Posted: April 25th, 2022

CPCCBC4003A Select and prepare a construction contract

CPCCBC4003A Select and prepare a construction contract
Project

Assessment

Student name: XXXXXX
Student number: XXXXXX
Assessment: 35664/01

Question 1
List and briefly describe three (3) basic elements that make up a typical contract.
A contract has three basic elements, namely, an offer, acceptance, and consideration.
The Offer
A contract always begins with an offer. This offer is usually the expression of a given party’s willingness to enter the contract on specific terms. An offer should always be firm and clear while avoiding being vague or ambiguous.
The Acceptance
The second key element is acceptance, where an agreement must be reached between the parties to a given contract. In other words, parties to a given contract have to understand the offer being accepted. This acceptance has to be absolute, with no deviations in place. Moreover, this acceptance should also be communicated to the offeree or the individual making a given offer. Silence cannot be considered as a form of acceptance.
The Consideration
The final stage of any given contract is the consideration phase. During this stage, both parties to a given contract have to play equal roles, or parts without a contract can’t be considered complete. The consideration often involves both parties exchanging items of value as described in the acceptance terms. The common considerations that should be made include; money, land, services, and tangible valuable items.
Question 2
• Briefly describe the situation and/or type of work suitable for each type of contract listed below.
• Outline the reasons why the contract would or would not be suitable for use between Sullivon Constructions and the client (max. 50 words each).
i. Small Works from $5,000 – $20,000 contract
Briefly describe the situation and/or type of work suitable for this contract: Is this contact suitable for use between Sullivon Constructions and the client? Briefly explain why/why not:
The small jobs contract tends to covers works like repair, maintenance, and other small improvement works. This type of contract is not suitable for use between Sullivon constructions and the clients. The contract involves the works involved are not repair, maintenance, or other small improvement works.
ii. Small Works over $20,000 contract
Briefly describe the situation and/or type of work suitable for this contract: Is this contact suitable for use between Sullivon Constructions and the client? Briefly explain why/why not:
This type of contract is necessary during the construction of new homes, significant improvements, or alterations. This type of contract would be suitable for use between Sullivon Constructions and the client because it involves constructing a new home, and significant improvements are required.
iii. Cost Plus contract
Briefly describe the situation and/or type of work suitable for this contract: Is this contact suitable for use between Sullivon Constructions and the client? Briefly explain why/why not:
This type of contract involves an agreement to reimburse a given company for any expenses incurred and an additional specific profit amount, which is often stated as a given percentage of a contract’s full price. This type of contract would be suitable in this scenario because the contractor will have the incentive to use the best material and labor. Moreover, it will also minimize the likelihood of the project being overbid. It is also less expensive than a fixed price contract because the contractor doesn’t have to charge higher prices to cover risks associated with higher material costs.
iv. Renovations and Additions contract
Briefly describe the situation and/or type of work suitable for this contract: Is this contact suitable for use between Sullivon Constructions and the client? Briefly explain why/why not:
The situation or type of work suitable for this type of contract includes details on both parties, the type of work to be completed, and a contractor’s license. It is mainly preferred during renovations, or there is very little repair work to be done. This type of contract is not suitable for use between Sullivon constructions and the clients because the contract involves the works involved are not repair, maintenance, or other small improvement works.
v. Residential Building contract
Briefly describe the situation and/or type of work suitable for this contract: Is this contact suitable for use between Sullivon Constructions and the client? Briefly explain why/why not:
These contracts involve home building works that cost more than $20,000, and the work tends to be more extensive. Moreover, This type of contract is necessary to construct new homes, significant improvements, or alterations. This type of contract would be suitable for use between Sullivon Constructions and the client because it involves constructing a new home, and significant improvements are required.

Question 3
You have just been awarded a contract to build the Casey Project. Prepare the contract. A template has been provided in Q3 (i).
i. Complete the contract template below using the information contained within the contract particulars above.
Contract Template
Owner (1)

Name(s) Mr. Steven Kennedy

Address 325 E Main St, Smithville, MO

Postcode 64089

Home phone 9462 4023 Work phone 9462 4033

Fax 9462 4033 Mobile 9462 4033

Email Stephen@gmail.com

Contractor

Name(s) Emi Grealish
AS SHOWN ON LICENCE
Licence No. AN01 /0123456/2020 Expiry date August 2022

Category of work
shown on license Builders Licence
Address 11 Jungle Road, Leominster MA
AS SHOWN ON LICENCE
Postcode 01453
Home phone 978-227-8332 Work phone 978-401-6582

Fax 978-401-6582 Mobile 978-660-2187

Email Grealishemi@gmail.com

Address
where the work has to be done (site) 301 Massachusetts Ave

Lunenburg

MA Postcode 1462

Title details CRS 38-26-105

LOT number 38-26-105 Deposited plan no. 26105

Certificate of title-folio identifier B791046

Contract Price *(including GST)

