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51912
Contract Practice - Performance security
Descrição
T017 & T016 Mapa Mental sobre Contract Practice - Performance security, criado por alison_patey0437 em 21-04-2013.
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t017 & t016
t017 & t016
Mapa Mental por
alison_patey0437
, atualizado more than 1 year ago
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alison_patey0437
mais de 11 anos atrás
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Resumo de Recurso
Contract Practice - Performance security
Bonds
What is a bond?
A contractual duty duty owed by one party to another is backed up by a third party
what are the two main sources of gurrantee that can be sought in construction?
Terms of bonds (12 points)
1. addressed to employer
2. details of project
3. value of bond
4. name and address of bank
5. validity of period of bond
6. irrevocable & unconditional undertaking by bank
7. immediate & freely transferable payment
8. reduction mechanism
9. without any deduction
10. should not affect organisational changes to the contract
11. rights & benefits should b made transferable
12. local laws and regulations r applicable
who provides a bond
bank/ financial institution
on demand bond
where beneficiary can call upon the surety 4 payment whether or not there has been a default under the main contract - as long as not fraudulent
Disadvantages?
-ve affects contractors cashflow
added to contract sum - employer pays for something not really necessary
Conditional Bond
surety only pays when specific conditions r met e.g. default
Types of Bonds
Retention Bonds
Purpose?
Instead of ddt retention form each interim payment
Value?
same amount as if retention is ddt e.g. 3% contract sum
Performance Bond
Most common
Emp recover losses in a breach of contractors obligations
Usually 10% of Contract Sum
+ premium 4 taking out bond
FIDIC
contractor must submit bond within 28 days
valid up to works completion
rtn. back to contractor within 14 days of Defects liability certificate
Notify contractor in writing
JCT
Guarantees performance
Materials off-Site bond
Covers emp. against loss/ damage 2 materials already paid for (in interim vals) before materials delivered to site.
Advance Payment Bond
JCT
Ent. into contract particulars
Fixed OR % sum
Note date 2 b paid & date of reimbursement
could be in full OR stages
issued b4 1st pay cert.
Cont. provide bond 1st
CA keep copies of bond corres.
Tender Bond
covers party inviting the tender if the lowest tender refuses to enter into contract with them
important = if inviting party is in turn tendering for works on the basis of that tender
Prevents idle tendering
Usually 1-5% of tender sum
Payment Bond
provides security that all persons supplying labor and material to the project will be paid
Subcontractors and suppliers are the "beneficiaries" of a payment bond
How does the Emp. call the bond?
prove the contractor is in breach + loss suffered
What kinds of Bonds does JCT provide?
Advanced
ent. in contract particulars
Schedule 6
Materials off-site
Performance
argument against bonds
shouldn't really be needed - tender process should ensure only reliable + caberble contractors r selected.
Unneccessary premiums
if a reg dev. adds a lot to projects
When is a bond appropriate?
contractor new/ unapproved
protect 'one-off' dev.
appropriate to risks of project
The difference between a gurrantee and a bond?
Guarantees are conditional
contractor must commit a default b 4 the guarantor can be called in to perform
The contractor has to fulfil its obligations
Payment bonds are unconditional
don't require proof of default
often referred to as unconditional/ on-demand bonds
guarantor pays a predetermined sum
Doesn't matter if there is a loss or not
bank has to pay without waiting for contractors action
Bank has primary liability
Protection
PB = comfort of being a payment guarantee from an independent third party
PB be from a reputable guarantor
PCG is directly related to the financial covenant of the parent
employer should be satisfied with the identity of the parent
Cost/availability
PB = Contrractor charge a premium
PCG = no cost implication
PCG will not be available if the contractor has no paren
not desirable parentdoesn't have a good financial covenant
Cover
PB doesn't guarantee completion of project, just recovery of financial loss up to a stated maximum amount.
PCG guarantees performance of the contract BUT little benefit if the parent unable to perform the contract (e.g. insolvency)
Duration
PCG = Often co-extensive with duration of contractor liabiltiy e.g. six or 12 years (deed/underhand) & covers contractor’s liability 4 remedies
PB = operate for the period contractor obligations to carry out the works e.g,
expires at either practical completion or the end of the 12-month rectification period.
Insolvency
PB = not necessarily give rise to payment entitlement under a standard unamended ABI form of PB
may be treated as an event terminating the main contract
PCG = needs reviewed to ensure they cover an event of insolvency
Enforcement
PB = nutoriously difficult to obtain payment
bondsman require the breach of contract to be upheld either in adjudication or court proceedings + emp. prove evidence of the loss it has suffered
Guarantees
FIDIC
there is a provision for paymnet guarantee 2 b provided by the employer to make sure that the employer shall pay for the works done by the contractor
What is a payment account?
where the employer keeps two months payment to the contractor incase the employer goes insolvent
same as secure account for retention monies
contractor has to ask for mechanism
Parent company guarantee
provided by the parent company of contractor
the take on the obligations to the employer if the contractor fails
access to contractors executive authority
use?
when employer wants a gurantee
liability only arises if its subsidiary commits a breach
any fails to rectify the breach
Payment provision
what are the options for contractors for non-payment?
Settlement, quick dispute resolution e.g. adjudication
contractual mechanism (suspension & termination)
Dispute resolution methods as per contract e.g. arbirtration
litigation
different types of adjustment mechanism?
Adjustment from a specified material price in the contract (base rate)
index escalation provision (TPI and other indices)
What are the different types of securities?
Surety (conditional) gurantees
performance gurantees
parent company gurantees
on demand (unconditional) bonds
tender bonds
advance payment bonds
retention bonds
Maintainence bonds
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