of construction without adequate site investigation and theconsequences of encountering unforeseen conditions, in the form of contaminatedground. None of the candidates gave particularly helpful commercial advice to theEmployer to help avoid a large fine due to a delayed contract (whoever was responsible).

Question 6

A strict contractual line was suggested which could have left the Employer vulnerable tothe Contractors claim that there was a less costly way of satisfactorily rectifying thesituation.

Question 7

Four candidates answered this question with varying degrees of success. The essence of the question was the failure of the Engineer to administer the contract properly whenissuing numerous variations before and after substantial completion. The best answer presented each point in a clear reasoned way and then summarised the advice in simpleterms.

Question 8

This question was not attempted by any of the candidates.


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Institution of Civil Engineers

Examination in Civil Engineering Law and Contract Management 2012

Module 1 (English and Scots Law)

Monday 11 th June 2012Time permitted: 14:00 to 17:20 (3 hours 20 minutes)

There are three questions in Section 1 and three questions in Section 2. Answer any two questions from each section ; a total of four questions.Please answer questions from Section 1 in an answer book provided (Yellow book) andanswer Section 2 questions in a separate answer book provided (Yellow book).

All questions carry equal marks

Only un-annotated copies of Statutes and Statutory Instruments may be taken into the Examination

References to Cases and Acts should be quoted where possible.

Please indicate on the outside of the Answer Booklets whether your answers will bein respect of Scots Law.


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Section 1

Question 1

Greg is a market trader, specialising in the sale of potatoes. Greg enters into a written

contract with Giles, the farmer, which states that Giles will deliver 500 bags of potatoesto Greg on 1 August 2011 and that time of delivery will be of the essence. Giles isaware that Greg usually sells only 100 bags of potatoes per day on his stall and hasentered into an agreement with John, owner of Burger Queen, whereby Greg wouldsupply Burger Queen with 400 bags of potatoes on 2 August 2011. The contractbetween Greg and Burger Queen provides that

a) if the potatoes are delivered on time, Burger Queen will make further orders; but

b) if Greg fails to do so, Liquidated damages of 5,000 per day will be deducted fromthe contract price.

Giles is unable to deliver any potatoes on 1 August 2011 and alleges that despite the

term in the contract, Greg had suggested he didnt really need the potatoes by this date.Greg accepts this as repudiation of his contract with Giles but is unable to obtain anymore potatoes until 3 August 2011. Michelle agrees to provide Greg with 400 bags of potatoes on 3 August 2011 at a price that is 20% higher than in the contract with Giles.

Advise Greg on the following:

a. Was Greg entitled to accept Giles actions as repudiation of their contract?

[6marks]

b. Is Burger Queen entitled to deduct liquidated damages fromGreg?

[5marks]

c. To what extent Greg can recover from Giles :

(i) Loss of profit on the 100 bags of potatoes he would havesold on the market stall;

(ii) Any liquidated damages payable to Burger Queen;

(iii) Loss of profit on future orders with Burger Queen;

(iv) The additional cost of purchasing the potatoes fromMichelle.

[14marks]


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Section 1

Question 2

Tom Foster, an architect, is negotiating a contract with Marketland, a nationwidesupermarket, to design a large new flagship store. During negotiations Tom makes thefollowing statements:

1. The store will be the best supermarket in the country ; and

2. My design will ensure that the building can contain 500 customers at any one time .

In order for the supermarket to be profitable to Marketland it is essential that the storedoes in fact have the capacity to hold 500 customers. The parties later enter into awritten contract, which does not contain either of the above terms. Unfortunately theproject is not a success and after the store is constructed it can only contain 200customers as a result of revisions Tom made to his design before entering into the

contract.a. Advise Marketland on its rights against Tom [11

marks]

During the project on 1 April 2011 Tom engaged Toilets R Us to design the public toiletsin the store. The parties entered into a written contract whereby Tom informed Toilets RUs that its invoices would only be certified and paid within 30 days if Tom has receivedpayment from Marketland. Toilets R Us agreed to this and having completed its worksubmitted an invoice for 50,000. Tom has not certified or paid this invoice on the basisthat he has not received payment from Marketland.

b. Advise Toilets R Us on any rights they may have against Tom forthe outstanding sums and how those rights may be pursued

[11marks]

c. How would your answer to b) differ if Tom had engaged Toilets RUs to design work on his own residential property?

[3marks]


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Section 1

Question 3

Brian enters into a contract with Poorbuild Limited whereby Poorbuild agree to build a

conservatory to Brians House. The contract provides that: Poorbuild are to be paid 100,000;

Poorbuild must complete the conservatory by 1 June 2012; and

Poorbuild will do everything necessary to complete by this date.

During the project Poorbuild encounter financial trouble and in the course of discussionBrian agrees to pay them an extra 10,000 to ensure that they complete on time (asBrian is holding a large party on 2 June 2012 for which the conservatory will be thecentre point). Poorbuild complete on time.

a. Can Poorbuild enforce the agreement to be paid the extra10,000?

[16marks]

After the conservatory is completed, Brian suffers financial difficulties too and does notmake payment by the dates set out in the contract. Poorbuild agree to accept 90,000as they are desperate to get paid and Brian tells them that they will receive no moneyunless they accept it.

b. If Poorbuild pursued Brian for the 110,000 could Brian enforcethis new agreement?

[5marks]

c. Would your answer to (b) differ if Brian did in fact have themoney to pay Poorbuild; Poorbuild were aware of Briansposition but still agreed to accept 90,000 and following thisagreement Brian gave the remaining 20,000 to charity?

