【Case 1】:

Even though the low-priced tender to clients may be considered as an incentive for
awarding tender to the contractor, it usually a response tendering for a project by the
contractor anxious to win the business by submitting a tender to carry out the work for less
than it will cost. (Dickens 2023) The definition of suicidal bidding states that:”
The practice of bidding unusually lower than competitors in order to obtain work is referred
to in the industry as suicide bidding.” (CIOB 2020) The motivation for making this bidding is
to ensure they have tasks for their skilled workers being employed, even if it means only
earning for breaking-even on a project, or in some situations resulting in loss. (Wade 2020)
The danger of suicidal bidding can often cause poor quality or work, and furthermore, the
potential danger for clients for accepting underestimated bids is that they are bound to the
contractors may cut corners to scramble a project hastily and carelessly to keep it afloat.
The most tragic poor quality example of is the Grenfell tower where the materials of
cladding systems was badly comprised with quality and fire resistance functions in value
engineering contracts and such this consequences can be avoided. Moreover, this is not only
the risk of quality, if the projects fell into the condition of liquation, the projects would
experience the delay and additional costs. (Dickens 2023) Giving the clients advice to take
the risk of lowest bid without taking into account the associated risks could be liable of
professional negligence, resulting in significant costs and causing the serious threat to the
company’s reputation which is not the desired outcome. The most well-known case of
construction field in professional negligence is the Ampleforth Abbey Trust v Turner &
Townsend (T&T) which T&T was liable for not employing their duty of care to finalise the
projects under the official contract, causing the claimant could not charge the liquidation
from the delayed project. If the client wish to accept the suicide bid, the potential events
may need to be considered that when the contractor submitting the variations for the
compensation of works, this might cause additional expense more than the average market
price of a tender. Under JCT 2016, the variation clauses are defined in the clause 5.1 and
the valuations of variations are outlined in the clause 5.1. The measurement and variation
rules are listed from section 5.6 to 5.10 to give directions to the client and the contractor
about dealing with disputes. Under NEC4, there is no specific term named variation,
however, the NEC4 ECC contract contains the compensation events which in section of 60
core clauses. The compensation events were issued by Project Manager in a process for
assessing the change to the prices and completion date due to a compensation event,
excepts changes are made in order to accept a defeat or changes are provided by the
contractor, or made at the contractors’ request or in order comply with the scope provided
by the client. (Dickens 2023) No matter under JCT or NEC4, all of the disputes are resulting
in bad reputations between the contractor and client, which also bring about the costly and
lengthy process through disputes. As a professional for the client, we suggest the Bank of
China not to accept the suicide bidding since the lost of company reputation, rectification
stage for poor quality and the expense for sorting out the disputes is worthless.

【Case 2】:

Liquidated Damages are monetary compensation for a loss, detriment, or injury to a person
or a person's rights or property, awarded by a court judgment or by a contract stipulation
regarding breach of contract. (Dickens 2023) There are some regulations when applying the
liquidated damages. Firstly, a clause cannot applied as a penalty if the claimed amount is
deemed as excessive and unconscionable when compared to provable loss resulting from
the contract breach. Secondly, a clause will be considered a penalty if the party in default is
required to pay an amount exceeding what would have been paid if they had fulfilled their
obligations. Finally, if the amount is difficult to pre-estimate the loss or if such pre-
estimation is impossible, the clause is less likely to be a penalty.

Under JCT 2016, the liquidation clauses are addressed under clause 2.32 which delineates
the methods to apply liquidated damages and mainly attributed to the delayed completion
of works, where the value is merely estimated in damages. Damages that occur outside the
project and not predetermined will be adjudicated in the court as unliquidated damages.

Under NEC4, delayed damages are covered in option X7 clause, there are less detailed
provided compared to JCT contract. It is obvious that its works reflect compensation that
are would be estimated as genuine value for liquidation damage.

There are clear principals when applying LDs, LDs is required to be pre-estimated and
agreed in advance before signing a contract. Liquidation damages should be paid as
compensation not as penalties which is not legal in the English law system in UK. If the
amount is considered as unreasonable then there is possible that the court will recognise it
as a penalty then the client may have to pay the contractor for its detriment.

