The revamped JCT suite of contracts has finally begun to arrive. So what’s changed, what’s stayed the same – and what do you have to look out for?
The much heralded JCT contracts have been relaunched, with the advance party comprising the Minor Works and Intermediate Forms of Building Contract (now with contractors design) and a Framework Agreement (for use in long-term public and private sector procurement arrangements). Publication of the remaining contracts is to follow in the next few months.
For those keen to embrace the “modern look”, initial enthusiasm needs tempering. Still awaited are the subcontracts and collateral warranties. Contractors and employers using the new contracts without those subcontracts and collateral warranties risk inconsistencies across project documentation and risks may not be appropriately “passed” to those involved in the construction process.
Apparently the old JCT contracts will no longer be printed from early 2006. Users should consider now the implications of the new contracts and the changes they may bring to their procurement and contracting arrangements.
So how do old and new contracts compare? The new Intermediate Building Contract With Contractors Design (ICD) illustrates some of the changes. Developers and funders will be pleased to note that a number of provisions introduced by the JCT Major Project Form (MPF) in 2003 have been followed in the ICD but with some interesting distinctions:
Although described as ‘irrevocable’, the copyright licence is only operable where all money due and payable to the contractor has been paid
- Design issues Like the MPF, the contractor is not responsible for the employer’s design. Unlike the MPF, the contractor’s liability for design is limited to using the reasonable skill and care of a competent architect or other designer. This diverts from the MPF requirement that the contractor be experienced in carrying out design work of a similar scope, nature and size. The ICD is stated as not suitable as a design-and-build contract – perhaps accounting for the distinction. But this may be a missed opportunity, given that design-and-build contractors are increasingly “adopting” responsibility for all design. This is an area where amendment is to be expected.
- Copyright A simple and common form of copyright licence in favour of the employer has been added. Although described as “irrevocable”, the licence is only operable where all money due and payable to the contractor has been paid. The effective removal of the irrevocable nature of the licence may be a weapon in the contractor’s armoury to secure payment, but is unlikely to be accepted by employers or funders.
- Professional indemnity insurance The ICD contains a requirement on the contractor to maintain professional indemnity insurance in an amount stated in the contract particulars. Where the basis of cover is not selected, the requirement will be to maintain cover on an aggregate basis. Failure to insert the relevant minimum level of cover means that the obligation to maintain such insurance will not apply. Where the contractor is undertaking design, employers and funders will wish to check this.
- Assignment The historic position is that the consent of either party is required to assign the contract. This is maintained. Amendment may be needed to meet development and funding requirements, although the new provisions for collateral warranties should be considered in tandem with any such amendments.
- Collateral warranties At last, detailed provisions catering for collateral warranties. Not surprisingly, the preferred form is the relevant JCT collateral warranty. But the new forms are still to be published. Discrepancies may arise if ICD is used with the “old” JCT forms.
The application of maximum caps on liability and net contribution provisions catered for in the ICD are often called for by consultants, subcontractors and their PI insurers but are not invariably accepted in the market. Developers and funders will seek to displace these provisions. For larger schemes that are externally financed, bespoke forms are likely to prevail. If using the new collateral warranty provisions, take care to comply with the notice requirements which specify that written notice must be given by actual, special or recorded delivery.
Heralding a new age for construction contracts? Certainly. Deserving a fanfare? The industry is yet to judge.
Helen Garthwaite is a construction partner at law firm Taylor Wessing, firstname.lastname@example.org