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JCT updates design and build contract, but uncertainty surrounds new loss clause, says expert

Out-Law News | 24 Jan 2017 | 9:52 am | 2 min. read

Changes to the Joint Construction Tribunal (JCT) standard form 'design and build' contract introduce new uncertainties for contractors around loss and expense claims, an expert has warned.

Neal Morris of Pinsent Masons, the law firm behind Out-Law.com, said that the new wording of clause 4.19 "could leave room for argument" that serving notice on the other party was no longer a 'condition precedent' to a loss or expense claim. This is because the new clause no longer states "provided always that", but rather provides for compliance with a later clause 4.20.

"This example shows the hidden pitfalls in changing the language in 'tried and tested' contract forms," said Morris, a construction law expert at Pinsent Masons.

"The result, probably unintentional, is to create uncertainty on one of the most important practical issues in any construction project - loss and expense - when the whole raison d'etre of these lengthy construction contracts is to avoid or minimise such uncertainty," he said.

JCT is the longest-running and largest contract producing body in the UK. It has rolled out a series of updates to its suite of model contracts over the past six months, with its 'design and build' contract family the latest to receive an update. These contracts are designed for use where the contractor carries out both the design and construction work on the project. Changes have also been made to the design and build subcontract agreement and conditions forms, reflecting the changes made to the main design and build contract.

The new versions of the contracts incorporate various public sector provisions, such as those required by the 2015 Public Contracts Regulations and the 2000 Freedom of Information Act. Further amendments have been introduced to reflect the 2015 Construction (Design and Management) Regulations, which made significant changes to site safety requirements. There have also been numerous changes to the wording of the contract.

The JCT loss and expense provisions are designed to allow the contractor to claim back certain additional costs from the employer where the works are disrupted or delayed because of a 'relevant matter', such as an employer instruction.

Clause 4.20, entitled 'notification and ascertainment', sets out the new procedure for notifying and ascertaining loss and expense claims. Notice is now required from the contractor "as soon as the likely effect" of a relevant matter on the progress of the project becomes, or should have become, reasonably apparent; as opposed to the 2011 version, in which notice was required once it became, or should have become, apparent that progress would be affected.

The updated contract also requires the contractor to provide its initial assessment of the loss or expense incurred, along with supporting information, at the same time as the notification or "as soon as reasonably practicable" thereafter. This initial assessment should then be updated monthly. The employer has 28 days in which to respond to the initial assessment, and then 14 days to respond to any further updates.