UK: Other Changes In The JCT 2011 Suite Of Contracts

Last Updated: 31 October 2011
Article by Kate Knox

We have already discussed the changes that the JCT are making to their suite of contracts to conform to the changes to the payment provisions in the Housing Grants, Construction and Regeneration Act 1996 (known as the 'Construction Act') introduced by Part 8 of the Local Democracy, Economic Development and Construction Act 2009. The new JCT 2011 suite of contracts were published on 9 September 2011.

The JCT has taken the opportunity to introduce some other changes outside those required by the new legislation.

Site Waste Management Plans Regulations 2008 ("SWMP Regulations")

On 6 April 2008, the Site Waste Management Plans Regulations 2008 came into force. Before works start on site, a site waste management plan, detailing the amount and type of waste anticipated to be generated on site and its reuse / disposal, must be prepared where the value of construction works exceed £300,000. The actual waste generation and its removal / reuse must then be recorded during the works and monitored against the plan. There are additional requirements imposed where the value of the works exceeds £500,000.

SWMP Regulations are now referred to along side the CDM Regulations in the articles of agreement in respect to the identification of the 'principal contractor' for the purposes of both the CDM Regulations and the SWMP Regulations. However, the JCT do appear to have missed the opportunity to follow this change through into the CDM clauses at the end of section 2 of the contract e.g. requiring the contractor to comply with its duties and obligations under the SWMP Regulations.

Dispute Resolution

Reference to the updated Construction Industry Model Arbitration Rules. Changes to the list of adjudication nominating bodies.

Insurance

Terrorism cover: JCT Terrorism Cover Update, December 2009 is now incorporated into the body of the insurance provisions. Where the works insurance excludes (or would otherwise exclude) loss or damage caused by terrorism, the parties can make an election for the insuring party to extend the joint names policy or obtain separate cover for terrorism. The parties can specify whether the terrorism cover is to be through insurers who are members of the Pool Reinsurance Company Limited scheme in the case of damage to commercial property arising from an act of terrorism (the cost of which is covered by the contract sum, where the contractor is insuring) or through another insurer (in which case the cost is added to the contract sum, where the contractor is insuring).

PI Insurance: The JCT have made a quick u-turn and the separate sub limits of cover for asbestos and fungal mould related claims introduced in Revision 2 of the JCT 2005 suite of contracts have now been deleted. This reflects the fact that the availability of cover for asbestos and fungal mould related claims is currently extremely limited in the market. It is a welcome change because PI insurance policies now exclude cover for fungal / toxic mould, as standard, in response to the US insurance market's experience of claims for fungal / toxic mould and consequent personal injury claims. However, specialist subcontractors should still be able to get this cover. If parties consider that asbestos and fungal mould are likely to be relevant to works to be undertaken, advice from specialist insurers should be obtained and the insurance provisions of the contract customised accordingly.

It is a shame that the JCT did not take this opportunity to address one of the main deficiencies in the JCT insurance provisions and produce some drafting to deal with the common situation where a tenant is carrying out works and (i) is unable to obtain all risks insurance cover for the part of the building outside his demise and (ii) the landlord is unwilling to allow the tenant to rely upon the landlord's insurance of the building. In simple terms, parties often chose to insert some bespoke drafting which provides that damage to the part of the building outside the demise of the lease will be covered by the contractor's public liability insurance and there are some additional amendments that need to be made to the insurance provisions set out in the schedule to the building contract as a consequence of this.

Extensions of Time – Relevant Events

The JCT 05 contracts previously only granted an entitlement to an extension of time where the architect / contract administrator has issued instructions as to action to be taken concerning any fossils, antiquities and other objects of interest or value found at the site. There was no express entitlement to an extension of time in respect to the contractor's compliance with the other requirements of clause 3.22.1 (using best endeavours not to disturb the object and cease work if necessary, take all steps necessary to preserve the object in the exact position and condition etc). This omission has now been addressed in the 2011 version.

Termination / Insolvency

You may be aware of the case which has recently been in the news concerning Shepherd Construction's allegations that Pinsent Masons negligently failed to update Shepherd's subcontract terms resulting in Shepherd's inability to rely upon pay when paid clauses in their subcontracts in the event of upstream insolvency. The clauses did not take into account the changes to the Insolvency Act 1986 introduced by the Enterprise Act 2002 and could not be relied upon when the employer went into administration through the 'self-certification' route.

The definition of 'Insolvent' has been substantially amended. Whilst it now encompasses the changes made by the Enterprise Act 2002, which are reflected in the Construction Act, it goes beyond this. New clause 8.1.4 contains events that the JCT treat as insolvent but which may not be regarded as events of insolvency under the Construction Act. There is therefore a danger that a pay when paid clause purportedly actionable in the case of upstream insolvency may not come within the ambit of section 113 of the Construction Act (conditional payment clause – upstream insolvency). Users of the JCT sub-contracts intending to rely upon pay when paid clauses for upstream insolvency may therefore choose to modify their contracts to limit the drafting to further exclude insolvency events under clause 8.1.4. This concern also applies where users of the JCT 2011 intend to rely upon section 111(10) of the Construction Act - right for payer not to make payment of a sum otherwise due before the final date for payment when the payee has gone insolvent.

Miscellaneous

  • Clause 1.8: A small point for the architects / contract administrators – certificates issued by the architect / contract administrator should be issued to the contractor and the employer at the same time, rather than issuing to the contractor immediately after issue to the employer.
  • Clause 1.11: (JCT SBC 05 only) provided that the failure of the architect / contract administrator to issue an interim or final certificate in time is treated as a ground of dispute or difference. However, under the JCT 2011, with the contractor now being entitled to take control of the payment mechanism and issue its own default payment notice in the absence of the architect / contract administrator's interim or final certificate, this provision is no longer necessary.

Conclusion

The changes are unlikely to ruffle any particular party's feathers, though it is important to give consideration to the issues raised above relating to the insolvency drafting and make sure that sections 110(10) and 113 of the Construction Act can be relied upon, should insolvency strike.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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