Suit yourself

Love them or loathe them, JCT contracts are the weapon of choice for most developments. It is usually the case that the printed JCT form is used with a schedule of amendments that tailors it to the requirements of individual transactions. But how cost effective and time efficient are such contracts? Not very, some would say. So the JCT is due to launch its digital service later this month. This takes a fresh approach to putting contracts together and has the potential to allow documents to be prepared more quickly and cheaply.

Some take the view that all building contracts are one-offs and require one-off contracts to go with them. But is that really the case? As with so many things, there is a range of possibilities.

At one end of the scale, we have complex, high-value developments where JCT amendments are often extensively drafted to suit the project. The benefits of the digital service are going to be felt less here than elsewhere. At the other end of the scale, there are straightforward, low-value developments where the printed JCT form can be used with little or no amendment.

This leaves a substantial middle ground where carefully drafted amendments will still be needed to fit the circumstances of the transaction but where it is inappropriate to use the full-blown set of amendments left lying about the office just because they were used on a big deal in the past. This is where the new digital JCTs, it is hoped, will come into their own.

When a set of amendments is over-the-top for the transaction on which it is being used, it tends to prolong the contract negotiations between employer and contractor, sometimes to the point that the project is completed before the contract is signed. Lengthy contract negotiations do not come free of charge and it is the developer that foots the bill for the legal and other consultancy costs associated with them.

Using the digital service should give construction firms the opportunity to prepare JCT contracts that are properly tailored to each transaction, without compromising their legal integrity and saving themselves time and money.

The digital service will come on CD, with the option of subscribing to online updates, and will allow the user to generate custom-built JCT contracts on screen by following a step-by-step questions-and-answers. It will permit the user to incorporate regularly used amendments by building up a library of clauses. Irrelevant information can be left out and the contract streamlined to fit the exact requirements of the job. Additions to the published JCT form will be shown in underlined text and deletions will be shown as struck-out text.

Over-the-top amendments can prolong negotiations to the point that the project is completed before the contract is signed

 

The online updates will be helpful in ensuring that the latest version of the JCT is always to hand, avoiding the risk of using a bespoke amendment from a previous set of amendments that does not work with the latest JCT.

A word of warning: the digital service will need to be used with care and suitable guidance – as with any computer application the phrase “rubbish in, rubbish out” applies. However, because all the changes will be shown as underlined or struck-out text, errors that may have lurked in schedules of amendments should now be glaring out of the customised contract.

A setback for some of the smaller firms is that they may not have the technology to benefit from the service. Sending contracts electronically between parties will require both to have the software. There is a costs issue here. Annual single-user subscriptions range from £99 for the small works edition without online updates to £375 for the complete edition with online updates. However, even if the firms choose not to invest in the software, they should reasonably expect their advisers to use it effectively.

The changes will not make lawyers redundant, in fact they’ll need to get busy preparing a library of clauses for these digital contracts. Clients are entitled to expect lawyers to get the balance right for each set of amendments prepared – by being clear, concise and cost-effective.

If the digital service is correctly used, it will be possible to prepare customised JCT contracts quickly and cheaply. It may not be suitable every time, but firms and their legal advisers should give the service careful consideration when entering JCT contracts in the future.