[4

marks]


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Section 2

Question 4

It is the final weekend of the season and all football eyes are on the title decider between local rivals HBFS United and Carnot Rovers. One of the most eagerlyanticipated contests is between Carnots top striker Thomas and the HBFS captain Guy,who have been goading each other in the press throughout the season. The day beforethe match, the stakes are raised even higher when the newspapers reveal that Thomashas been having an affair with Guys wife.

The match itself is a fierce one. With the score at 2-2, Guy charges up the pitch. AsThomas receives the ball, Guy sees an opportunity and commits a brutal tackle. Hefollows it up by stamping on Thomas leg. Gu y receives a red card for his actions, butHBFS nonetheless heroically win the game in the last minute. In a post-match interview,Guy is asked about the tackle and responds, I wasnt thinking about getting the ball.

Thomas is very seriously injured as a result of Guys actions. The injury is made evenmore severe by Thomas refusal to wear shin pads for the match, as he felt he would

not need them. Despite the best efforts of Carnots medical team, Thomas is forced toretire just one month after the match. He had previously publicly expressed his firmintention to retire in two years time, when his highly lucrative contract with Carnot(worth 2 million per annum) was due to expire.

After his retirement, Thomas experiences a recurrence of a neck pain he had sufferedfrom when he was last seriously injured (as a teenager). Thomas checks himself into aprivate hospital. He initially receives standard treatment for a period of six months andrecovers. However, he is then persuaded by a Dr Flynn to undertake a very risky,experimental treatment for a further period of six months. This, ultimately, worsensThomas condition. The treatment is later condemned in the medical community asdangerous. Thomas is invoiced for the full 12 months of treatment.

Thomas comes to you and expresses his wish to make a claim against Guy.

a. What claim would Thomas have against Guy? What wouldThomas have to demonstrate to be successful? [9

marks]

b. What defences could Guy potentially raise to avoid liability? Towhat extent, if at all, are these likely to succeed? [10

marks]

c. If successful, what could Thomas claim from Guy by way of

damages?

[6

marks]


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Section 2

Question 5

Robert owns the freehold for the Staten Farm, a large farming estate which makes

significant profits from its free-range produce. Adjacent to Staten Farm is a plot of landowned by Curtis, on which he has built a rather grandiose mansion. Owing to their rather different views on life, Robert and Curtis have a difficult relationship with oneanother and conflict is never too far away.

The land on which Staten Farm is situated is considered holy by members of a localsect. One night, three members of that sect (Clifford, Gary and Corey), in a somewhatinebriated state, decide to conduct a ritual on the land directly in front of the mainfarmhouse, where Robert is sleeping. Clifford, Gary and Corey have no difficultiesgetting onto the land, as Roberts free range philosophy is such that he does not believein any fences or gates marking off the Farm.

Once on the land, Clifford, Gary and Corey set a custom-made totem pole on fire aspart of the ritual. This fire runs out of control and catches a large pile of hay. The firespreads towards the border between Staten Farm and Curtis land, which is marked off (by Curtis) by a small stone wall with an ornamental bush on top. As the fire reaches thewall, a bolt of lightning strikes which enables the fire to jump into Curtis land. The firethen reaches Curtis mansion and burns it to the ground.

Curtis is not in the mansion at the time of the fire, but he is furious upon being informedthat his mansion is no more. Curtis comes to you and seeks advice on a possible claimagainst Robert.

a. Curtis says he has previously been advised about a case calledRylands v Fletcher which may be relevant. If so, what wouldCurtis have to demonstrate to make a claim? [7marks]

b. How could Robert potentially avoid liability in thesecircumstances?

[8marks]

c. What other claims would be open to Curtis against Robert? [8marks]

d. Would a claim under Rylands v Fletcher be preferable for Curtis?If so, why? [2

marks]


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Section 2

Question 6

Upon retiring from his job at Factory Co, Tony decides to withdraw the full contribution

to his pension plan (some 250,000) and try his hand at investments. He speaks to hisson, a banker in the City, who refers him to Martin, a broker who is known for having aMidas touch when it comes to picking up-and-coming companies.

Tony meets with Martin, who tells him about a new industrial venture called JD Ltd(JD). Martin says he has looked at their business plan and watched its developmentfor a number of months and says it is a guaranteed success. Tony is initially reluctantbut eventually agrees to invest the full 2 50,000 in JD on the strength of Martinsadvice.

Excited at the prospect of a big return on his investment, Tony checks JDs share pricereligiously for the next month. He is disappointed to find that the shares steadily declinesuch that, by the end of the month, he has lost some 125,000 on his originalinvestment. Tony decides to look into it further and, upon a brief inspection of theinvestors pack (sent to him following his investment), realises that JD has been thesubject of a government investigation for some months with all contracts frozen in themeantime.

Tony rings up Martin who, when confronted with this information, agrees that it was apoor investment and suggests Tony pulls out while he can. Tony rings up his son tocomplain about Martin, who suggests getting a second opinion from Alan, another friendof his in the City with decades of experience in picking and choosing investments. ToTonys surprise, Alan says that the government investigation will fold imminently and theshares will soar. Alan says Tony would be mad to pull out his money now and makes itclear that JD will grow rapidly.

As a result, Tony decides to leave in his investment (still at 125,000). However, theshare price continues to drop, such that Tonys investment stands at 75,000 by theend of the following month.