Amount in words Twenty thousand only

$ 20,000

ii. Complete the ‘Contract documents schedule’ by inserting the documents listed in the Contract Particulars
Contract Documents Schedule
Plans: prepared by: No. of pages: Date:
Rob Holding 3 5th Jan 2021
Alexander Smith-Rowe 3 5th Jan 2021

iii. Provisional sums schedule
Complete the ‘Provisional sums Schedule’ by inserting the Provisional Sums indicated in the Contract Particulars.
Item of work Quantity Unit Dollar rate per unit Provisional sum
(including GST)
Separate sanitary accommodation 1 1 $500 $500
Commissions and bonuses awarded to employees 100 100 $50 $5000
Temporary telephone to Engineer’s office 3 3 $30 $90
Office accommodation 1 1 $1000 $1000
Total Cost $6590
iv. Complete the ‘Prime cost items Schedule’ by inserting the Prime costs indicated in the Contract Particulars.
Prime Cost Items Schedule
Item of work Quantity Unit Dollar rate per unit Provisional sum
(including GST)
Tiles 50m2 1,500 @$3/m2 $4500
Taps 15m2 15 @$50/m2 $750
Doors 20m2 20 @$130/m2 $2600
Bathroom fittings 5m2 5 @$230/m2 $1150

Total
Cost $4950
v. Complete the ‘Schedule of progress payments” by inserting the progress payments indicated in the Contract Particulars.

Schedule of Progress Payments
Stages of work Amount
1 Demolition $3,000
2 Drywall and carpentry $36,000
3 Electricals $7,000
4 Doors and hardware $1,000
5 Roof Framing $14,100
Total
Cost $61,100
vi. Explain why you think the ‘Wall and Roof Framing to lock up’ would be 30% of the overall estimated cost.
The ‘Wall and Roof Framing to lock up’ would be 30% of the overall estimated cost because they are crucial items in this construction. In particular, the wall and carpentry are made up of expensive materials that drive up the project’s estimated overall cost. The fact that the lock-up also requires quality and expensive material also contributes to this high cost.
vii. Prepare a final’ rise and fall’ amount in the table below, when the Provisional Sum allocations have increased by 20% and the Prime Cost allocations have decreased by 6%:
Item Provisional Sum Allowed Prime Cost Sum Allowed Increase by 20% Decrease by 6% New Amount
Bored concrete piers $5,360.00 $1,072.00 $6,432.00
Landscaping $2,000.00 $400 $2,400
Toilet pans and cisterns $1,178.86 $70.73 $1,108.13
Bathtub $360.00 $21.6 $338.40
Vanity units $1,500.00 $90 $1410.00
Porcelain shower bases $560.00 $112 $672.00
Laundry tub $600.00 $36 $564.00
Kitchen sink $160.00 $32 $192.00
Rainwater tank $300.00 $60 $360.00
Hot water unit $500.00 $30 $470.00
Totals $1676.00 $248.33
Therefore, the client must pay an additional sum of $_$1676.00_ or receive a deduction of $_$248.33_.

vii) List the three (3) mandatory documents that must be included in the contract.
a. Certificate of title-folio identifier
b. Category of work
c. license Title details

viii) List three (3) other documents that may also be included in the contract.

a) The form of agreement
b) Site information
c) Conditions of contract

iv) Complete the following statement in relation to defect rectification.
“The contractor must rectify omissions and defects in the work which become apparent within six months from the date the work has been completed.”

Question 4
What are the two (2) main national legislative regulations that you need to consider when selecting and preparing the contract?
The two main national legislative regulations that you need to consider when selecting and preparing the contract include state case laws and statutory legislation.
The state case laws legislation refers to the precedent that has already been set in courts across the land. In other words, they are the rules and regulations that already exist within a given jurisdiction as determined by the courts. In particular, this source refers to the judicial decisions that have already been made by judges.
Statutory law refers to establishing the standard and rules for governing different transactions between parties to a given contract. Applying statute law as a contract law source ensures that the contract being formulated enhances fairness and equality.

Question 5
List three possible causes for the termination of a contract?

A contract can be terminated for several reasons, one of them being because of performance’s impossibility. This implies that circumstances have made the situation impossible for an individual or a signatory to a contract to complete it.
Another possible cause for termination would be a fraud. Fraud is among the most common cause for termination in any given contract. Common fraudulent practices that can result in a contract termination include intentional misrepresentation or deception to achieve personal or monetary gain. As such, when a party enters into a specific contract, and one of the parties to the contract commits fraud, these are sufficient grounds that can lead to the termination of such a contract.
Finally, termination can also occur due to a breach of a contract. A breach occurs when one of the parties fails to fulfill or perform the agreed specific tents of a given contract. However, for a contract to be terminated under these guidelines, a material breach has to exist. Among the key factors contributing to a material, breach includes the specific amount of benefits that one of the parties received from other parties’ willful or negligent behavior. If a party has already completed a large portion of the contract agreement, a breach cannot be used to terminate the contract.

