Justin McGuirk Good, we're all here …
Neil Jones Testing, testing, one, two, three.
Justin Hi Neil. So, everyone's talking about the new JCT Major Project Form. Obviously it hasn't been put through its paces yet, but let's discuss its pros and cons. Ann, you wrote a positive appraisal of it in the magazine, Neil's just written a book about it and Gillian's got serious reservations about it. Ann, why was it produced?
Ann Minogue The objective was to produce a form that reflected the sort of terms being used in the marketplace between big clients and their contractors and to avoid book-sized lists of amendments to the existing JCT Design and Build Form.
Justin How does the form help contractors? Ann Contractors will know where the balance of risk lies and can price accordingly. Certainty is better than surprises for everyone.
Justin But Neil, you feel it favours the employer?
Neil It certainly favours the employer.
But in my view, it will still be significantly amended to make it even more favourable. As ever, contractors will use the new form having been dragged to it kicking and screaming.
Justin What will the grounds be for amending it?
Gillian Birkby The design liability is not clear. Possession is still not properly resolved, despite what you have all said about it, and the payment procedures could be more equitable.
Neil Final statement provisions are dodgy; contractors' design responsibility will be increased; the professional indemnity clause needs expanding to better protect the client.
Justin Ann, do you agree that employers will still make lots of amendments?
Ann I think the only possible area of amendment may validly be subcontractors' warranties to banks, tenants etc. But we all want to get rid of that paperchase, don't we?
Gillian No, there are more areas than that.
Ann I have no problem with payment provisions being expanded in the pricing document but the reason JCT forms are more than 100 pages may be something to do with a rather unpragmatic view about what a contract needs to cover. This form, by the way, is 30 pages, excluding schedules.
Gillian But we all know that if it's not in writing that can lead to disputes, given the kind of industry we are.
Ann Given the history of litigation around JCT forms, its could be said that it's unnecessary words that generate the disputes.
Neil But it's not about the number of words – although the JCT forms have become wordy to the point of self-destruction. It's about risk allocation and fairness.
Ann Couldn't agree more!
Gillian I think we all agree that clarity in drafting is important, but that is not the same as leaving out wording or being too vague.
Ann But there is a lot of underlying law.
Why repeat it all with pages of unnecessary and unenforceable procedures too?
Justin Gillian, what's your chief complaint with the Major Projects Form?
Gillian One is access. The only access the contractor will have is that which is "reasonably necessary". If the contractor doesn't have possession of the site then the employer must have it, and therefore the employer is liable as being in possession or control of the site. So there's a big risk for the employer here.
Ann Well, there is of course a duty on the contractor to comply with the statutory requirements, and the question of control over the site is a question of fact.
Gillian This also raises the issue of site security – how can the contractor control security if he doesn't have possession? How can he protect work which is finished from others pending practical completion? I can see lots of arguments about what is "reasonably necessary access".
Neil Is it right to expect clients to be guinea pigs in testing the third-party rights provisions in the contract when separate warranties are a safe bet?
Ann A lot of big clients are using third-party rights routinely now – British Land, Stanhope, Greycoat, and the Crown to name a few. It is hardly novel and has been endorsed by the City of London Law Society construction group.
Justin Neil, I'm not clear on how the contract favours the employer.
Neil Well, while this contract places more risks on the contractor than any other standard form, it falls well short of what most clients have come to expect.
Ann I am very surprised you say that. In what respect does it fall short?
Neil Design responsibility for pre-contract work is not addressed in the way in which many clients would want – it should assume that the contractor is to be responsible. The third-party rights schedule is not available for mid-contract funders; there are no step-in provisions for purchasers etc. And there is far too little employer control in relation to the replacement of named specialists and pre-appointed consultants.
Gillian But you can't have it both ways. If you are giving the contractor so much risk, he must be allowed to decide on replacement of specialists etc if it is actually required.
