JCT 2016 – what’s changed?

Date published

07/12/2016

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The Joint Contracts Tribunal (JCT) is currently rolling out the latest major update to its family of standard form construction contracts. We provide a review of the changes to date and assess the implications for employers, contractors and insurers.

The staged publications have so far included updates to the Minor Works Building Contract, the Design and Build Contract (DBC) and the Standard Building Contract (SBC), plus associated subcontracts. In this article, we will collectively refer to these as the 2016 Contracts.

Overall, the risk allocation between the parties has not changed. However, parties should note some practical and administrative issues in order to avoid falling foul of the new provisions.

Our views on three key changes are set out below. We recommend our extended analysis and guide for any parties who intend to enter into, or administer, the 2016 Contracts in the future.

Payment terms

The payment provisions in section 4 of the 2016 Contracts look quite different to those in the 2011 edition.

The aim of the changes is as follows:

  • To simplify the payment terms as far as possible. The timing of all interim payments is now linked to an ‘Interim Valuation Date’ (IVD) that is stipulated in the contract particulars. Interim payments do not have to be listed in a payment schedule. This avoids the situation that arose in Balfour Beatty Regional Construction Ltd v Grove Developments Ltd [2016], where the Court of Appeal upheld a first instance decision that no further interim payments were due after those listed in the payment schedule.
  • To regularise the payments within a contract chain and facilitate payment to all tiers of the chain (contractor, subcontractor and sub-subcontractor) within 31 days of the IVD.

Comment

The new provisions create a more straightforward and holistic payment scheme. However, employers and contractors will need to review any standard payment/notification processes currently in place. In addition, the simplified scheme relies on the payment provisions being un-amended throughout the contractual chain. Care must be taken to carry any bspoke amendments in the main contract through to any subcontracts and sub-subcontracts to avoid creating an inconsistent payment regime.

Loss and expense

The changes to the provisions relating to loss and expense in the DBC and SBC are intended to improve communication between the parties and create a timeframe for information to be provided and assessed.

Comment

The changes provide helpful guidance as to when and how information in relation to loss and expense claims is to be provided by both parties. However, they do not (apparently) give any ‘teeth’ to this process. Some commentators have questioned whether the new wording creates a condition precedent to the contractor recovering compensation for loss and expense. The JCT Council drafting sub-committee has confirmed that this was not the intention. It will be interesting to see if this point is tested in the courts.

Insurance

The insurance options set out in Schedule 3 of the DBC and SBC have been consolidated to remove repetition of terms.

In addition, Option C has been amended to allow parties to choose (by stating in the contract particulars) to replace this option with their own ‘Replacement Schedule’. This change acknowledges that many employers are tenants and therefore not responsible for insuring the existing structures.

Comment

The changes are welcome insofar as they allow for more flexibility and acknowledge the need for alternative arrangements. However, it is still necessary for the parties to liaise with their insurers and brokers to establish exactly what those arrangements will be and to draft appropriate contract terms to be contained within the Replacement Schedule.

Read other items in Construction Brief - December 2016

View our extended analysis and guide to the changes that have been introduced.