The case had defined in the case of Dunlop Pneumatic Tyre Company v New Garage & Motor
co (1915). The concept of liquidated damage had defined by the court: “The House of Lords
determined that the clause in question was not a penalty, as expressed by Lord Dunedin
stated, LDs will be considered a penalty if the stipulated sum is excessive and
unconscionable in amount when compared to the maximum conceivable loss that could be
proven to have resulted from the breach." (LawTeacher 2021)

Therefore, we have to go back to examine the amount that client wants to charge will be
₤6m per week, we have to calculate the profits of best room in city will be ₤1000/ per night
and this is 6 stories hotels with its total profit a week is approximately ₤1000*20 rooms*6
stories* 7days=₤840k per week. This is amount of the pre-estimated that the China Bank
will be suffered from loss if the works cannot be completed on time. Given the figure ₤6m
initially, this would be considerable as a penalty in the project. We may suggest the client
the Chinese Bank apply the reasonable LDs as ₤1.5m based on conscionable amount.

Retention bond ensures the contractor finishes the works with proper completion under the
contract term. In some contracts, the client may keep from 2.5~5% from contract value as
a retention bond from to 6 to 12 months. This period of time called the defects liability
period (now called the “rectification period” in JCT contracts) begins upon certification of
practical completion; it is a period during which the contractor is responsible for rectifying
any defects that arising from poor works or unsatisfied quality performance. A retention
bond can be used as an alternative way for releasing the cash flow for the contractor or
sub-contractor. Retention bond ensures that the contractor obtains the full amount of
agreed payment certificates without any retention money being kept. A retention bond is
usually offered by a third party such of bank or insurance company to the client or main
contractor as a guarantor of a contractor’s main performance of their obligation.
In the JCT 2016, retention bonds are addressed in clause 4.18, detailing the procedure for
their application. This provision aims to motivate the contractor to complete the works to a
high standard, minimizing the need for rectifying defects in the future.

On the other hand, NEC4 briefly mentions retention bonds in secondary option clause X16.3.
It clarifies that the contractor has the option to use a retention bond, but the client retains
the right to reject it if the commercial position is not robust enough.

Retention bonds are used to secure clients from disappointed completion of works, and it
also expand the additional flexibility of the contractor’s cost by lowering cash flow needed
during the stage of the project. For the amount of ₤20m, it will be around 14% of the total
contract price appears as high value in the contract. The recommendation of proper
retention for China Bank may take 5% of the total contract as practicable value in case that
the contractor is not appealed to enter the project especially if the expense of the surety
exceeds the retention funds received. Additionally, the contractor may shift the surety cost
to the client by incorporating it into the tender price, it consequently raises the construction
cost of China Bank. For this project, both of them can be included since liquidation damages
seeks for the extension of time for completion and the retention bonds claimed for money
after the rectification period of a project.

【Case 3】:

The advanced payment is a way that the client paid the agreed sun under the contract
before the commencement of the work. And this approach is making sense for both parties
since the inflation of materials goes fluctuation in the higher way as time goes by. For the
client, in order to ensure the project goes smoothly without questions on half-way through,
it is safer to provide an advanced payment bond. An advanced payment bond is similar to
other bonds, functioning as an insurance policy provided by a bank or insurer. This bond
assures payment in the event of a specified issue. In the scenario of contractor default or
insolvency, the developer has the ability to reclaim the advance payment from the issuer of
the bond (bondsman). The alternative provision can be a parent company guarantee. A
parent company guarantee can serve as assurance for this situation, but there is a potential
risk: if the subsidiary company faces bankruptcy, the parent company may also be at risk.
The House of Lords stated that a party to a construction contract in excess of 45 days is
entitled to interim payments or stage payments bases on Construction and Regeneration Act.
(Dickens 2023) The mid-payment usually is hard to be determined by the time or stage or
works, so under JCT contracts it detailed covered interim payments and due dates in Clause
4.8. If no other period is agreed on, it automatically establishes interim valuation dates
(IVD) at one month intervals. The agreed payment frequency with the contractor is
subsequently applied to subcontractors and sub-subcontractors. The JCT contract intends to
deliver a fairer payment system by synchronizing how the payment cycle works throughout
all tiers of contracts. NEC4 outlines the timetable of payment in 51.2 of the core clauses.
The contractor is entitled to interim payments which are assessed by the project manager at
each assessment date. The project manager certifies the amount that is amount payable to
the contractor at each assessment date. So if this project carried on under the NEC contract,
the client should pay attention that if the project manager’s negligence, extra interest will
be added on the late payment and the client, the project manager and the contractor may
deal with disputes by following the decision of the adjudicator under the clause in 51.3.
The deviation from the industry-standard payment of 30-day terms could bring negative
consequences for contractors involved in this project. Since the construction working as a
work break down structure, the delay payment for main contractor means the prolonged
payment for their sub-contractors. It may cause the stagnant cash flow in financial. Cash
flow issues may emerge since most construction firms typically remunerate their workforce
and supply chain on a weekly or monthly basis. Therefore, it could possibly lead to the
bankruptcy of any part of the supply chain. This was happened on Carillion’s collapse in the
2018, they were notorious for their aggressive bidding and accounting, along with the 120–
day payment terms caused the bankruptcy of their supply chain. This would be considered a
company’s reputation and quality both being affected if the collapse prolongs the completion.