Ann You can't just impose responsibility on the contractor, you have to let him have the opportunity to object. In relation to mid-contract funders, the recipients of third-party rights are to be identified in the appendix so it's pretty easy to deal with this one. And if – which is rare for purchasers after completion – step-in rights are required, the appendix needs to state that the relevant third-party rights are given. Easy!!
Gillian But there is a problem with the schedule, because you only have rights under the third party act, and not obligations. The funder will not be a party to the building contract, so how can the contractor enforce the funder's obligation to pay the contractor if he exercises the step-in rights?
Neil Gillian, the act provides for benefits to be made subject to obligations.
It was a matter of policy to draft a simple and operable set-off regime that did not trip everyone up with incomprehensible procedures like the existing JCT provisions on liquidated damages
Ann You will see that the funder's rights on step-in are conditional on him serving a notice assuming obligations – F10 and F11. Two leading QCs have blessed this arrangement.
Gillian I'm relieved to hear two QCs have given it the tick. I agree that this is probably the way round it for the courts, but it is straining the act to its limits.
Neil Don't agree! Extensions of time could be an issue. On the one hand, exceptionally adverse weather and strikes are not expressly included. But they are probably brought back in under force majeure.
Gillian Not sure, Neil, about the weather. Unless it is the Act of God-type scenario – tornados etc, I think custom of the industry would be against you on that.
Ann I agree. Most of the cases equate force majeure to frustration – which was one of the drivers for producing the form in the first place!
Neil Was it a matter of policy for the payment provisions to virtually emasculate the protection given to the contractor in relation to withholding and set off under section 111 of the Construction Act?
Gillian I agree with Neil, the payment provisions are very sketchy. We definitely need some more procedures, eg for discussing the payment application before the employer serves his interim payment advice.
Ann It was a matter of policy to draft a simple and operable set-off regime that did not trip everyone up with incomprehensible procedures like the existing JCT provisions on deduction of liquidated damages. Whose interest is served by them? Except lawyers, of course.
Neil But surely the intention was not to thwart the policy behind section 111?
Ann Payment is dealt with generally in the pricing document – and you can make that as complicated as you like!
Gillian Let me try something else on you all. The employer can take over parts of the project before practical completion, but how does he do this when the contractor has never had possession of any part of the site? How can he take over when he has never given up possession in the first place?
Neil Gillian, that's just pedantic.
Gillian I don't agree. This whole issue of control of the area where the works are taking place is quite crucial to the efficient operation of the project and being able to produce it on time.
Ann I don't get Gillian's point either. The employer owns the site, it is ultimately his to do with as he wishes.
Neil Surely you wouldn't actually give the contractor legal possession would you?
Gillian Yes. Other documents can deal with pricing etc, but that comes back to the question of whether the sophisticated employer and contractor will use it, or whether it will also be used by the less expert, however many health warnings you put on it.
Ann Neil, existing JCT forms do just that. I think they are wrong to do so and I am glad to see you do too!
Neil We agree at last.
Gillian The other JCT forms give the contractor "legal" possession, so handover then makes sense. The contractor needs possession in order to organise his work to maximum efficiency.
Justin OK, so what are your conclusions?
Gillian Design-and-build and the small works are winners! Like all the other JCT forms, this one will generate amendments, to suit individual requirements, as well as filling in the gaps. So not much change there.
Neil The Major Projects Form has many attractions, particularly its brevity and plain language. But it may be misleading as to what it appears to offer both employer and contractor.
Ann I am a big fan. I am sure it will be used by many, many clients, and it is the first JCT form that has been drafted with any sort of eye to their interests. If there are one or two amendments OK, but we must stop this culture of lawyers producing books of incomprehensible amendments.
Justin Are bigger contractors better off with this than the other JCT forms?
Neil Definitely not.
Ann They know what they are taking on and can price accordingly.
Gillian No, they will find it tougher than the other forms.
Ann My fingers are aching … Justin That would be the bell. Thank you all.
Neil Many thanks to everyone.
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