The new JCT Minor Works Contracts 2016 have arrived
The JCT has commenced its staggered launch of new Building Contracts with the publication of the:
1.) JCT Minor Works Building Contract 2016 (MW 2016);
2.) JCT Minor Works Building Contract with Contractor's Design (MWD 2016); and
3.) JCT Minor Works Sub-Contract with Sub-contractor's Design (MWSub/D 2016)
We understand that the next contracts to be published will be the short form of sub-contract and sub-subcontract, followed by the Design and Build Contract in the Autumn.
Within the Minor Works suite of contracts JCT have taken the opportunity to tighten up on some areas of drafting and react to case law and statutory changes. Within this note we will primarily focus on the Minor Works Building Contracts, although the Minor Works Sub-Contract is specifically touched on in some instances.
The changes include:
JCT has incorporated into the 2016 Minor Works Contracts the relevant wording required as a result of the introduction of the CDM Regulations 2015 (including reference to Principal Designer). This is unlikely to have a significant impact given that most Contracts will have incorporated the JCT CDM Regulation update in any event.
Consents and approvals
Any consent to be provided under the Minor Works Contract by any of the Employer, Contractor or Architect/Contract Administrator shall now not be "unreasonably delayed or withheld". There are exceptions to this being:
A. The Employer's consent to be given to the Architect/Contract Administrator where ascertaining if the Contractor should make good a defect or reduce the Contract Sum for the associated costs (please note that the Contract now refers directly to the Employer having the right to "an appropriate deduction" from the Contract Sum as an alternative to a defect being made good); or
B. The consent of either party required for any assignment of the Contract
in which case this remains at the sole discretion of the relevant consenting party.
Under the JCT Minor Works Contracts 2011 the Architect/Contract Administrator had to confirm oral instructions in writing within 2 days. The time period has now been removed from the new Contracts.
There has been a change in approach to the payment provisions. These changes perhaps represent the most significant divergence from the original 2011 suite of Contracts with a view to providing a "fair" payment procedure and include:
A. The provision of a definition for the Interim Valuation Date, with a default position that the first interim valuation date is one month after the commencement date of the works and then at monthly intervals. The inclusion of a specific date should then allow for certainty going down the chain into the JCT Minor Works Sub-contract using the same intervals for payment.
B. The due date for payment is now defined by reference to the Interim Valuation Date, rather than as 4-weekly intervals from the commencement date as under the 2011 Contract. The due date is then 7 days after the defined Interim Valuation Date, and in the JCT Minor Works Sub-contract it is 12 days after the relevant Interim Valuation Date. The final date for payment in all the contracts is 14 days from the respective due date. Again, this is providing greater certainty for all parties, although one could argue may lead to a further delay for sub-contract payments.
C. Interim payments to be made after practical completion are now no longer distinguished from those made beforehand. The monthly payment cycle continues after practical completion up to the due date of the final payment (as opposed to operating on a two-monthly cycle following practical completion under the 2011 Contracts).
D. The Contractor is now expressly allowed to make an application for payment. This change is perhaps made in recognition of what happens in practice, despite the 2011 Contracts technically only permitting such an application if the interim certificate was not issued within 5 days after the due date by the Architect/Contract Administrator.
Recent case law has identified significant risks in amending the payment provisions within a JCT Contract, particularly in relation to appending a specific schedule of interim applications and payments. One can conclude that amending these payment provisions further does lead to risks to both the Employer and the Contractor.
The insurance provisions of the JCT 2016 Contracts have been amended to allow for "Insurance of the Works and existing structures by other means". Under the 2011 Contracts there was reference only to the insurance of existing structures by the Employer in their own name. The amendments allow far greater flexibility in the type of insurance put in place, especially where existing structures cover for the Contractor is not readily available to the Employer at a reasonable cost (such as where the Employer is a domestic homeowner or where he is only a tenant and the structures cover is effected by the Landlord). Importantly the Contracts advise in all cases for each party to obtain specialist insurance advice especially where there are existing structures and in the case of a tenant Employer to involve the insuring landlord at the outset, communicate with the contractor and its advisers at the earliest opportunity, and ensure that appropriate cover is in place before work commences on site.
The 2016 Minor Works Building Contracts provide for some new termination events, which include:
A. Where the Employer is a Local or Public Authority and the Contract is subject to the Public Contracts Regulations 2015, the ability to terminate under the said Regulations.
B. The right of either party to terminate, following a period of suspension, for loss or damage to the works arising from any risk covered by the "Works Insurance Policy" or by an "Excepted Risks". Previously this referred only to damage caused by any of the "Specified Perils". The inclusion of the reference to "Excepted Risks" (being risks such as radioactivity, nuclear explosion and pressure waves) widens the scope of termination.
C. Both the Employer and the Contractor have a new right to terminate if it is just and equitable to do so in circumstances where there is a material loss of or damage to any existing structure. This will be treated as a neutral termination event, although immediately one envisages issues arising as to what circumstances are "just and equitable" and what is "material" loss or damage.
Building information modelling (BIM)
There had been suggestions that the new JCT suite of contracts would clarify the drafting position on BIM. However, there is only a brief mention on BIM within the 2016 Contracts, whereby it is noted that the BIM protocol should be included in the Contract Documents. The incorporation of BIM into the Contract will accordingly have to continue to be made through bespoke amendments, although further guidance may be given in the new Design & Build Contract.
Local or Public Authority
In addition to the incorporation of the termination event under the Public Contracts Regulations 2015 the 2016 Minor Works Contracts also include further Local or Public Authority provisions including:
A. The need for transparency, whereby the terms of the Contract are not confidential, unless the terms are considered exempt from disclosure under the Freedom of Information Act 2000 (with the Employer having absolute discretion to decide what is or is not exempt); and
B. Where the Contract is subject to the Public Contracts Regulations 2015, to impose obligations in relation to the same in any sub-contract.
Based on our initial review of the Minor Works Contracts the changes appear to represent common sense adjustments to what is intended to be a relatively simple form of contract. Due to the nature of the works to be undertaken under such a Contract it is unlikely that the document is ever going to be the subject of substantial amendment by any party (unlike with Standard, Intermediate and Design & Build Contracts). This accordingly makes it very important that the standard un-amended conditions of the Contract are understood. When considering the day to day administration of the Minor Works Contracts, one expects the changes to the payment provisions to have the most impact. They accordingly need to be closely reviewed in order to be sure that all parties (Employer, Contract and Architect/Contract Administrator alike) know what is required.
This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.