【Case 4】:

Sectional completion is beneficial to the client when they intend the contractor to finish a
specific portion of the works, enabling the client and another contractor to take control of
that section entirely. Each section should be defined before signing the contract since there
is a proportion down to the liquidated damages. No reduction of liquidated damages on the
sectional completion is required since there is sectional completion liquidated damages has
been included in the contract on a per section basis. There is no need to the contractor’s
consent for sectional completion but the instruction in the booklet of JCT contract should be
completed such as: “description of the sections, date of possession for each section, date of
completion of each section, section sums and the liquidated damages for each section.”
The JCT contract covers sectional completion in Clause 2.30.2, specifying the sections and
proportion of liquidation damages in Contract Particulars 2.32.2. In NEC4, sectional
completion is addressed through clause option X5, with the contract data providing details
on the sections and completion dates. If the client intends to apply sectional completion, the
contractor have to be prudent of the cascading effect from the date of commencement of
stage completion will be affected by the subsequent section if being delayed. In the Liberty
Mercian Limited v Dean & Dyball Construction Ltd case (2018), the consequential delay to
section 1 didn't exempt the liquidated damages provisions, as it was attributed to the
contractor's own delay of lacking the better management of resources allocated to each
section. (Thiru 2023)
Partial Possession allows when the client, with the contractor’s consent, is permitted to take
control of specific portions of the project. Upon the execution of this right, the relevant
section of this work is considered effectively completed. Under JCT contract, the liquidated
damages will be reduced by the same proportion as the relevant part to the contract sum or
appropriate sectional sum. In the JCT, the clause 2.35 defines the partial possession as
following: Before the practical completion certificate is issued by the contract administrator,
if the employer obtains the contractor's consent, they can take possession of any part of the
works or a section. So simply a verbal instruction is not permitted, the client’s instruction
has to make it as a report to the site manager as its nature of a variation which need to be
agreed and issue to a contractor. With the clause 2.37 addresses the liquidated damages to
relevant part, it clarifies that liquidated damages stated in respect of the works containing
relevant part shall reduce by the same proportion as the value of the relevant part bears to
the contract sum or to the section sum. Under NEC4 ECC contract, if the client wants to
take over on the date before the completion date, then the taking over in the following
applicable assessments and is dealt with the clause 35.2 which states: “The client may use
any part of the works before the Completion Date has been certified. The client takes over the
part of the works when it begins to use it except if the use is: for a reason stated in the
Scope or to suit the contractor’s method of working.” The clause is more clearly expressed
to state that the client is allowed to use the part of the works, and if they do so, they are
considered to take that part of the whole works except for a specific reason stated in the
scope. Also, under NEC the secondary clause X7.3 states: “If the client takes over a part of
the works before Completion, the delay damages are reduced from the date on which the
part of taken over. The project manager assesses the benefit to the client of taking over the
part of the works as a proportion of the benefit to the client of taking over the whole of the
works not previously taken over. The delay damages are reduced in this proportion.” If the
client decides to choose partial possession, they need to be aware of that a verbal report is
not acceptable in terms of contract. Also, while the JCT evaluates the reduction by
determining the value of the taken-over works in relation to the contract sum, the NEC
Project Manager assesses the advantages of the takeover and adjusts the delay damages
accordingly. (Suttling 2022)

【Case 5】:

