The JCT Standard Building Contract 2011
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Abbreviations used in the text xvi
Notes before reading xvii
Part I Preliminaries 1
1 Introduction 1
1.1 What is a contract? 1
1.2 Purpose of building contracts 4
1.3 Types of construction contracts 4
1.4 Characteristics of a standard form 7
1.5 Commonly used contracts 9
1.6 Important background to SBC 11
1.7 SBC and variants 11
2 Basic matters 13
2.1 Works 13
2.2 Drawings 13
2.3 Specification 14
2.4 Schedules 15
2.5 Bills of quantities 15
2.6 The Standard Method of Measurement 16
2.7 Privity of contract and the Third Party Act 17
2.8 Third party rights and collateral warranties 18
2.9 Base Date 19
2.10 Common problems 20
3 About the contract documents 23
3.1 What constitutes the contract? 23
3.2 What are articles and recitals? 24
3.3 How to complete the contract form 25
3.4 Priority of documents 29
3.5 Errors, discrepancies and divergences 30
3.6 Custody and copies 34
3.7 Limits to use 35
3.8 Reckoning days 35
3.9 Certificates, notices and other communications 36
3.10 Applicable law 37
3.11 Common problems 37
4 Related matters 40
4.1 The Housing Grants, Construction and Regeneration Act 1996 as amended 40
4.2 Entire contracts 42
4.3 Express and implied terms 43
4.4 Limitation periods 44
4.5 Letters of intent 46
4.6 Quantum meruit 47
4.7 Limited companies 48
4.8 Bonds 49
4.9 Common problems 51
Part Ii Participants 53
5 The architect's powers and duties 53
5.1 What the architect can do or must do 53
5.2 Specific requirements under the JCT contract 54
5.3 Powers 54
5.4 The architect's design role under SBC 54
5.5 The architect as agent for the employer 61
5.6 No power to direct contractor 62
5.7 Issue of certificates 63
5.8 The issue of instructions 66
5.9 Instructions in detail 70
5.10 Issue of information 70
5.11 Duties under the contract 73
5.12 General duties 77
5.13 Does the architect have any duty to the contractor? 79
5.14 Common problems 79
6 The contractor's powers and duties 82
6.1 What the contractor can do or must do 82
6.2 Person-in-charge 82
6.3 Access to the Works and premises 82
6.4 Carrying out the Works 96
6.5 Levels and setting out 98
6.6 Workmanship and materials 98
6.7 Contractor's master programme and other documents 100
6.8 Statutory obligations 103
6.9 Antiquities 104
6.10 Drawings, details and information 104
6.11 Compliance with architect's instructions 106
6.12 Suspension of performance 107
6.13 Does the contractor have a duty to warn of design defects? 108
6.14 Common problems 108
7 The employer's powers and duties 110
7.1 What the employer can or must do 110
7.2 Express and implied powers and duties 110
7.3 General powers 115
7.4 General duties 122
7.5 Common problems 123
8 Consultants 125
8.1 General points 125
8.2 Quantity surveyors 126
8.3 Employer's representative/project manager 128
8.4 Structural engineers, mechanical engineers and others 129
8.5 Common problems 129
9 The clerk of works 131
9.1 Method of appointment 131
9.2 Duties 131
9.3 Snagging lists 132
9.4 Defacing materials 132
9.5 Common problems 133
10 Sub-contractors and suppliers 134
10.1 General 134
10.2 Assignment 135
10.3 Sub-contracting 136
10.4 Listed sub-contractors 138
10.5 Named specialists 139
10.6 Common problems 140
11 Statutory authorities 143
11.1 Work not forming part of the contract 143
11.2 Statutory authorities in contract 143
11.3 The CDM Regulations 2007 145
11.4 Common problems 147
Part Iii Work in Progress 149
12 Insurance 149
12.1 Why insurance? 149
12.2 Types of insurance in the contract 149
12.3 What is an indemnity? 150
12.4 Injury to persons and property 151
12.5 Things that are the liability of the employer 152
12.6 Insurance terms 153
12.7 Insurance of the Works: alternatives 154
12.8 A new building where the contractor is required to insure 155
12.9 A new building where the employer insures 156
12.10 Alterations or extensions to an existing building 157
12.11 Benefits for sub-contractors 158
12.12 The Joint Fire Code 158
12.13 Terrorism cover 159
12.14 Common problems 159
13 Possession of the site 161
13.1 General 161
13.2 Date of possession 162
13.3 Common problems 163
14 Extension of time 165
14.1 Basics 165
14.2 Extension of time 166
14.3 Grounds 168
14.4 Procedure 177
14.5 Important conditions 186
14.6 Common problems 188
15 Liquidated damages 190
15.1 What are liquidated damages? 190
15.2 Procedure 191
15.3 Common problems 193
16 Financial claims 195
16.1 Loss and expense claims 195
16.2 Procedure 196
16.3 Effect on regular progress 200
16.4 The architect's opinion 201
16.5 Ascertainment 202
16.6 Reimbursement under other contract provisions 203
16.7 Relevant matters forming the basis of a claim 203
16.8 Certification of direct loss and/or expense 207
16.9 Contractor's other rights and remedies 208
16.10 Common problems 208
17 Architect's instructions 210
17.1 Purpose 210
17.2 Scope 210
17.3 Common problems 216
18 Variations 219
18.1 What is a variation? 219
