It's been 18 months since JCT released the newest edition of its standard form suite of construction contracts, which includes the Standard, Intermediate and Design and Build Contracts as well as the Pre-Construction Services and Framework Agreements.
We provide an overview of the JCT 2016 and how it is being received.
Key changes in the JCT 2016 release
When the latest edition of JCT contracts was released, it provided welcome change in the following keys areas:
- Simplified payment provisions, with payments due monthly both before and after practical completion, and payments during the rectification period paid every month rather than every two months.
- A procedure for the prompt assessment by the employer of loss and expense claims by the contractor.
- Greater flexibility relating to insurance where works are carried out to existing structures (Insurance Option C).
- Standard form terms to practitioners and clients who, until then, had usually included similar terms in their own schedules of amendments.
Reaction from contractors and employers
The 2016 changes were welcomed by contractors and employers as being concise, flexible and user-friendly. However, the JCT forms are not yet infallible.
Historically, JCT contracts have been perceived by some as difficult to comprehend, with users often having to muddle through widespread cross-referencing and multiple descents into sub-sub-clauses. Some users were therefore disappointed that the JCT did not take the opportunity to simplify the wording and structure of its contracts in the 2016 release.
Additionally, the provisions in the amended forms have introduced an increased risk of disputes in the following areas:
- Oral instructions, where these instructions only become final 14 days after the contractor issues its written confirmation to the employer.
- Loss and expense, for example where a contractor’s entitlement is not assessed promptly.
Inevitably, parties have continued to use schedules of amendments in order to amend the suite of construction contracts to their needs, continuing with the trend of making the document more unwieldy and the negotiation process still potentially lengthy.
What are the most frequently amended terms?
Working predominantly for employers, we find that the most widely-amended clauses in the JCT forms tend to focus on:
- responsibilities and liabilities in relation to:
- site conditions
- discrepancies in the documents
- CDM regulations
- use/specification of deleterious materials
- practical completion
- standard of care
- the limitation period
- third party agreements
- force majeure
- security and third party rights/warranties.
As these areas are usually the most heavily negotiated, it is disappointing that JCT could not provide more universally acceptable provisions in these key areas. Inconveniently for the contracting parties, amendments (and lawyer involvement) often remain a necessity.
What is the current thinking?
So far, clients (including intermediaries, such as project managers) have seemed disinclined to use the 2016 forms as they regard the 2011 forms as sufficient. Another reason for the slow take up may be the lack of guidance on the key changes.
The 2011 forms also remain at the forefront because the 2016 versions did not need to address any new laws/regulations, so their use is not a necessity.
While many lawyers may wish to start using the 2016 form, particularly to take advantage of the new insurance provisions, some intermediaries can be quite slow to change. Parties have often agreed the form of contract to be used before lawyers get involved.
What happens next?
We anticipate the industry moving over to the 2016 forms over the next year or so. We are alive to the likelihood of continued protracted negotiations relating to the insurance issues highlighted by the new drafting when working for clients carrying out works in existing structures, and the use of fluctuation provisions in larger contracts (for example with Brexit on the horizon) – especially as JCT has simplified this option.
More generally, we anticipate that the increased use of technology in both the construction and legal sectors will soon require the same forms of building contract. The 2016 editions do not yet provide for this and so further forms, and hopefully processes, are an inevitability.