The Joint Contracts Tribunal has recently published its updated Design and Build Contract and Sub-Contract.
Some of the changes about which the JCT has previously released details which have piqued interest in the industry include the introduction of a new target cost contract, to offer an alternative to the popular NEC Option C contract. That is not due to be released until later in the year along with the updates of the other JCT forms of contract.
However, the changes which have been brought into the JCT Design and Build Contracts are likely indicative of the changes that will be made to the other forms of contract.
We have therefore highlighted some of the changes that the JCT drafting committee have introduced and provide some thoughts on the changes following an initial review.
The first thing to say is that the changes are not wholesale; it is not like the change from JCT 98 to JCT 2005 when the format of the contract changed fundamentally; the changes are tinkering at the edges rather than a complete change to the format.
There are also some changes such as the introduction of gender neutral language and the use of electronic notices, albeit this is an option to be selected in the Contract Particulars, which are overdue.
There are some interesting changes that we discuss below, which should be taken into consideration by parties using the JCT 2024 contracts.
Obligation to co-operate, collaborate and act in good faith and in a spirit of trust and respect
The first significant change is the introduction of a new Article 3 which requires the parties to:
“…work with each other and other project team members in a co-operative and collaborative manner, in good faith and in a spirit of trust and respect.”
This change has been brought in to bring the JCT contract more in line with the NEC contract by placing express obligations on how the parties operate the contract. This change arguably goes further than the NEC requirement, as it expressly requires the parties to act in good faith, which is potentially a step further than the NEC requirement to act in a spirit of mutual trust and c-operation.
It will be interesting to see how the courts interpret this requirement and whether it changes how obligations are construed under the JCT contracts. The 2020 Scottish case of Van Oord v Dragados has been seen by some commentators to give some teeth to the requirement to act in a spirit of mutual trust and co-operation under NEC contracts, although that point has not yet been tested in the English courts.
Most parties are seeking to protect their position when they are managing their obligations on construction projects, and do not intentionally act in bad faith even if the other party may consider their actions to demonstrate the contrary. Until this obligation is considered by the English courts, it is advisable for parties using JCT 24 contracts to keep this requirement at the forefront of their mind when managing and operating their contracts.
Building Safety Act changes
The JCT 2024 has made changes to update the contractual requirements to reflect the introduction of the Building Safety Act 2022.
The changes appear to not be as extensive as were maybe anticipated and the JCT drafting committee appears to have taken the approach that the existing obligation to comply with statutory requirements is wide enough to cover the obligations under the Building Safety Act.
This means there are no specific provisions for higher risk buildings, which will likely lead to Employers seeking to make amendments for those projects which fall into that category. This seems to be an opportunity missed, as the JCT have utilised the option of selections for other issues, so it seems like clauses dealing with the requirements for high risk buildings could have been incorporated as an option to be selected in the Contract Particulars.
Changes to Contractor’s liability
Cap on liability
There is provision in the JCT 2024 Guidance Notes for how parties can provide for an overall cap on the contractor’s / sub-contractor’s liability. This is in response to the extensive use of caps on liability to limit contractor’s overall liability on projects. The Guidance Note provides a sample clause for how parties can deal with an overall cap on liability, along with how the parties can provide for a sub-cap on liability for liquidated damages, although it is probable that parties will seek to provide their own clauses in these circumstances.
Post-termination liability for liquidated damages
Another change to JCT 2024 is that, in the event of the termination of the Contractor’s employment, the JCT 2024 expressly limits the Contractor’s liability for liquidated damages to the point of termination. This change reflects the Supreme Court decision of Triple Point v PTT, but contractors should note that they remain liable for general damages after the point of termination. Contractors should also be wary that the new wording In the JCT 2024 does not appear wide enough for the level of liquidated damages to act as a cap on general damages post-termination. Contractors should therefore consider whether they should propose amendments to this effect.
Liability for discovery of asbestos / contaminated materials
The JCT 2024 also provides that an instruction under clause 3.15 which deals with the discovery of asbestos, contaminated material and unexploded ordnance is a Relevant Event and Relevant Matter unless the issue was identified in the Contract Documents. This is on top of antiquities which were previously allowed as a Relevant Event and Relevant Matter.
Design liability
Another change introduced is to expressly state that, to the extent allowed by statute, the contractor will only be liable for exercising reasonable skill and care in its design, and so will not be liable for any fitness for purpose obligations included within the Contract Documents. Contractors and subcontractors should be wary of the amendment or removal of this provision.
Amendments
With all of the above issues, there is a good chance that some or all of the above changes will be dealt with by way of amendment by employers and subsequently by main contractors, so the above should be kept in mind by contractors and sub-contractors when looking at any proposed schedules of amendments to the new JCT design and build contracts.