18.2 Does extra work always involve payment? 221
18.3 Valuation 222
18.4 Treatment of approximate quantities, defined and undefined provisional sums 227
18.5 If the conditions for carrying out other work are altered 228
18.6 Valuation of obligations and restrictions 229
18.7 Schedule 2 quotations 229
18.8 Acceleration 231
18.9 Daywork 232
18.10 Valuation of contractor's designed portion 233
18.11 Common problems 233
19 Payment 235
19.1 The Contract Sum 235
19.2 Valuation 237
19.3 Method and timing 239
19.4 Payment procedure 240
19.5 Retention 243
19.6 Final payment 245
19.7 The effect of certificates 248
19.8 Off-site materials 250
19.9 Fluctuations 251
19.10 Common problems 252
20 Contractor's design 254
20.1 Contractor's Designed Portion (CDP) 254
20.2 Documents 254
20.3 The contractor's obligations 255
20.4 Liability 258
20.5 Variations 259
20.6 Insurance 260
20.7 Common problems 261
Part Iv Closing Stages 263
21 Practical completion 263
21.1 Definition 263
21.2 What the contract says 263
21.3 Consequences 265
21.4 Partial possession and sectional completion 265
21.5 Common problems 267
22 Defects liability 269
22.1 During construction 269
22.2 Rectification period 271
22.3 Definition 271
22.4 Defects, shrinkages or other faults 271
22.5 Frost 272
22.6 Procedure 272
22.7 Common problems 275
23 Termination 276
23.1 General points 276
23.2 Termination by the employer 278
23.3 Grounds: contractor's defaults 279
23.4 Grounds: insolvency of contractor 282
23.5 Grounds: corruption 283
23.6 Grounds: neutral causes 283
23.7 Grounds: insurance risks and terrorism cover 284
23.8 Consequences of termination for contractor's default or insolvency 285
23.9 Consequences of termination for neutral causes or insurance risks 288
23.10 Termination by the contractor 288
23.11 Grounds: employer's defaults 288
23.12 Grounds: insolvency of employer 292
23.13 Grounds: neutral causes 293
23.14 Grounds: insurance risks and terrorism cover 293
23.15 Consequences of termination for employer's default, neutral causes or insolvency of the employer, etc. 293
23.16 Consequences of termination for insurance risks 294
23.17 Suspension of the Works by the contractor 295
23.18 Common problems 295
Part V Intractable Problems 297
24 Dispute resolution procedures 297
24.1 General 297
24.2 Adjudication 301
24.3 Arbitration 310
24.4 Legal proceedings (litigation) 317
24.5 Mediation 317
24.6 Common problems 317
Notes and references 319
Table of cases 330
Subject index 339
Clause number index to text 346
Part I Preliminaries
1
Introduction
1.1 What is a contract?
Law
Everyone is subject to the law of the country in which they live. In general, the law is divided into two parts: criminal law and civil law. If we break the criminal law, we may find ourselves having an interview with the police. There are also Acts of Parliament that make doing things or failure to do other things a criminal offence. The Health and Safety at Work Act 1974 is an example of one such Act. Most people understand that very well.
The civil law governs the way we should behave to our neighbour. We all have rights and duties to each other. They are sometimes set out in Acts of Parliament and sometimes they are derived from the judgments of the courts. Law that is found in the judgments of the courts is usually referred to as the 'common law'. These are duties and rights that are there whether we like it or not.
Tort
In general 'tort' is a civil wrong for which the person suffering the wrong is entitled to take action through the courts for compensation. It is based on the duty that everyone owes to one another. There are many wrongs that most people will recognise and that will come under the headings of 'tort'. Such things as negligence, trespass, nuisance and defamation are concepts in general use; although not always properly understood.
Contract
As well as these legislative or common law rights and duties, two people may agree additional rights and duties to each other. For example, I may agree to buy a clock from a shop for £100. I have a right to receive a clock, but a duty to pay £100 for it to the shop. The shop has a right to the £100, but a duty to supply the clock. Where there are agreed rights and duties on both sides we call it a contract. Of course there are all kinds of other things that also might have to be agreed, such as the style, make and colour of the clock and the date on which I must pay. That is why even the simplest contracts can become quite complicated.
Breach of contract
We usually say that two people have 'entered into' a contract or that a contract has been 'executed' if documents have been signed. Contracts are legally binding, which means to say that usually once the contract is agreed, neither person can say: 'I've changed my mind now' without serious consequences. If one person does something that the contract does not allow or fails to do something that the contract requires, it is referred to as a 'breach' of contract.
