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New JCT contracts form is clearer ? and cuts retentions

The changes to the JCT Conditions of Contract are not world shattering but the differences and similarities between the new and old forms ? and with the NEC engineering and construction contracts ? are worth a close look, writes Jeremy Winter

A NEW standard form of contract may be difficult to appreciate but JCT Conditions of Contract are the most important contract document in the industry.

What we have here is a complete new suite of Joint Contracts Tribunal contracts. For example, the distinction between local authority and private versions of the standard building contract has gone.

We also have a new Framework Agreement for long-term arrangements with suppliers and contractors, under which the employer is able to make specific call-offs throughout the life of the agreement.

I have not read them all but it is possible to extrapolate the characteristics of the new forms from the Standard Building Contract With Quantities.

Those who like the JCT forms will be pleased to know that little of substance has changed. The JCT has deliberately not shifted the balance of risk from one party to the other, compared to the risk allocation in the equivalent old form.

But those who know their way around the old JCT forms may not be so pleased to learn that things are not in the same place as they were before. Forty-two sequential clauses in the JCT 98 form have become nine sections with varying numbers of sub-sections in the 2005 form. So if you go looking for the variations clause under Clause 13, you will not find it there ? it is under Section 5.

Thankfully the index is clear.

But the re-ordering of the clauses is quirky ? for example, practical completion and liquidated damages is in Section 2 but payment is in Section 4.

The drafting of the new form is certainly clearer and more concise than the old form, which had been tinkered with and new bits pasted in at various stages in its 25 years lifetime. For example, the variations provisions now cover just three and a half pages, plus a schedule, instead of the old seven.

There are more significant changes, too. Firstly, all references to nominated subcontracts have gone from the main contract forms, ref lecting the fact that this practice died some years ago Secondly, the list of Relevant Events justifying an extension of time has been shortened.

Under JCT 98 it used to be that if the contractor was unable, for reasons beyond his control, to obtain either labour or materials, this would give him grounds for an extension of time. Any sensible employer deleted these.

The 2005 version ref lects that it is not reasonable to expect the employer to bear that risk and no longer includes these. Some other Relevant Events have gone, but probably they are the kind of events that will be swept up by the all-embracing 'impediment, prevention or default?by the Employer' provision.

There has also been a corresponding shortening of the list of Relevant Matters affecting progress and therefore justifying the payment of loss and expense under what is now Section 4.23.

But the most radical change is that the drafters have taken on board the Contracts (Rights of Third Parties) Act, which allows one to include in a contract provisions for the benefit of, and which are enforceable by, a third party. If used properly, this could avoid the need for collateral warranties, which are widely unpopular. The new form conveniently allows the user to use either the third party rights provision or collateral warranties.

There are also things that one might have thought would have been changed but have not been. For example, the role of the architect as independent certifier. The domestic and international civil engineering forms have recognised the reality that a consultant employed and paid by the employer is not independent but the JCT perpetuates what many would consider a myth.

Another apparent oversight is the absence of any requirement for the contractor to produce ? and the architect to approve ? a programme. Contrast this with the NEC engineering and construction contract ? probably the role model for contracts that focus on the contract as a management tool ? which places the emphasis on the role of the programme in monitoring progress and managing change.

The recurring themes in claims situations of 'who owns the f loat?' and how to deal with concurrent delay (by contractor and by employer) are also not tackled, perhaps because they would have been difficult to get consensus on among the JCT constituents. My longheld view that the employer ? or at best, the project ? owns the float under the JCT form, because the delay caused by a Relevant Event has to cause completion of the works to be delayed beyond the contract completion date, still prevails and is there to be challenged.

Force majeure remains a Relevant Event in the new JCT contract, justifying an extension of time, but there is still no definition of what force majeure actually comprises.

Retention is another untouched area. I'm sure many will rail against the perpetuation of retention provisions but at least he will be pleased by the fact that the default percentage is now 3 per cent instead of 5 per cent as it was under JCT98.

All in all, the new form is a small but important step forward. I'm sure some, who are familiar with the old form, may wonder why they bothered to update it. My answer would be: think of the new generation of people coming to the form for the first time ? no longer will they have to tackle the impenetrability of clause That alone has to be worth it.