Tony, exasperated with the advice he has received, now comes to you.

a. On what basis does Tony have a claim against Martin? [10marks]

b. To what extent, if at all, can Martin avoid liability in respect of anyclaim by Tony?

[6marks]

c. What would Tony be able to claim for by way of damages andfrom whom?

[6marks]

d. Tony says that, if he has a claim, then there is no reason why heshould pull out the remaining 75,000 investment. Is this correct?

[3marks]


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Points to answer Module 1 Section 1Question 1a) It was an express term of the contract that delivery would be made on1 August

1 mark

Discussion as to whether the term is sufficiently important so as toenable Greg to treat the contract as terminated 2 marks

Discussion of parole evidence rule 2 marks As the contract states time is of the essence Greg can accept asrepudiation

1 mark

b)Liquidated damages could be a penalty clause 1 markCorrect citation of Alfred McAlpine v Tile Box and discussion as towhether the sum is a genuine pre- estimate of Burger Queens losses: itdoes not need to be correct and only if it is substantially different fromthe losses likely to be suffered will it be unreasonable.

3 marks

It is likely that Burger Queen can enforce the LDs 1 markc) Correct citation of both limbs of Hadley and Baxendale 2 markItem i) is likely to fall within the first limb of Hadley and Baxendale sowould be recoverable

1 mark

Item (ii) may not fall within the first limb, unless the LDs are common inthat industry and the level is reasonable

2 marks

LDs will be recoverable under the second limb if John is aware of thecontract with BK

1 mark

Item (iii) is unlikely to fall within the first limb. 1 markLoss of opportunity to earn future profits under the same contract canbe recoverable (ref to Jackson v Royal Bank of Scotland). Application

of this to losses under a different contract.

3 marks

Item (iv) is Greg attempting to mitigate his losses 1 markCosts of mitigation can be recovered if reasonable (BritishWestinghouse)

2 marks

(iv) can be recovered 1 markQuestion 2 a)Identify that this is likely to be an issue of misrepresentation 1 mark

A misrepresentation must be a statement of fact, not opinion 1 markCite Bisset v Wilkinson 1 markItem 1 is an opinion, so will not give rise to a claim 1 mark

A misrepresentation must be false, at the time Tom made therepresentation it was true

1 mark

Tom was under a continuing duty to correct his misrepresentation andtherefore should have informed Marketplace of his design changebefore entering into the contract

1 mark

A misrepresentation must also induce the contract and be addressed tothe party relying upon it.

2 mark

Marketland has a claim for misrepresentation 1 markDiscuss types of misrepresentation and conclude as to which oneapplies (probably negligent).

2 marks

b) Identify that the relevant clause is a pay when paid clause 1 mark

Identify that such clauses are not permitted and so the clause is invalid 1 markThis is a construction contract 1 mark


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Refer to Section 113 of HGCRA 1 markRefer to paragraph 4 of Part II of the Scheme 1 markIdentify that payment will be due on making the application or 7 daysfrom the end of the month (whichever is later)

1 mark

Refer to Paragraph 8 of Part II of the Scheme 1 mark

Identify that payment is due 17 days from payment 1 markToilets R Us can therefore pursue Tom for breach of contract 1 markToilets R Us could rely upon adjudication 1 markRef to section 108 HGCRA 1 markc)The HGCRA does not apply to a contract with a residential occupier 1 markRef to section 106 HGCRA 1 markThe section would apply and there would be no adjudication provision 1 markQuestion 3a)For a valid contract to have formed consideration must be present 1 markDefine consideration e.g. some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other

2 mark

Cite Currie v Misa 1 markConsideration must have some value 1 markState the general rule that a promise to perform a pre-existing dutydoes not make good consideration

2 mark

Cite Stilk v Myrick 1 markPre-existing duties may be consideration if the nature of those dutieshas changed significantly

1 mark

Cite Hartley v Ponsonby and conclude it does not apply 2 markState the exception where the promise obtains a practical benefit 1 mark

Cite Williams v Roffey Bros 1 markState that as the work was completed on time and Brian can now havehis party; and there was no duress and he has obtained a practicalbenefit so a contract may have been formed.

3 mark

b)Payment of a lesser sum cannot be satisfaction of a larger debt 1 markCite Pinnels Case and F oakes and Beer and D & C Builders v Rees 3 markThere is unlikely to be consideration or a valid contract 1 markc)Consider and explain equitable estoppel 2 markCite Hughes v Metropolitan Railway 1 markBrian may be able to rely upon equitable estoppel as a defence 1 mark


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Question 4 Points to answer Module 1 Section 2 The legal issues in this question are:

Negligence;Volenti non fit injuria;

Contributory negligence;Egg shell skull rule; andNovus actus interveniens.

a)The candidate will need to identify the cause of action as beingnegligence and what needs to be shown to make out that cause of action. In these circumstances, this means showing that:

o (1) Guy owed a duty of care to Thomas as a fellow player;o (2) Guy breached that duty by tackling him in a reckless manner and following it up with the stampo (3) As a result of Guys actions, Thomas suffers an injury.

9 marks

b)o Thomas contributory negligence in failing to wear shin pads,including an explanation of the meaning of contributory negligence andapplicable principles for apportionment.

