We continue our series of articles on the standard form JCT Design and Build Contract 2005 with a look at partial possession and early use.
The effects of partial possession and early use are very different and without amending JCT 2005 it can sometimes be difficult to distinguish between the two. Therefore, you may want to adapt JCT 2005 to make sure the contract works for you.
Partial Possession – risk passes to the employer
Under JCT 2005 the employer may take possession of part of the works before practical completion provided it obtains the contractor’s consent. Contractors are unlikely to withhold consent in most instances because taking possession of part of the works means that practical completion is deemed to have occurred for that part. Therefore one of the key risks passes to the employer. This is good news for the contractor as it can sidestep the usual rigours of having to demonstrate to a third party that the works are complete.
Early Use – risk remains with the contractor
The effect of early use is different from partial possession. Under clause 2.5 if the contractor allows the employer to use part of the site before the works are ready (e.g. to allow the employer’s fit-out contractor to carry out its works), practical completion is deemed not to have occurred. The risk of completing the works on time remains with the contractor. Of course, the employer should always keep one eye on clause 2.26 (Relevant Events) as its actions may give rise to a claim for an extension of time and loss and expense.
Partial Possession or Early Use: which one applies?
The courts have decided that the central issue is to establish which party has exclusive possession of the relevant part of the site. If it’s the employer, the partial possession provisions apply. If it’s the contractor, the early use provisions apply. However, without amending JCT 2005 it is not always easy to decide which regime wins through and this uncertainty can lead to some odd decisions. For example, where an employer’s tenant used part of the site to carry out fit out works the court decided this was partial possession. In contrast, where an employer occupied and operated a hotel before practical completion, the court decided this was no more than early use. Therefore if you are going to use the works early, you may want to amend JCT 2005 so the parties are clear which set of rules applies.
How should you amend the contract?
A common amendment is to include an agreed access regime to make it clear when and how the employer can occupy the works without triggering the partial possession provisions. Parties can also use the access regime to deal with insurance, health and safety and security issues. The employer may also want to amend JCT 2005 so that the contractor waives its rights to claim an extension of time or to recover loss and expense for complying with the access regime.The parties may also decide to amend the contract to clarify that when the parties use the access regime the contractor remains responsible for the site.
The parties should consider modifying JCT 2005 to suit their needs as the amendments can often result in a more flexible contract for both parties. The amendments can also avoid confusion and therefore prevent disputes occurring. In the next issue we will consider extensions of time.