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24 Cards in this Set
- Front
- Back
What are the three ways that benefits can be transferred under JCT contracts? |
1) Collateral warranties |
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What are collateral warranties? |
Create contractual relationships between parties where there would otherwise not have been any. They are alongside another agreement
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Why are they used? |
Privity of contract means the rights and obligations under a contract can only be enforced by a party to that contract, therefore |
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Who might want a collateral warranty? |
Any third party with a financial stake in a project but not party to the main contract
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How are they requested? |
They should be notified to the tenderers at the time of tender
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What are the common clauses / terms in collateral warranties? |
Obligations should mirror main agreement - therefore a breach of the main agreement would also be in breach of the warranty |
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Name some standard forms of collateral warranty that may be used? |
CWa/F – JCT standard form of collateral warranty for a funder |
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How has the contract (rights of third parties) act changed the situations regarding rights under contracts? |
It has significantly changed the traditional principle of privity of contract, whereby obligations can only be enforced by the parties to a contract
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What contracts does the act apply to? |
All contracts made after the 11 May 2000 |
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What has been the impact of the Act? |
Initially the response was suspicion – new – not much case law – not tried and tested etc |
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How can third party rights be included under JCT contracts? (DOUBLE CHECK THIS DETAIL) |
Fill in Part 2 of the contract particulars – sections 7A and 7B |
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Why might third party rights be used instead of collateral warranties? |
If a lot of warranties are required it involves a lot of administration and cost – easier for third party rights |
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Where the rights and benefits of one contractual party are transferred to a third party |
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Can benefits be assigned under JCT contracts? |
The standard position (clause 7.1) is that assignment of rights under the contract is totally excluded |
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It is standard to allow assignment of rights twice without consent
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What is novation and how does this differ from assignment? |
A new contract that transfers the rights and obligations of one contractual party to a new third party – assignment is only rights |
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Give a common example of assignment and novation |
Assignment of the rights under a collateral warranty to a different tenant / purchaser
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What is the key issue after a design team has been novated? |
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If the contractor took full responsibility for the design what would they want? |
They would want the ability to take action against the consultants for breaches before novation |
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How does novation affect the employer’s rights? |
They lose all contractual relations with the novated party and therefore the right to take action for a breach - it is therefore common for there to be a collateral warranty between the employer and novated party |
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What is a limitation clause, give some examples? |
Clauses that limit a party’s liability for loss. Eg's: |
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What is a net contribution clause? |
Clause that limits a party’s liability to the proportion of loss that they are responsible for |
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How can the employer potentially lose out? |
They would have to sue each contributing party separately to reclaim their total loss
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What act is relevant? |
Unfair Contract Terms Act 1977 |