3 marks

o Volenti non fit injuria in respect of the claim as a whole. Argumentthat Thomas agreed to run the risk as a willing participant in the footballmatch. Discussion will, ideally, acknowledge the difficulty in showingvolenti but discuss the greater likelihood of implying consent in asporting context

3 marks

o Novus actus interveniens. Thomas may be able to avoid liabilityfor the bills for the experimental treatment as being an unforeseeableindependent act of a third party

4 marks

c) o Damages available in respect of the 2 million contract for the twoyears until his retirement

Damages available relating to the treatment for the period of six

months, applying the egg shell skull rule to personalities (Smith VLeachbrain)

3 marks

3 marks,Question 5

The legal issues in this question are: Rylands v Fletcher claims;Acts of third parties;Acts of God;NuisanceNegligence

a)Candidate to identify the elements of such a claim with discussions of 7 marks


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underlying principles. Namely:

(1) Must be a dangerous thing.

(2) Must have been an escape.

(3) Must have been a non-natural use of land.

Claim here will be against Robert on the basis of the escape of fire(being a dangerous thing) fr om his land onto Curtiss land, causing lossby burning down his mansion.b)Two potential defences .marks for identifying both with discussion as tothe principles

(1) Act of a third party. Will need to be an act of a third party which hascaused the damage in circumstances which could not reasonably havebeen foreseen and guarded against. Act of third party here obviouslyrelates to the act of the members of the sect setting the totem pole onfire on Roberts land.

4 marks

(2) Act of God. Will need to show an occurrence which is exclusivelythe consequence of natural causes, of an extraordinary nature andsuch that it could not be anticipated or provided against by thedefendant. The act of God here will be the bolt of lightning whichfacilitat ed the jump from Roberts land to Curtiss land.

4 marks

c) Negligence claim against Robert in respect of the acts of the sect.Established that there may be a claim in negligence in failing to guard

against that which the owner ought reasonably to have foreseen(Northwestern Utilities v London Guarantee and Accident Co [1936] AC108 at 125 per Lord Wright). Candidate will set out, briefly, theelements of any such claim

4 marks

Nuisance claim against Robert, being the obvious further or alternativeclaim to a claim under Rylands. That claim will be that the fireconstituted unreasonable interference with Curtis enjoyment of hisland, causing the damage to his mansion. Established that an owner of land may be liable in nuisance for the acts of third parties (Sedleigh-Denfield)

4 marks

(d) Liability is strict in a claim under Rylands, so Curtis would not need toshow that the escape could not have been prevented by the exercise of reasonable care

2 marks

Question 6The legal issues in this question are:

Negligent misstatements and Hedley Byrne ; Novus actus interveniens ; andMitigation of loss.

(a)Candidate to identify the claim as being for negligent misstatement.

The following principles should be set out (Hedley Byrne)

6 marks


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(1) Duty of care to take care in the making of statements ariseswhenever a special relationship comes into existence. Such arelationship comes into being where a person seeks advice or information from another, who is under no contractual or fiduciaryobligation, in circumstances in which a reasonable man so askedwould know that he was being trusted or his skill being relied on anddoes not disclaim responsibility for it;

(2) Breach where statements are negligently made;

(3) Liability in respect of loss suffered as a result of the negligentmisstatement.

Applying the principles to the facts, Tonys claim against Martin, insummary, arises out of their special relationship, where Tony soughtadvice from Martin who used his special knowledge and skill in pickinginvestments under no obligation and Tony reasonably relied on hisstatements as to JDs prospects

4 marks

(b) Martin may be able to avoid some liability on the basis that Alans ownnegligent misstatement constituted a novus actus interveniens , thusextinguishin g Martins liability to Tony thereafter. Candidate should alsoconsider the relevant principles, including the extent to which such anact was foreseeable

6 marks

(c) Tonys claim would be for economic loss. Candidate should note thecircumstances in which such damages may be recoverable and applythem to Tonys position.

4 marks

Candidate should then go on to apportion the damages to Martin andTony

2 marks

(d)Candidate should be able to explain why this is not correct havingregard to the principle of mitigation of loss, namely that a claimantcannot recover damages in respect of loss which could reasonablyhave been avoided (British Westinghouse). Candidate should go on toadvise that Tony pull out his investment in the circumstances

3 marks


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Institution of Civil Engineers

Examination in Civil Engineering Law and Contract Management 2012

Module 2 NEC (English and Scots Law)

Monday 18th June 2012

Time permitted: 14:00 to 17.20 (3 hours 20 minutes)

There are four questions in Section 1 and four questions in Section 2. Answer any two questions from each Section ; a total of four questions.

Please answer questions from Section 1 in an answer book provided (Green book) andanswer Section 2 questions in a separate answer book provided (Green book).

All questions carry equal marks.

You may consult un-marked copies of the NEC3 Engineering and ConstructionContract (ECC), NEC3 Engineering and Construction Subcontract (ECS), Statutes,CDM Regulations and CESMM3.

All questions must be answered using NEC3 Contracts.

Please indicate on the outside of the answer booklets whether your answers will be inrespect of Scots Law.


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Section 1

Question 1

During the construction of a new rural highway under a Contract incorporating ECC

Option C and secondary Option W2, the Project Manager instructs a change to theWorks Information to include for an additional pond. It is clear the additional works willincrease the total of the Prices and delay Completion, yet the Project Manager does notnotify a compensation event at the time of giving his instruction under clause 14.3.

a. Upon receiving this instruction the Contractor believes it to be acompensation event. How should the Contractor proceed and isthere a time limit? How should the Project Manager reply to anynotification the Contractor gives and within what period?

