Contract killers

The Joint Contracts Tribunal (JCT) released an entirely new series of contracts in 2005. This was significant for two reasons. JCT contracts were normally revised after a 20-year period (1963, 1980 and 1998) but the latest series was published only seven years after its predecessor and, for the first time ever, there is an attempt to provide a complete ‘suite’ incorporating partnering provisions and with contractor design involvement. In the process, the contracts have been simplified and modernised wherever possible.

It is the new JCT publisher, Sweet and Maxwell, which is largely responsible for the new layout, wording and formatting. This has led to the greatest number of JCT standard forms becoming available.

Sweet and Maxwell does not intend to publish innumerable contract amendments. Each addendum is to be freely available from its website for a limited six-month period; after that the contract will be reprinted in its entirety, seamlessly incorporating each amendment. Readers, when faced with a new printed form of contract, will need to ensure they are dealing with the latest revision; and revisions are what we may indeed expect.

For instance, the JCT has not yet universally adopted the Major Project contract form’s definition of Practical Completion.

The JCT states that its intention is not to alter the balance of risk, although there is a tacit acceptance that with new words comes the risk of new legal interpretation, but by streamlining and simplifying the contracts JCT hopes that each party will be able to look to their risks obligations better.

Each 2005 contract family has a separate contract form enabling contractor design input at either main or subcontractor level; even down to the minor works form. These are not intended to provide a design and build form however; employers are guided to the Design and Build family if that is what is required.

Clients, customers and contractors are advised to visit the JCT website or procure one of Sweet and Maxwell’s catalogues to see in which circumstance each contract family is designed to be used.

Although the selection will invariably be made by the professional team, there is little excuse for selecting an inappropriate procurement route. The 2005 suite has been expanded to include generic forms of subcontract, home owner contracts and framework agreements.

The clause numbering system has been simplified and standardised. For instance, Clause 4 will always contain the payment provisions. In place of nomination provisions is the facility to require a collateral warranty, this in spite of the Contracts (Rights of Thirds Parties) Act.

The term ‘defect liability period’ is to be replaced with the defect ‘rectification period’. The issue as to whether ‘a reasonable period of time’ has elapsed since the defects have been issued and corrected remains, which given it triggers the release of the final moiety of retention, is still an issue.

It is not all bad news. The JCT has relegated the provisions as to CDM and VAT to a mere mention, reasoning that reproducing legal requirements in what is a commercial agreement is a pointless exercise.

The insurance provisions are now to be found scheduled, separately, at the rear of the contract in a new section termed the ‘Contract Schedules’. Here the reader will find the provisions concerning dispute resolution, bonds, insurances, drawing design submittal procedure and ‘Quotations for changes’ to name but a few.

Professional Indemnity Insurance provisions appear too, although not in the schedules. Readers will have to see whether the Contract Particulars (formally the Appendices) have been completed to indicate the value and range of PI Insurance required.

In the Standard Building Contract, the Particulars are now located at the front but the Intermediate and sub-contracts have their respective particulars printed in a separate ‘Agreement’ document.

Historically, the JCT provided a facility for contract drafters to settle upon, say, their own level of retention. Problems arose where no choice was made and to combat this the new JCT form has introduced a whole series of default provisions. For instance, retention defaults to 3%; where Arbitration is not selected Litigation prevails; Option ‘A’ in the fluctuation provisions will be favoured assuming that the provisions are not struck out.

The consequential changes to DOM 1 and DOM 2 are awaited with anticipation.