For example, if I only pay £95 for the clock, or if the clock is supplied in a different colour or style, or if it does not work. These are all breaches of contract. It is not always appreciated that it would also be a breach of contract if I was supplied with a better clock worth £150 when we had agreed a particular clock for £100.
The person who is not in breach is usually referred to as the 'injured party' or the 'innocent party'. The injured party is entitled to receive payment from the person in breach to make up for the breach. That is called 'damages'. The amount of money to be paid is normally calculated to put the injured party back in the same position as if the breach had not occurred. Sometimes that is easy, for example, I could be ordered by a court to pay the additional £5 together with any other costs I had caused as a result of my failure to pay the full £100 for the clock. Sometimes it is not possible, but a court tries to do what it can to rectify the situation.
Repudiation
If the breach of contract is particularly serious, it may be what is called 'repudiation'. That is a breach that is so serious that it shows that one of the persons wants nothing more to do with the contract. Extreme examples would be if I refused to pay anything for the clock or the shop took my money but refused to provide any clock at all. In building terms, it might amount to a contractor walking off site, never to return, half-way through the project or the employer telling the contractor that he would not be paid any more money.
Faced with repudiation, the injured party has the choice of, either accepting the repudiation and seeking damages through the courts, or saying that the contract is still in place and carrying on with it (called 'affirmation'). The injured party is still entitled to seek damages even after affirmation. Obviously, there are many instances where it is just impossible to carry on as if nothing had happened; for example if the contractor walks off site.
Essentials of a contract
People sometimes get confused between a promise by one person to do something for another and a contract. In order for there to be a contract there must be three things:
- Agreement.
- An intention to create legal relations.
- Something given by both persons.
Agreement is usually demonstrated by showing that one person made an offer and another person accepted it. Using the clock example: if I offer £100 for the clock and the shopkeeper accepts, there is an agreement.
An intention to create legal relations is usually assumed in commercial dealings and it is for the person who says that there was no such intention to prove it. In a social context, people do not always intend to create legal relationships. If Tim says to Lucy that if she joins him at a restaurant that evening, he will buy her a meal, that is not a contract and the arrangement can be broken with impunity.
Something given by both persons is fairly straightforward. In the case of the purchase of the clock, I agree to give the shopkeeper £100 and the shopkeeper agrees to give me the clock. This can be expressed in various ways. For example, it can be said that the shopkeeper promises to give me the clock if I give the shopkeeper £100. In a construction contract, the contractor promises to construct the building and the employer promises to pay whatever is stated in the contract as the Contract Sum. In legal terms, it is usually referred to as 'consideration'. This consideration can take forms other than the ones just described. For example, one person may agree to pay another, if that second person agrees to stop doing something or not to do something he or she was about to do. The important thing is that both persons contribute something; not necessarily of apparent equal value.
When talking about contracts, it is customary to refer to the 'parties' to the contract. That is convenient when reference to 'persons' would not be appropriate - for example, where one or both parties are corporate bodies such as local authorities, universities or limited companies.
Two types of contract
There are two types of contract:
- Simple contracts.
- Deeds or specialty contracts.
Most contracts are simple contracts. If it is desired to make a contract in the form of a deed, it is necessary to observe a particular procedure. Before 1989, all deeds had to be made by fixing a seal to the document. That could be in wax, but more often it was simply a circular piece of red paper embossed with the name of the relevant party. Nowadays, the procedure is laid down by statute. Essentially, the document must clearly state that it is a deed and the parties must sign in one of the prescribed ways. The alternative ways are usefully set out in JCT contracts on the attestation page.
A deed is a very serious form of contract. Its attributes are:
- There is no need for consideration. In other words, a promise that one party will do something for the other becomes legally binding.
- The limitation period is 12 years (see Chapter 4, Section 4.4 below).
- Statements in a deed are conclusive as to their truth as between the parties to the deed.
Therefore, a contract should not lightly be entered into as a deed.
1.2 Purpose of building contracts
Broadly, the purpose is to get a building erected. The contract sets out the rights and the duties of the parties: what each may do and what each must do. It also sets out the procedure for certain things. For example, how the contractor can have the time allowed for constructing the building extended, or how the architect can get an instruction carried out if the contractor is slow, or on what grounds either party may bring their duties under the contract to an end. In SBC, there will be an employer (who employs the contractor) and the contractor (who carries out the construction work). There is also a contractor administrator who is often, but not necessarily, an architect (and assumed to be so in this book) and who does the things allocated in the contract and a quantity surveyor who is principally concerned with valuing the work.
1.3 Types of construction contracts
Construction contracts can be analysed into three types relating to costs:
Fixed price contracts
1
This is where the contractor undertakes to do the specified work for a sum not adjustable in the price of goods or labour. This is the common situation when a contractor quotes for the installation of a shower or other minor building work. It is commonly thought that if a contractor submits what he terms an 'estimate', he will not be bound by the price. Indeed, if the...