[6marks]

Later the Project Manager decides the event is a compensation event and instructs theContractor to submit a quotation. Around this time the Contractor submits a revisedprogramme for acceptance. His programme shows an immediate start on the new pondwill best mitigate the delay and cost effects. The programme is accepted.

b. Several weeks later the work has still not commenced. TheContractor argues the Project Manager has not yet accepted hissubmitted quotation and he refuses to start the additional work.Is the Contractor right to delay for this reason? Explain your

answer.

[6marks]

Eventually the Contractor commences work on the new pond some 3 weeks later thanprogrammed. The Project Manager decides the Contractor s quotation did not correctlyassess the compensation event and he notifies the Contractor he will be making hisown assessment.

c. What relevant assumption might the Project Manager base hisassessment on given the works did not commence as soon as

they should have?

[4marks]

On a separate issue, during February the Project Manager instructs a change to theWorks Information for parts of the footways, requiring them to be coated with red slurryand marked as cycle ways. The additional works are planned for April and theContractor includes a reasonable time risk allowance of 2 days in his quotation, as thecoating cannot be laid below a certain temperature.

The Project Manager considers the Contractor s quotation is realistic but withholdsacceptance and waits to see if the two days risk allowance are used. If not, he intendsto do his own assessment based on actual Defined Cost plus the resulting Fee.


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d. Is the Project Manager s planned strategy valid? Explain youranswer

[5marks]

e. What can the Contractor do if the Project Manager fails to reply tothe quotation or provide his own assessment of thiscompensation event, and what effect might this ultimately haveon the Prices and Completion Date?

[4marks]


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Section 1

Question 2

The Project Manager on an ECC Option C contract for the construction of a new factoryunit, instructs the Contractor to submit a first programme for acceptance (no programmeis identified in the Contract Data). Four weeks later the

Contractor has still not

submitted a programme and the Project Manager is about to assess the amount due for a forthcoming assessment date.

a. Outline the importance of the programme and how its absenceaffects the Projects Manager s asse ssment of the amount due?

[5marks]

Eventually the Contractor submits a detailed programme for acceptance that shows theorder and timing of the operations and details of resources and Equipment. However,

the programme optimistically assumes best productivity throughout with plannedCompletion a month earlier on the 24 th December.

b. How might the Project Manager reply to the submittedprogramme?

[5marks]

The Employer also has a separate ECC contract with an M&E specialist who will beinstalling the air conditioning unit on the same project.

c. What defined term refers to those who are not the responsibility ofthe contractor and have no part in his contract with the Employer ?Give two examples.

[3marks]

The work of both Contractor s will need careful coordination to ensure the project isdelivered on time. The Contractor constructing the factory will need to have the worksready for the M&E Contractor to install the air conditioning unit by a specific date.

d. Explain what provisions of the contract could help the Employer coordinate the two Contractor s, whilst protecting againstadditional costs? Explain any limitations.

[6marks]

The Project Manager is at a disadvantage when considering quotations for compensation events if the latest revised programme submitted for acceptance has notbeen accepted for a reason stated in the contract.

e. How does the contract address this disadvantage? Explain theprocess the Project Manager follows to progress through thecompensation event?

[6marks]


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Section 1

Question 3

A growing company has awarded an ECC Option A contract for the construction of a

new multi-story car park adjacent to its offices. The Employer left tenderers free todefine the activities on their Activity Schedule.

a. Had they not taken this approach, explain the possibledisadvantages i.e. if the Employer had defined the activities onthe Activity Schedule.

[5marks]

For one Contractor its the first time they have bid on a priced Activity Schedule basis.They are a bit unsure how to structure it and end up including a document under Contract Data part two entitled Activity Schedule, but presented much like a bill of

quantities summary e.g. A23 Steel reinforced concrete works 1,400,350

A24 Exterior blue steel cladding to fire escape 70,465

The Employer does not challenge this format and the Contractor s tender is successful.

b. In four weeks time the Project Manager will be making anassessment of the amount due. How might the Contractor bedisadvantaged by his approach to pricing the activity schedule?

[5marks]

c. How would your answer to part b. differ if it was an option Ccontract?

[3marks]

Two weeks after the commencement date the Contractor submits his first programmefor acceptance showing a realistic sequencing of activities. He also submits a revised

Activity Schedule that relates to his programme

d. Is the Contractor able to submit a revised Activity Schedule? Ifso are there any limitations and how the Project Manager might

reply?

[5marks]

The Works Information specifies blue cladding to the fire escape but the Contractor canbuy green cladding at much lower cost. He had therefore included reference to greencladding in his revised Activity Schedule, which was accepted by the Project Manager .The Project Manager notices the arrival to Site of the green cladding and tells theContractor it must be blue. The Contractor notifies a compensation event as he willnow incur significant additional cost and delay.

e. Is the Contractor entitled to a compensation event? Explain yourreasoning. [7marks]


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Section 1

Question 4

Consider an ECC Option C design and build contract for the construction of a newpedestrian bridge between two shopping centres.

The Contractor submits his design for a treated steel floor to the Project Manager for acceptance. The Employer s Works Information was not specific regarding the type of floor to be used. The following day the Employer informs the Project Manager he isconsidering having a marble floor.

a. Upon hearing the Employer is considering a marble floor, howshould the Project Manager alert/manage this matter with theContractor ?

[4marks]

After the Contractor has submitted his design for the steel floor the Employer tells theProject Manager he now definitely wants a marble floor in the bridge.

b. Assuming the Contractor s design for a steel floor complies withthe Works Information and the applicable law; can the Project Manager reject it? If so what are the implications?