Question 6
Complete the table below to explain the key terms, clauses, and procedures of a valid contract and provide examples of how each works in practice.

Contract item Explanation of contract item Example
Offer and acceptance
A contract always begins with an offer. This offer is usually the expression of a given party’s willingness to enter the contract on specific terms.
Acceptance is where an agreement must be reached between the parties to a given contract. In other words, parties to a given contract have to understand the offer being accepted. Silence cannot be considered as a form of acceptance. An offer should always be firm and clear while avoiding being vague or ambiguous.
Acceptance has to be absolute, with no deviations in place. Moreover, this acceptance should also be communicated to the offeree or the individual making a given offer.
Breach of contract A breach occurs when one of the parties fails to fulfill or perform the agreed specific tents of a given contract. Among the key factors contributing to a breach includes the specific amount of benefits that one of the parties received willfully or negligent other parties’ behavior. If a party has already completed a large portion of the contract agreement, a breach cannot be used to terminate the contract.
Prime cost items
It refers to an allowance within a contract that supplies essential or necessary items yet to be finally selected. Examples of prime cost items would be door furniture and taps.
Provisional sum items
It refers to an allowance included within a fixed-price construction contract that allows for work items that can’t be priced by a contractor when entering a contract. When the lump sum contract price involves a provisional sum, the principal’s final amount payable is reflected to adjust a provisional sum work’s actual costs.
Insurance
This contract is represented through a policy, where an individual or entity has to receive financial reimbursement or protection against any losses by an insurance company. An insurance company has to pool its client’s risks because it makes a payment more affordable for the insured parties.

Defects liability period
It refers to a set or specific period after the project construction is completed. A contractor is given a window of time to return to the construction site to correct or remedy any defects. In most cases, this period is about 12 months. This type of contract benefits both the owner and the contractor because the owner is granted the opportunity to request the contractor to return to the site and correct any potential defects or flaws. The contractor also benefits because he doesn’t incur the costs of compensating the owner for any defects resulting from their work.
Dispute resolution
A dispute resolution clause refers to an agreement in a contract that outlines the necessary dispute resolution mechanism between contractual parties. A dispute resolution clause has to be clear, workable, and concise. Where dispute resolution clauses are unclear or ambiguous, risks of uncertainties regarding how it operates tend to be costly and time-consuming.
Practical Completion
When a building is finished to a level where it starts being put to its intended purpose or use, small and minor defects are still present.
Practical completion doesn’t require the building to be fully complete. Instead, it applies when a building has reached a level where a building or home can be occupied or used.
Delay costs, disruption, and extension of time Delay costs, disruption, and extension of time affect work progress in a construction project differently, depending on the cause and impact. These delays and disruptions present different concepts. This clause exists to ensure that both parties’ best interests are served by ensuring that a full mechanism exists to deal with any delays or disruptions during the construction process.
Variations
This refers to an alteration to a given scope of work that is originally specified within a given contract through addition, omission, and substitution to any works through changes to how works are conducted. Given that both parties to a construction contract cannot anticipate everything that is likely to occur during the construction process, variations play an important role in catering to such uncertainties.
Contract Termination
This is the process of legally ending a given contract before any of the parties have completed or fulfilled their obligations through specific terms.

Fraud is among the most common cause for termination in any given contract. Common fraudulent practices that can result in a contract termination include intentional misrepresentation or deception to achieve personal or monetary gain.
Liquidated damages
It refers to monies agreed upon by both parties when a contract was signed and specified the types of damages recoverable in case a contract breach occurs. These liquidated damages are supposed to reflect or establish the best estimates regarding actual damages when parties are signing a contract.
Retention sum
It refers to monies that are deducted and later retained by the employer from the sum that would have been paid to the contractor as stipulated within a contract. These monies are held back and only released for payment once all the conditions for its release have been fulfilled. This type of contract is crucial because it ensures that the owner or developer s protected from potentially defective work by the contractor.

Rise and Fall
This is a building contract clause allowing for the final pricing of a given contract to move either up or down based on the fluctuations of the material prices and wages to a given contract. This type of contract is crucial because it allows for fluctuations in labor costs, materials, or other related construction costs.

