JCT contracts - Main changes to the design and build form of contract

Introduction

The Local Democracy, Economic Development and Construction Act 2009 (LDEDCA) is being implemented on 1 October 2011.

Part 8 amends the Housing Grant Construction and Regeneration Act 1996 (often referred to as the ‘Construction Act’). JCT has launched a new suite of contract documents to take into account the changes required by LDECDA.

We summarise, below, the main changes which have been made to one of the most common forms of JCT contract, the 2005 design and build contract, revision 2, 2009. This is not an exhaustive list and we would be happy to address any specific questions or concerns.

Corresponding changes have been made to the other forms of JCT building contract. The new contracts also anticipate the implementation of the Bribery Act 2010. The new contract will be known as design and build contract 2011 (DB 2011).

Payment provisions

Changes to the payment provisions in construction contracts generally are summarised in a previous article published in May this year. In the D&B contract, the changes are contained in section 4 (payment).

Clause 4.8 of the old JCT contract now forms part of clause 4.7 of the new version. New clause 4.8 provides that the contractor (C) must make an application (an ‘interim application’) to the employer (E) stating the amount that C considers due to him by way of interim payment.

New clauses 4.8.2 and 4.8.3 apply in relation to due date for payment for, respectively, alternative A (stage payments) and alternative B (periodic payments).

New clause 4.9 now deals with the final date for payment, which is stated to be 14 days from the due date (which, as before, is likely to be amended by employers generally). Not later than 5 days after the due date for payment, E must give a notice (‘payment notice’) that specifies the sum E considers to be due and the basis on which it has been calculated (new clause 4.10.1).

Clause 4.9.4 introduces a new concept of the cumbersomely-named ‘pay less notice’ (similar to a notice of intention to withhold under the old form of contract) to be served in accordance with clause 4.10.2. The pay less notice must be served not later than 5 days before the final date for payment.

Where C suspends the carrying out of works on the grounds of non-payment, new clause 4.11.2 now gives C the right to receive a reasonable amount in respect of costs and expenses incurred by C in the exercise of that right.

Clause 4.12 (final statement and final payment) has been amended to take into account the new definitions of ‘payment notice’ and ‘pay less notice’.

As noted in our earlier article, although the new legislation is designed to clarify the content of the payment and withholding provisions, these remain complex. Anyone turning to the payment provisions of the new JCT (or other standard-form documents) expecting something slightly more user-friendly, is likely to be disappointed.

Principal Contractor (Article 6)

The provision for appointment of the principal contractor, for the purposes of the CDM regulations, is extended to cover that function under the site waste management plans regulations 2008

Insurance – terrorism cover

The risks covered by ‘all risks Insurance’ are defined by reference to exclusions (section 6). The changes incorporated in DB 2011 reflect those in the JCT December 2009 update, including new clause 6.10 dealing with policy extensions and premiums in relation to terrorism cover. Schedule 3 (insurance options) has been amended accordingly.

Termination

Clause 8.1 (‘meaning of insolvency’) of DB 2011 has been redrafted.

There are some detailed amendments to the consequences of termination provisions in clauses 8.7.3 and 8.12.

Clause 8.6 now refers to the new Bribery Act 2010 rather than the Prevention of Corruption Acts 1889 to 1916.

Summary

This is a very brief summary of the main changes to the JCT D&B form of contract. We would be pleased to provide further advice on this form and the other standard forms of contract as required.

As always, the new forms of contract will no doubt be extensively amended on a project-by-project basis, in particular by those advising employers under the contracts.

The JCT has made available all its standard forms of contract showing the 2011 changes tracked, by way of comparison with the latest 2009 revisions. These forms are available from the usual outlets.

For more information on JCT contracts, please contact our commercial team.