Chartered Institute of Building Magazine of the Chartered Institute of Building

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Do consultants amend JCT contracts just to boost their fees?

3 November 2020 | By Nicola Conway

Contractors often grumble about amendments to JCT contracts. Nicola Conway looks at the arguments

There is a commonly held view that, while the Joint Contracts Tribunal (JCT) suite of contracts are not closed books, clients are often encouraged by advisors to make unnecessary amendments to the contract under the guise of balancing of risk – which results in uncertainty and complicated, lengthy disputes.

Lawyers are more than familiar with this argument. Drafting a ‘one size fits all’ contract for every project is of course no easy feat and the JCT suite remains the most widely used form of contract in the private sector. However, it is natural for clients to seek to tailor any contract to their unique circumstances and, more often than not, amendments will be made to a contract during negotiations. 

While contract amendments are viewed by some as a cynical exercise in generating fees for professional advisors, those amendments mostly look to reduce disputes rather than increase uncertainty between the parties. The amendments often encourage conversations between parties that would otherwise not take place prior to entering into the contract, and this ultimately benefits both parties. 

By way of a topical example, there has been considerable debate about whether the current coronavirus pandemic constitutes force majeure under standard form contracts. The JCT’s choice to leave the term – which has no established definition in English law – undefined has already led to thousands of hours of lawyers’ time being incurred advising clients on whether contractors will benefit from an extension of time, or the right to terminate their JCT contract.  

There is very little previous judicial opinion on how force majeure should be interpreted and the industry is expecting a wave of litigation to follow. This is not a mess born of lawyers’ interference; even before the pandemic, we would often advise clients to delete force majeure wording in the JCT contract because it is inadequately defined.

There are many more common amendments that clients demand. Take for example, the JCT Design and Build 2016. The title is a misnomer; the contractor is not in fact fully responsible for all of the works’ design and relief is given to the contractor for errors in the content of the upfront design, the employer’s requirements (ERs). 

Responsibility for the ERs

Many clients, who are not necessarily construction experts, will understandably be seeking a ‘single point of responsibility’ for defects in design and construction. This is equally an expectation of their funders, tenants and other interested parties. Therefore, well-advised clients often amend the standard form contract so that the contractor takes the responsibility for the ERs and the contractor’s proposals, as well as mistakes, errors or discrepancies within or between the contract documents.  

Likewise, most parties would expect the building contract to be freely assignable without the contractor’s consent, which is not the standard position under the JCT. This is particularly the case when the client wishes to secure finance for the project or where it wants to dispose of the property on completion to a buyer or asset operator. Flexibility on assignment is market standard these days and is not ordinarily considered to be contentious. 

Another key area for dispute is ground conditions. The JCT is silent on this risk, but the common law position is that the risk of unforeseen ground conditions rests with the contractor. Adding specific provisions dealing with ground conditions allows for the parties to discuss the issue and draw out any project specific issues at the outset, ensuring the position is clear to both as to where responsibility lies. 

If JCT amendments are drafted correctly, then the contract should operate to resolve issues as and when they arise on site without leading to lengthy and costly disputes.  

Nicola Conway is a senior associate at Trowers & Hamlins

Comments

Nicola,

I am not sure that contractors see the amendments made to JCT contracts as a fee earning scheme by Legal or Professional teams?

As a Construction Director I always felt that the amendments were being made primarily to offset risk away from the clients, which I understand.

My frustration sits where clients are being advised to have contractors accept responsibility for Errors & Omissions by professional teams who have been employed to do the initial designs and investigations but who can offset their risk to people in a competitive tender process.

Paul Fitzpatrick, 3 November 2020

Professionals have a responsibility to their client and will, using the competitive process seek to offload risk onto the contractor using the dangled carrot as pressure. However once upon a time the QS used to advise on contract but that is not the case today and so called ‘non contentious’ lawyers advise on contracts, bonds, warranties and PCGs. This service varies from absolute malice where contractors and their supply chain don’t stand a chance to money for copy and paste where terms are a complete waste of space. No body makes money from projects that go bad contrary to popular belief. Generally people claiming that stuff is done for a purpose give the side accused great credit!

Vaughan Burnand, 19 November 2020

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