New features of the JCT Design & Build 2024 Contract (and Sub-Contract)
The Joint Contracts Tribunal (JCT) is in the process of updating its suite of contracts. The first release was the 2024 edition of the Design & Build Contract (“the Contract”).
JCT 2016 contracts are the most widely used form of contracts in the construction industry. The 2024 edition seeks to modernise and improve upon the previous form.
Here, we will be briefly looking at the key new changes which can be divided into the following categories:
- Modern communication
- Legislative changes
- Future proofing
- Fluctuations
- Design liability and fitness for purpose
- Extension of Time
- Loss and Expense
- Liquidated Damages
- New contract family
- Conclusion
The Sub-Contract
Although we have referred to the Contract between the Contractor and Employer, most of the changes discussed here also apply to the Sub-Contract between a Contractor and their Sub-Contractors.
Modern Communication
The language in the 2024 edition has been updated to use gender-neutral terms.
In line with modern practices and common amendments, notices can now be served electronically, providing increased flexibility. There are corresponding entries in the Contract Particulars for details of the email addresses to be used.
The JCT has also acknowledged that contracts are now often signed electronically. The Contract includes notes giving guidance on electronic execution.
Legislative Changes
The Building Safety Act 2022 and the new part 2A of the Building Regulations 2010 have both now been accommodated. That legislation and the CDM Regulations require a Principal Designer and a Principal Contractor but, confusingly, the roles they have under each differ.
The Contract Particulars now include entries for the Principal Designer and Principal Contractor for the CDM Regulations and for the Building Regulations 2010.
The Contract does not specifically address issues under Part 2A of the Building Regulations in relation to higher-risk buildings like those over 18m in height or with 7 or more storeys. The rationale for this is that they are just one of many different types of project. The guide which the JCT published alongside the Design & Build Contract provides further information.
The Contract clarifies the position on payment after termination by adding a new payment due date which occurs after termination. This reduces uncertainty as to the effect of the Housing Grants, Construction and Regeneration Act 1996.
Two new insolvency grounds have also been added to the termination provisions of the Contract, for compliance with the Corporate Insolvency and Governance Act 2020.
Future proofing
The Construction playbook contains 14 key policy areas to drive change throughout the construction process. It is primarily for the public sector but is intended to set out best practice for the private sector.
The JCT reviewed the Construction Playbook and decided to make two optional provisions from the 2016 JCT contracts mandatory instead. These are 1) collaborative working, and 2) sustainable development and environmental considerations.
The wording of the collaborative working provision is unchanged.
The wording of the sustainable development and environmental considerations provision has been enhanced.
Fluctuations
The JCT has several optional fluctuation provisions, which provide various options for adjustment of the Contract Sum as a result of different inflationary factors. They are rarely used.
They can still be used in the 2024 Contract. If you want to read what they say, you will need to download them from the JCT website as separate supplemental documents, as their wording does not appear in the printed form.
Design Liability and Fitness for Purpose
Under the 2024 Contract, the wording of the standard of care for design has been updated to wording which is often included in schedules of amendments to the JCT. The Contractor has to exercise the level of reasonable skill and care of a qualified and experienced architect or other appropriate professional designer.
Significantly, the new Contract excludes fitness for purpose obligations in relation to the design to the extent permissible by the Statutory Requirements.
It is likely that this amendment has been introduced because of the case M.T. Højgaard v E.ON Climate & Renewables UK Robin Rigg East Limited [2017] UKSC 59. In that case the Supreme Court concluded that a requirement that the Contractor construct foundations that would last for 20 years was binding. That requirement was included in the technical documentation which formed part of the Contract Documents. There was also an obligation for the Contractor to exercise reasonable skill and care in providing the design. The Supreme Court decided that the contractor had a contractual duty to ensure that the works were designed to last for the specified design life period, as well as a duty to use reasonable care and skill. So, the contractor had two parallel duties.
Until this case it was commonly thought that the reasonable skill provision applied to all the Contractor’s obligations. In other words, it was thought that a Contractor would just have to use reasonable care and skill to try and meet the design life (or other strict obligations in the contract), so if they failed to achieve the design life, but had used reasonable care and skill, they would not be liable.
As a result of this case reversing the commonly-held view, contracts were frequently amended so that obligations included in the technical documents would be subject to reasonable care and skill, not fitness for purpose.
Extension of Time
The Employer now has 14 days to notify if it requires additional particulars when evaluating an interim Extension of Time (“EOT”) applied for during the Works.
The time period for the Employer to assess interim EOT claims has been reduced from 12 to 8 weeks. The time period for determining the final EOT entitlement remains at 12 weeks.
The JCT continues to list the grounds for EOT as Relevant Events. Following the Covid-19 pandemic, a new Relevant Event for epidemic and related issues has been added.
The Relevant Event relating to the discovery of antiquities has been updated to include asbestos, contaminated material, and unexploded ordnance. This alters the allocation of part of the risk relating to ground conditions.
A Relevant Event relating to the exercise of statutory powers and changes in law has also been added. It includes publication of guidance by the UK Government or local authorities and the Construction Leadership Council.
Loss and Expense
As per the 2016 JCT Contracts, events entitling the Contractor to loss and expense are listed as Relevant Matters. The Contract Particulars include optional entries which can make epidemic and/or exercise of statutory powers by the UK Government Relevant Matters. If they are selected, the Contractor will be entitled to loss and expense where they occur.
There is a further optional Relevant Matter for the exercise of statutory powers and changes in law which corresponds with the new Relevant Event mentioned above.
As with the corresponding Relevant Event, the Relevant Matter relating to the discovery of antiquities has also been expanded to include the discovery of asbestos, contaminated material and unexploded ordnance.
Liquidated Damages
A new clause 2.29.5 has been added to reflect the Supreme Court decision in Triple Point Technology Inc v PTT Public Company Ltd [2021] UKSC 29.
The new clause allows for liquidated damages to accrue between the date of completion or the date of termination, whichever is earlier. Any delay losses following termination may be recovered as general damages.
This is helpful as it provides consistency between the contractual position and the common law. The court has however emphasised the need for careful drafting and any claim for liquidated damages will still be assessed on a case-by-case basis.
New Contract Family
Although it is not part of the Design & Build Contract covered in this post, the JCT will be launching a new contract family, the JCT Target Cost Contract (TCC). It will comprise a main contract, sub-contract, and. This provides a JCT alternative to the NEC Option C ECC form.
Conclusion
The JCT 2024 Design & Build Contract is not dramatically different from the 2016 version. It is more of an evolution than a revolution. If you regularly use the 2016 form, you will find that a lot of the 2024 form is familiar.
The most significant change from a risk-allocation point of view is likely to be the new Relevant Event relating to asbestos, contaminated material and unexploded ordnance. Allocation of this risk may require careful consideration.
We will be providing further updates on the other releases of the 2024 JCT contracts and explanation of key themes arising from this.
How CCC can help
CCC has considerable experience in assisting Contractors and Sub-Contractors and can provide the specialist advice and support that you need, including:
- Reviewing and/or drafting your contract to help you assess and manage risks.
- Providing advice to help you make sure you are contract compliant.
- Assessing claims and assisting with dispute resolution.
- Providing training for you and your employees to have the right commercial and contractual knowledge.