[4marks]

Three weeks later the Contractor has still not heard back from the Project Manager . The Accepted Programme shows the design acceptance was needed the previous day andthe Contractor is starting to incur additional costs due to the delay. If he doesnt order the materials soon he may miss a window of supply resulting in considerable delay tothe project.

c. What would you advise the Contractor to do in this situation? [6marks]

On a separate issue, the Employer s Works Information specifies all exposed steel i s tobe painted in a specific shade of purple. The Contractor overlooks the requirement for purple and submits his design detailing blue paint. The Project Manager accepts theContractor s design.

Half of the bridge is painted blue before the Supervisor notices and notifies a Defect tothe Contractor .

d. The Contractor argues there is no Defect as his design wasaccepted by the Project Manager , clearly showing blue paint. Isthe Defect valid?

[6marks]

The Employer during a visit to the Site decides that he actually quite likes thecontrasting blue and purple and advised he would be happy for the bridge to be blueand purple.

e. What is the process for accepting a Defect? Is this acompensation event?

[5marks]


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Section 2

Question 5

The Employer adds some matters in Contract Data part one which he wants to beincluded in the Risk Register these include vandalism, theft and protesters. Tenderer

A, when completing Contract Data part 2, adds some further matters which he wants tobe included in the Risk Register these include late design acceptance by Project Manager , Subcontractor insolvency and global warming. Tenderer B does not list anysuch matters in his Contract Data part two. The contract is awarded to Tenderer Awithout any revisions to these listed matters. The contract placed is ECC Option C withsecondary Options X2, X18 and Y(UK)2.

a. What is the contractual difference between the two Tenderers forthese stated matters?

[4marks]

b. What is the role of the Risk Register and what does it contain? [4marks]

c. Who upkeeps the Risk Register and when is it reviewed? [4marks]

Whilst closing the Site for the weekend, the Contractor unfortunately left the gateunlocked and some vandalism occurred. The Contractor considers that this is anEmployer s risk, as the Employer decided to take that risk as clearly shown on ContractData part one in the list of matters to be included in the Risk Register, and also notifiesthis an a compensation event under clause 60.1(14).

d. As Project Manager , how do you respond? [7marks]

Putting right the vandalism damage with his own labourers cost the Contractor about500. The Contractor includes this in his next application for payment, stating thisamount is within his excess so he didnt bother to claim t hrough his insurance.

e. Is he correct to do this? [6marks]


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Section 2

Question 6

Your client is reasonably familiar with NEC3 Contracts and is confident of being able toprepare their own tender document, but would like a second opinion on certain mattersfrom you. The most likely contract is NEC3 ECC with main Option A. The projectinvolves the construction of a large diameter sewer across a busy main road beingcarried out over a 4 month period commencing in June. The design has been carriedout by the clients in -house design team.

a. The client firstly wishes to confirm that the ECC is the correctcontract to use in this instance, as opposed to the NEC3Engineering and Construction Short Contract (ECSC). How wouldyou go about advising the client on this?

[6marks]

Following your advice, the client is satisfied that ECC is the right choice over the ECSC.He has eliminated four of the main Options available and cannot decide between mainOption A and C in this case. He has heard good things about main Option C but wantsas much cost certainty as he can get.

b. What advice would you give him here? [7marks]

The client eventually decided to use main Option A and now wants to know your thoughts on using Option X2, X6, X7 and X16.

c. What advice would you give to your client on using or not usingthese four secondary Options?

[12marks]


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Section 2

Question 7

You are the Project Manager on the construction of a new bypass. The tendered totalof the Prices was approximately 7m and ECC Option B with secondary Options X1, X2and Y(UK)2 were incorporated. The Contractor started works on the Site some 6 weeksago. You have just received a communication from the Contractor saying thatunfortunately the Site Agent, who has over 20 yea rs experience, is required on another project and a replacement will be sought as soon as possible.

a. How would you respond? [3marks]

You establish that the reason behind this is a personal one. You are sympathetic but of course have a concern about the successful completion of the project. The Site Agentwas a key person stated in Contract Data part two.

b. Does that have any bearing on this? [5marks]

The Contractor then submits curriculum vitae of an agency person, with only 4 monthssite experience.

c. What would you do on receipt of this? [4marks]

Shortly afterwards, a suitable replacement is found and progress on the job is good.The Project Manager then receives news he is due to have his knee operated on in 2weeks and will be off work for 2 weeks.

d. What will you do on receiving this news? [6marks]

The first day your replacement acts as a delegate of the Project Manager , theContractor submits a design of a culvert for approval, asking for permission tocommence straight away with procuring it as he is probably just in delay. He states he isprepared to take all risk of the design being wrong.

e. As delegate of the Project Manager , what would he do next andwhat happens if subsequent to the acceptance of the design,there is a flaw found in the design?

[7marks]


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Section 2

Question 8

On an ECC Option C Employer -designed contract, the first programme has beensubmitted by the Contractor and accepted by the Project Manager . The Employer askswhat the contract provides for in terms of training of the Employer s staff duringhandover to safely and properly run the new asset. He cannot locate this on the

Accepted Programme. The Project Manager reads through the contract documentationand cannot locate any such requirement. On receiving this news, the Employer is far from happy and calls a meeting with the Project Manager . The Employer outlines hisrequirements and requests the Project Manager immediately actions this.

a. Where would you expect such a provision to be statedand how would you action this omission?

