The amendment (to clause 2.21) is bracketed: "Site Materials shall not be removed except for use on the Works unless the Employer has consented in writing to such removal, such consent not to be unreasonably delayed or withheld. Where the value of any such materials or goods [or materials and goods incorporated or used in the works which remain unfixed] has been included in any Interim payment [those] materials and goods shall become the property of the Employer, but, subject to Insurance Option B or C (if applicable), the Contractor shall remain responsible for loss or damage to them."

The reason (in short)

Construction contracts for the development of hotels and care homes often include the supply of some fittings and furniture by the contractor. Depending on the type of facility, the cost of such fittings and furniture can represent a significant sum. If the employer becomes insolvent after the fittings and furniture are installed, but before paying, the question of ownership comes under the spotlight.

In short, under the Joint Contract Tribunal (JCT) design and build terms, there are two categories of on site goods and materials. They are those incorporated into the works and those not yet incorporated into the works. Clause 2.21 provides that title in materials not yet incorporated remains with the contractor until the materials are paid for. Once though the materials are incorporated into the works, it appears that title passes without the need for payment, although the JCT terms do not state this expressly. It is likely that this would apply to fittings and furniture being incorporated (albeit not fixed) into the works as much as bricks and mortar. Thus when furniture is unpacked and/or assembled and placed wherever its intended location happens to be, it is likely that title passes to the employer.

Given that any fittings and furniture are likely to be the last items provided by the contractor, this amplifies the age old risk of the employer becoming insolvent before goods and materials are paid for. In such circumstances, contractors would benefit from clarification in the JCT terms that title in used but unfixed materials will not pass until payment is made (such that if payment is not made, the contractor retains title to the goods and can recover them to reduce his losses due to non-payment). The small amendment to clause 2.21 above is intended to extend the retention of title to used but unfixed materials.

This amendment is by no means bullet proof, but equally the original clause 2.21 is not well drafted. The amendment is therefore a compromise between sticking with the original style of the clause and trying to incorporate further protection for the contractor.

Download our detailed analysis of the JCT terms (PDF, 78KB)