Question 7
List three (3) groups of people who may not have the legal capacity to enter into a contract.
The three groups of people that lack the legal capacity to enter into a contract are Minors, individuals with unsound minds, and people already disqualified by law.
A person is considered a minor when they have not yet attained eighteen years of age. The law considers minors as incompetent to enter into any contract, but they can be beneficiaries of a given contract. Minors can benefit from a contract when a parent or guardian acts on their behalf by entering into a specific contract to benefit such a minor.
Another group of people that lack the legal capacity to enter into any contract is those with an unsound mind. Individuals are considered to be of sound mind when they can understand or form rational judgments. Individuals with an unsound mind cannot enter into any contract. Examples of individuals with unsound minds include lunatics or people with an unbalanced mental power. Moreover, an intoxicated or drunken person is also considered an unsound mind. Such individuals cannot form rational judgments and are incompetent to enter into any contracts under such circumstances.
Finally, individuals disqualified by law also lack the legal capacity to enter into any contracts for several reasons. For example, convicts and individuals who have been declared insolvent are often disqualified from entering into contracts.

Question 8
List three (3) sources that could be used for advice in the preparation of the contract.
During the contract preparation process, three sources could be used as advice on how to go about this process. These three sources include state case laws, state statutes, and the uniform commercial code.
The state case laws refer to the precedent that has already been set in courts across the land. In other words, they are the rules and regulations that already exist within a given jurisdiction as determined by the courts. In particular, this source refers to the judicial decisions that have already been made by judges.
Another source of advice when preparing for the contract is through statutory law and, in particular, the uniform commercial code. This code is often used to establish the standard and rules for governing different transactions between parties to a given contract. Applying statute law as a contract law source ensures that the contract being formulated enhances fairness and equality.
Finally, expert judicial knowledge from professions like councils and judges can also be used as a source of advice when preparing the contract. Relying on such knowledge as a source of reference is crucial because it sets precedence for future case.
Question 9
i. Create a short video (no longer than 3 minutes) of yourself presenting on the following:
• A brief explanation of the following contract definitions:
o Condition Precedent
A condition precedent refers to an event or condition that must occur before a specific right, duty, or claim arises. In other words, an event has to occur before the contract parties can be obligated to perform. For instance, in an insurance contract, the insurer may be required to pay to rebuild or renovate a client’s home in a situation where a fire destroyed their premises during a specific policy period. Under such circumstances, the fire is the condition precedent. In other words, the fire has to occur before an insurer gets obligated to pay for the rebuild or renovations.
To avoid forfeiture, courts often prefer to interpret clauses within a contract as promises instead of conditions. In the construction industry, a condition precedent refers to an event where the lodging of a given property’s interests happens. F a condition doesn’t occur before a given specified timeframe, the condition fails, while the property interest doesn’t vest.
o Exclusion clause
An exclusion clause refers to a term within a contract that seeks to limit or exclude a party’s liability to a specific contract. For instance, an exclusion contract may state that a given party doesn’t have any liability when a particular contract gets breached. Alternatively, such a contract also seeks to limit a range of remedies that might be available or, in some cases, the period in which these remedies can be claimed. Some terms of this clause stipulate that in some instances, one of the parties to a given contract can seek to reduce or disclaim their responsibility under such a contract. Today an exclusion clause exists in many different areas of our daily lives ranging from car parks, supermarkets to construction sites.
o Implied terms
Implied contract terms refer to items that courts might assume intended for inclusion in a particular contract, although they have not been stated expressly. In the construction industry, businesses or professionals would generally not want to rely on the court’s interpretation of the implied terms. Instead, to avoid such terms, their contracts tend to be quite extensive to cover many materials items included within a contract. Although it’s not possible to cover all the possible details within a contract, lawyers have the right to appeal that some specific terms were implied or intended to give force to a contract’s intent.
ii. Create a short video (no longer than 3 minutes) of yourself and one other participant. During the discussion, you must:
o Provide the participant with an overview of two (2) different contract types and the circumstances each of them covers
o Answer questions asked by the participant (you can prepare questions for them to ask)

The Differences between a Cost plus Contract and Fixed Price Contracts
Me: In this presentation, I would wish to explain to you the differences between Cost plus and Fixed Price Contract.
A Cost plus Contract involves an agreement to reimburse a given company for any expenses incurred and an additional specific profit amount, which is often stated as a given percentage of a contract’s full price. On the other hand, a fixed price contract outline a single or lump sum cost of a particular construction project. The contract is usually an agreement to complete a particular project at established prices that is inclusive of all profits and costs.
Participants: which of these two types of contract do you think is suitable for a construction project?
Me: At a glance, the two contracts appear quite similar but they are not. Their small distinguishing characteristics have the potential for huge repercussions for both the developer and contractor. However, I think that a cost-plus contract would be suitable in a construction project because it will benefit both the developer and a contractor.
Participants: Can you please expound on this point further?
Me; in a cost pus contract, the contractor will have the incentive to use the best material and labor. Moreover, it will also minimize the likelihood of the project being overbid. Finally, it is also less expensive than a fixed price contract because the contractor doesn’t have to charge higher prices to cover risks associated with higher material costs.

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