[6 marks]

b. How will the test of Completion be affected by this? [3 marks]

The Contractor submits his quotation and just submits a lump sum of 2,000 + resultingFee for this additional work, no effect on planned Completion so no change to theCompletion Date.

c. The Project Manager is really pleased with the submittedquotation, it is far less than he thought it would be whatwould you do as Project Manager ?

[6 marks]

As it turns out, the Project Manager did not reply within 2 weeks of the Contractor submitting the quotation. The Contractor cites clause 64.4 and says the quotation isdeemed accepted.

d. Is the Contractor correct and what happens next? [5 marks]

In the meantime, the Contractor has started to carry out some of the additional work,preparing a set of training proposals that he intends to out-source to another organisation. The Project Manager learns of this as an outline of the training issubmitted to him for forwarding to the Employer for comment. He is not happy that work

has commenced on this item as the compensation event has not yet been implemented.He writes back to the Contractor thanking him for the submission but noting this will bea Disallowed Cost in the next assessment and will remain that way until thecompensation event is finally implemented.

e. Is the Project Manager correct? [5 marks]


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Points to answer Module 2 Section 1Question 1a)

The Project Manager should have notified the compensation event atthe time of giving the instruction changing the Works Information as it

was clear the additional works would increase the Prices and delayCompletion (61.1). He should also have instructed the Contractor tosubmit quotations at this time.

The Contractor should notify the compensation event to the Project Manager under clause 61.3. The 8 weeks time bar will not apply in thisinstance as the Project Manager should have notified the compensationevent to the Contractor .

The Project Manager should reply within 1 week under clause 61.4confirming the compensation event has been correctly notified andinstruct the Contractor to submit quotation(s).

6 marks

b)The Project Manager s initial instruction changed the Works Information

under clause 14.3. The Contractor s core responsibilit y is stated under clause 20.1; to Provide the Works in accordance with the WorksInformation. This has immediate effect. Clause 27.3 further confirmsthe Contractor obeys such instructions.

The Project Manager s acceptance or otherwise of a quotation for acompensation event has no bearing on when the Project Manager sinstruction triggering the same compensation event is to be put intoeffect.

6 marks

c)

The Project Manager bases his assessment on the assumption that theContractor reacted competently and promptly to the compensation eventand that any Defined Cost and time due to the event are reasonablyincurred - clause 63.7.

In this case the Contractor frustrated the effects of the compensationevent by not reacting promptly. His programme showed the best time tocommence these works in order to mitigate the impact on Completionand the Prices.

The Project Manager should assess the compensation event as if theContractor had undertaken the works promptly, in this case inaccordance with his programme.

4 marks

d)The Contractor is right to include time risk allowances for cost and time

matters that have a significant chance of occurring. The Project Manager is in breach of clause 10.1 and clauses 62/63 in a number of ways given he considers the quotation is correct yet is attempting to usehindsight to achieve the most favorable outcome for the Employer .

His strategy is not valid because the second part of clause 63.1 statesthe instance of instruction for quotations divides the work already donefrom the work not yet done.

Further the Project Manager is required to reply to the quotation within2 weeks of the Contractor s submission. Not doing so qualifies as a

compensation event although it is difficult to see how this would result inadditional time/cost to the Contractor ; perhaps the Project Manager

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believes there is no consequence in ignoring the requirement to reply. If the Project Manager notified his own assessment on the grounds the

Contractor s assessment did not use Defined Cost of work already done,the Contractor s recourse would be to notify a dispute under W2 andrefer the matter to the Adjudicator .

[mark awarded for this point either here or in 1e] e)

After the time allowed to reply to the quotation has passed theContractor can notify the Project Manager . If the failure to reply persistsfor a further 2 weeks the quotation is treated as having been accepted.Similarly if the Project Manager replies that he is going to make his ownassessment and fails to do so the Contractor can notify the Project Manger to the same effect.

If the Project Manager notified his own assessment on the grounds theContractor s assessment did not use Defined Cost of work already done,the Contractor s recourse would be to notify a dispute under W2 andrefer the matter to the Adjudicator .

[mark for this point awarded either here or in part 1d]

3 marks

Question 2a)

Programme is an important tool to the Project Manager whenassessing the amount due as it helps identify where he should devotehis attention in the assessment of Defined Cost and the accounts andrecords he focuses on. It also identifies Key Dates, Completion, thetiming of work by the Employer and other requirements that may have aneffect on the amount due.

To recognise this, the Project Manager may withhold 25% of the Pricefor Work Done to Date until a first programme showing the informationthe contract requires is received (clause 50.3). Note the programmedoes not need to be accepted to release the 25% retained.

5 marks

b)The programme shows best productivity case rather than likely

productivity in practice. The difference between the two is time riskallowances (TRA) and the contract requires these to be shown whereapplicable to future activities. The Project Manager should thereforereject the programme for the reason that it is unrealistic or impracticable,or does not show the information the contract requires. TRA is ownedby the Contractor and cannot be used to offset the effect of acompensation event. In addition 63.6 allows such risk to be allowed for in the assessment of a compensation event.

5 marks

c)Others. People or organisations such as utility companies,

landowners or other contractors.3 marks

d)Key Dates are shown on revised programmes together with when

the Contractor believes he will meet the Condition stated for them. This

helps coordinate multiple Contractors . If the Project Manager decidesthe Condition for a Key Date has not been met by the date stated the

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Project Manager assesses the additional cost incurred by the Employer within 4 weeks of the date. The additional cost is limited to that incurredon the same project by the Employer either carrying out the work or paying others to carry out the work.