In the relation to unforeseen ground condition, the JCT contract adopts an approach akin to
the common law position, meaning the unforeseen ground condition is not a relevant event
leads to the entitlement to an additional of time or additional payment. The case law in
respect of unforeseen ground condition can trace back to the 19st century. The case of
Bottoms v York Corporation (1892) held that there is no guarantee to the soil’s
characteristics so that the contractor was not eligible for the additional payment. Another
case also reiterated in another case Workshop Tarmacadam Co Ltd v Hannaby (1995), in
which a contractor tried to claim an additional cost out of unforeseen ground hard rock. The
judge’s view had pointed that if the plaintiffs had wished to make a provision in the event of
unforeseen ground condition, they could have easily included specific terms to address this
in their agreement; however, they failed to do so. (Buckingham 2023) To simplify,
according to JCT contracts and common law, the responsibility for unforeseen ground
conditions lies with the contractor. If a contract doesn't explicitly outline provisions for
extension of time or compensation in such cases, then the risk remains with the contractor.
Under the NEC4 Contract uses the ICE foreseeability test in relation to ground conditions.
(Dickens 2023) The NEC4 identifies that the project manager is required to notify
compensation events under clauses 60.1 and provides for a compensation event in certain
circumstances where the contractor encounters physical conditions that had “such a small
chance of occurring that it would have been unreasonable for him to have allowed for them”
in clause 60.1(12). However, in judging of physical conditions for the purposes of a
compensation event certain factors need to be taken into account, including site information
provided to the contractor states in the clause 60.2. In our case, the contractor and the
client both have the responsibility to re-examine if there are any disclaimer during the
process of signing all the documentation. If the information given to the contractor turned
out to be wrong and had not warranted explicitly or implicitly on the accuracy of that
information by the client, then the contractor may have claim for the damages. Such
statement had been supported by the case Bacal Construction (Midlands) Ltd v
Northampton Development Corporation (1975), the contractor necessitate the redesign and
additional work based the given data and it was an implied term of the contract that the
ground conditions would accord with the data given to it. However, the employer can offer
site information without compromising the fundamental requirement that the contractor
must carry out the works at the agreed price, even if the ground conditions prove to be
more challenging than initially anticipated. In the end, the buildability is the province of the
contractor. (Harris 2015) The contractor must be aware of that the onus is on their
shoulders and acquire and realise the actual site information for the construction works.
Therefore, we would suggest China Bank find some implication in the site report that “Site
information may be supplied, accompanied by disclaimers within the contract explicitly
stating that any inaccuracies or errors will not lead to liability for the client”.

【Case 6】:

Novation contract in the construction field means a procedure where a new party replaces
one of the entities in a contract, taking on identical responsibilities, liabilities, and
entitlements as the original party. Taking our case for example, if the client wants to novate
the original architect, then under the JCT contract clauses that original architect will under
the control of the contractor’s scope. Based on the JCT contract, the main responsibility for
quality control is the designer, i.e. the architect, serves as contract administrator. Clauses
3.17 and 3.18 provide procedures for dealing with defective works. The CA has the power to
issue instructions to (1) open up for inspection any work covered up or (2) to test any
materials, goods and executed work. In this case, our client may lose control for overall the
quality of the project since the architect is subjected to the contractor. Moreover, the
contractor may increase tender price to compensate the expense of hiring the architect.
Under NEC4, the project manager is on duty for the quality management as the clause 40.3
states that “The project manager may instruct the contractor to correct a failure to comply
with a quality plan.” To make sure all the clients’ requirements are met. However, the
project expense will not be lower since the additional price for achieving a high quality goal
which relied on the connection among the architect, the project manager and the contractor,
the extra employment fee of a designer will be added in the tendering price.

【Reference】
Dickens, G, 2023. Lecture 2 for introduction to JCT and NEC contracts. [Lecture to MSc
Quantity Surveying Nottingham Trent University]. 5th October 2023.

CIOB, 2010. Procurement in the Construction Industry. [online] Google:CIOB. Available at:
https://www.cic.org.uk/uploads/files/old/procurement-chartered-institute-of-building.pdf
[Accessed 13 December]

Wade, R, 2020. SUICIDE BIDDING – A WARNING FOR CONSTRUCTION FIRMS. [online]

London: Business Matters Magazine Available at: https://www.blakemorgan.co.uk/suicide-
bidding-a-warning-for-construction-firms/ [Accessed 13 December]

Dickens, G, 2023. Lecture 4 Liquidated Damages. [Lecture to MSc Quantity Surveying

Nottingham Trent University]. 19nd October 2023.

Dickens, G, 2023. Lecture 6 Contractual Risk Bond PCGs. [Lecture to MSc Quantity
Surveying Nottingham Trent University]. 2nd Novemebr 2023.

Thiru, S, 2023. Sectional completion – pitfalls & risks. [online] Google: HKA. Available at:
https://www.hka.com/sectional-completion-pitfalls-risks/ [Accessed 13 December]

Suttling, D , 2022. Practical Completion and Partial Possession. [online] Google: C-LINK.
Available at: https://c-link.com/blog/practical-completion-and-partial-possession/
[Accessed 14 December]

Harris, P, 2015. Buildability in construction contracts. [online] Google: Wright Hassal.

Available at: https://www.wrighthassall.co.uk/knowledge-base/buildability-in-construction-
contracts [Accessed 15 December]