Legal Skills: Contract Law: Engineering contracts

Audience

• Engineering managers
• Engineers aiming to make a transition to managerial positions
• Project managers and engineers
• Buyers and sellers of engineering products or services
• Contract/commercial managers

Skills Gained

• You will gain a thorough understanding of the structure and content of public and private engineering contracts, including how to make a balanced risk analysis of such contracts.
• Principles of contract law will be related to engineering practice and examples of their most recent application will be discussed, to help ensure that you avoid the problems and pitfalls.
• It will give you a valuable insight into the practical application of engineering contracts, to help you ensure the success of any engineering projects in which you are involved

Course Outline

Negotiating and structuring engineering contracts

• Different types of forms
• Choice of forms: MF1, MF2, MF3, IChemE, ICE, FIDIC
• Different versions of conditions: contractor's, purchaser's and amended standard forms of either party
• How engineering contracts may come into being
• Resolving problems arising during the negotiations
• Keeping effective records
• Amending or generating documents to reflect negotiations
• Letters of intent and instructions to proceed
• What to do and what to avoid
• Authority to contract
• Work commenced in the absence of a contract
• Payment and other liabilities

Time and the engineering contract

• The date of the contract
• The commencement date of the project
• Key dates for information and approvals
• Key dates for the purchaser to make available the site and facilities
• The importance of the programme
• Monitoring the programme
• Meetings
• Scope for revision of programme
• Cost implications
• Failure to meet stated times or dates
• Liquidated damages
• Different negotiating options for setting liquidated damages in the contract
• Distinction from penalties
• Time and whether or not it is 'of the essence'
• What this means in terms of risk
• Time extension and force majeure

Price, payment and additional costs

• Ways in which the price can be formulated in an engineering contract
• Legal requirements
• Linguistic problems in setting out the terms
• Methods of payment
• Payment milestones
• New laws about 'Pay when paid' clauses
• Entire contracts and stage payments
• Retention money
• Cancellation and its effect on payment
• 'Cancellation for convenience' clauses and their scope for negotiation
• Additional cost clauses
• The profit margin
• Variations and their effect on cost
• The relationship of force majeure to costs

Key clauses about obligations of the parties

• The role of the engineer or other person appointed
• Contractor's obligations (where applicable)
• Design
• Manufacture
• Delivery
• Installation
• Testing
• Handing over
• Performance of further tests
• Insurance and risk
• Indemnities and their meaning

Terms and obligations relating to quality

• Express terms
• The importance of the specification and standards
• Implied terms
• Recent changes in the law
• Establishing obligations as to fitness for purpose
• Remedies under common law
• Under statute
• Under warranty
• Limits of liability and the different ways of setting them
• How far such limits stand up in law
• Consequential loss: what does it mean?

Relationships involving other parties

• Assignment and sub-contracting
• The extent to which these rights can be controlled by the contract
• The commercial reasons for doing so
• Some problem areas involving third parties
• Design responsibility
• Free-issue
• Compatibility of terms

Title to goods and intellectual property

• The importance of establishing title to goods
• Risk
• Insolvency
• Different times or methods by which property can pass
• Position of the purchaser making advance payments
• Intellectual property rights in an engineering contract
• Securing those rights in goods or documentation
• Indemnities in respect of intellectual property

Guarantees, bonds and other undertakings

• What are bonds and guarantees and what commercial purposes do they serve?
• Relationship to letters of credit
• How and when the obligation to provide them arises
• Who provides the bond or guarantee?
• Bank
• Insurance company
• Parent company
• Conditional and on-demand bonds and their legal implications
• Values of bonds in relation to the price and method of payment
• Risk appraisal
• Some practical points to bear in mind when dealing with bonds and guarantees

Legal Skills: Contract Law: Engineering contracts / LE-CL-EC