If the Contractor did not have the works ready to receive the air-

conditioning unit, one option to the Employer may be to instruct the M&EContractor to do the preparatory works necessary at the start of their contract with the Employer . The additional costs the Employer pays tothe M&E Contractor will be paid by Contractor constructing the factory.

e)Clause 64.1/64.2 deals with the circumstances under which the Project Manager performs his own assessment of a compensation event. Oneof these circumstances is where the Contractor submits quotations for acompensation event and the Employer has not accepted theContractor s latest programme for a reason stated in the contract.

The Project Manager should reply to the Contractor s quotation within 2weeks with a notification that he will be making his own assessment,making clear his reasons as discussed above. The Project Manager willhave the same time the Contractor had to submit his quotation, to makehis own assessment.

When making his own assessment the Project Manager uses his ownassessment of the programme for remaining work rather that the nowout of date Accepted Programme (clause 64.2).

6 marks

Question 3a)

Under option A the Contractor is paid for completed activities; if theEmployer defines these he is influencing the Contractors cash flow. If activities span more than one payment assessment the Contractor willhave to finance this, which may affect the overall price.

A further problem is if the Employer does not include all of the itemsthat the Contractor is supposed to allow for. In Option A the Contractor is at risk for errors in the pricing document itself, unlike Option B.However if the Employer writes the Activity Schedule the Contractor maybe able to argue that any errors are at the Employer s risk.

5 marks

b)Under Option A the Price for Work Done to Date is assessed using the

prices for completed activities (clause 11.2(27)) with no provision for apercentage complete approach. This ensures payment assessment isstraightforward and may have been part of the Employer s strategy.

The Contractor s approach to pricing means he wont be paid e.g. theprice for reinforced concrete until all the reinforced concrete is complete.This obviously has significant effect on the Contractor s cash f low and hewill have to finance large parts of the works.

5 marks

c)Under Option C the Price for Work Done to Date is the forecast Defined

Cost plus Fee. The Activity Schedule is not used for payment; so has no

effect on cash flow. However a realistic Activity Schedule can inform

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earned value etc.

d) The only reason he can change it is if his planned method of working

changes so that an activity does not relate to the operations on the

programme (clause 54.2), for example if he has an act ivity for scaffolding and now decides to use scissor lifts instead.He is further limited in that he cannot disproportionally allocate money

across the activities to front load the project and improve his cash flow.Only the Parties (not the Project Manager ) can agree to do that andthere are strict rules on how (clause 12.3)

For the reasons above the Project Manager should reject thesechanges.

5 marks

e)No. Information in the Activity Schedule is not Works Information

(clause 54.1). The Contractor s obligation is to provide the Works inaccordance with the Works Information (clause 20.1). The Project Manager s acceptance of the Contractor s revised Activity Scheduledoes not change the Contractor s responsibilities (clause14.1).

The issue is not therefore a compensation event under the contract.The Contractor may notify an early warning on the basis that the matter may increase the Contractor s cost. He may also instruct the Project Manager to attend a risk reduction meeting. At the meeting the Project Manager may be able to help the Contractor consider ways of mitigatingthe delay in obtaining blue cladding and may have buying power or swaywith the suppliers.

7 marks

Question 4a)The Project Manager should notify an early warning to the Contractor .

In the event the Employer decides he definitely wants marble flooring,this will increase the Prices and has potential to delay Completion or themeeting of a Key Date. At this point the Project Manager may consider the Prices will not increase if he believes the Works Information coversfor the eventuality. However he is aware of the Contractor s plans andcan foresee possible delay.

Either party could instruct the other to attend a risk reduction meeting(clause 16.2). They could also invite the Employer to attend. Thoseattending collaborate in applying their collective foresight to mitigate theproblem and reduce the risks. Specifically they cooperate in seekingsolutions, making proposals and deciding actions. The Project Manager keeps records of the above in the Risk Register and ensures theContractor is provided a copy.

4 marks

b)Clause 13.4 states the Project Manager may withhold acceptance of a

submission by the Contractor but he must state his reasons (whatever they are) in his reply. Withholding acceptance for a reason stated in thecontract is not a compensation event.

Withholding acceptance for a reason stated in the contract is not a

compensation event. Withholding for a reason not in the contract will be

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a compensation event under clause 60.1(9).

c)Clause 21 deals with the Contractor s design and clearly states the

Contractor does not proceed with the relevant work until the Project

Manager has accepted his design.

6 marks

The Contractor should notify a compensation event under 60.1(6) giventhe Project Manager has failed to respond to a communication in thetime allowed. The Contractor must do this within 8 weeks or he will loseentitlement to a change in the Prices, Completion Date or Key Dates.The Project Manager is required to reply to the Contractor s notificationwithin 1 week either rejecting the compensation event for a reason inclause 61.4 or agreeing and instructing a quotation. If he doesnt reply within the week the Contractor may notify him with a

reminder. If the Project Manager fails to reply within two weeks of thereminder the event is deemed to be a compensation event and theContractor may proceed as though he had been instructed to submitquotations.

d)Yes. A Defect is a part of the works which is not in accordance with the

Works Information, or not in accordance with the accepted design.Whilst this is in accordance with the accepted design, it is not inaccordance with the Works Information and therefore remains a Defect.

6 marks

e)The Contractor and the Project Manager may each propose to the

other that the Works Information is changed to accept a Defect. If bothare prepared to consider the change the Contractor submits a quotationfor reduced Prices and/or earlier Completion Date for acceptance. If theProject Mana

ice contract

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