JCT98 Building Contract: Law and Administration

Issaka Ndekugri, Michael Rycroft

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781317761327
• Edition: 1
• Topic: Architecture
• Subtopic: Architecture General

The Joint Contracts Tribunal's Standard Form of Building Contract is the most common contract used in the UK to procure building work. Understanding it is a core part of any construction student's degree and a vital part of the working life of professionals in the construction industry. 'The JCT98 Building Contract' works through the contract systematically explaining it in easy-to-follow language, covering all contract issues thoroughly and illustrating with case law examples the current situation and latest amendments. It is ideal reading for both the student of construction and the professional seeking to update their knowledge.

1
Style of JCT 98, contract execution and related problems

1.1 Standard form contracts generally

Any transaction between two business concerns will inevitably place a demand on the fixed overhead resources of the parties. Whether the contract is a simple exchange of letters or a lengthy document signed by each party, there is some administrative input; the extent of the input is determined largely by the effort required to negotiate terms and to commit them to writing. The nature of some companies’ work may be such that transactions are numerous; other companies’ transactions may be few but complicated. In either case it is an advantage to any organization to develop personal terms of trading. A contract which sets out such terms is widely known as a standard form contract. The advantages to the parties issuing such terms are many, e.g. familiarity from use, understanding, saving on drafting time, saving on negotiating time, or saving on senior staff time when transactions can be concluded by clerical staff are all good reasons for the issuing parties to enter into their own standard form contract. This type of standard form is normally issued unilaterally.

However, for the party intending to use the standard form of another (unilateral standard form) there are clearly some disadvantages. Savings on time, both in drafting and negotiating, will certainly remain an advantage, and are perhaps the principal reasons for the use of standard forms, but clearly there is a danger that the terms will also contain onerous provisions for some users. In any event, the main benefit of standard forms is still lost to one party since unless the company enters into a particular contract form regularly it will not develop familiarity or understanding. As a result, unilateral standard forms are often looked upon with suspicion by those with previous bad experiences. The way out of such situations for some is to insist on their own standard terms. There are then two sets of unilateral terms and the scene is set either for a negotiation or a battle¹ position dictating the basis of the contract.

There is another option; that is to reap the benefits of standard form contracts whilst avoiding the disadvantages. Many industries have developed a different type of standard form contract, a type which is more worthy of the general title ‘standard’, and which could be called ‘industry standard forms’. The terms are settled through negotiation by representative bodies of commercial interests in a particular industry, and are based on mutual experience of the practices of the industry. Such forms, as a class, have been described by the courts as being widely adopted because experience has shown that they facilitate the conduct of trade, and that there is a strong presumption that their terms are fair and reasonable because they are used widely by parties whose bargaining power is evenly matched.²

The main virtues of an ‘industry standard form contract’ can be summarized as:

• being a device for allocating contingent risk whilst saving time and assisting bargaining at arms length;

• being a device for avoiding writing terms for each transaction;

• having the benefit of providing understanding by familiarity and experience in practice;

• being less likely to protect the interests of only one party, having been negotiated by independent bodies representing all interests in an industry;

• producing savings in transaction costs, avoiding the need to negotiate each contract;

• removal of unwanted discretion from individuals, enabling a structured approach to negotiations;

• enabling allocation of risk to be anticipated and provided for in calculations;

• enabling necessary quotations from others such as sub-contractors and suppliers to be obtained with greater accuracy.

Disadvantages of industry standard form contracts as a general class appear to be few, since they go some way towards removing the principal objection to unilateral forms (that is a stronger party imposing its will on a weaker party). However, within an industry the individual industry standard forms in common use may draw criticism, and the building industry is no exception.³

1.2 The Joint Contracts Tribunal Limited

One of the most prolific producers of contract forms for the building industry is the Joint Contracts Tribunal Limited (formerly the Joint Contracts Tribunal for the Standard Form of Building Contract), commonly called the JCT.

The constituent members are representative bodies of various commercial interests in the building industry, who settle the terms of the JCT stable of contract forms; at the time of writing they are:

• Association of Consulting Engineers

• British Property Federation

• Construction Confederation

• Local Government Association

• National Specialist Contractors Council

• Royal Institute of British Architects (RIBA)

• Royal Institution of Chartered Surveyors (RICS)

• Scottish Building Contract Committee.

In 1931 the JCT was formed comprising the Royal Institute of British Architects and the National Federation of Building Trades Employers (now the Construction Confederation). In 1939 the JCT published a major standard form of contract revising and replacing an earlier form⁴ which had been known for many years as ‘the RIB A Form’.⁵ Although the JCT was self-appointed, its forms were in common usage and in 1963 a further new edition was published which was again revised in 1977. By this time the constituent bodies had grown in number to include the Royal Institution of Chartered Surveyors, Association of County Councils, Association of Metropolitan Authorities, Association of District Councils, the Greater London Council, Committee of Associations of Specialist Engineering Contractors, Federation of Specialists and Sub-contractors, the Association of Consulting Engineers, British Property Federation, and Scottish Building Contracts Committee.

In 1980 a substantial new edition, called the Standard Form of Building Contract 1980 Edition (JCT 80), was published in several Private and Local Authority versions — With Quantities, Without Quantities, and With Approximate Quantities.

JCT 80 incorporated changes from the earlier 1963 Edition, 1977 Revision, notably a decimal numbering system, reference to all paragraphs and sub-paragraphs as clauses, a definitions clause, and separately published fluctuations clauses. Between 1983 and April 1998, JCT 80 was changed by a further approximately 200 items in 18 published amendments and 4 reprints. The most significant of these changes is Amendment 18 issued in April 1998. Amendment 18 was prompted by the need for construction contracts in writing to comply with the Housing Grants Construction and Regeneration Act 1996, Part II.⁶ However, the JCT went a step further. The 1996 Act followed some, but not all, of the recommendations contained in a report by Sir Michael Latham called Constructing the Team.⁷ The JCT took the opportunity to incorporate the spirit of some of the other recommendations, and to introduce provisions in their contracts that reflected modern practice; Amendment 18 was used as the vehicle. Unfortunately Amendment 18 together with its guidance note totalled 60 pages containing 22 items, 2 bond agreements, and 2 misleadingly titled adjudication agreements (perhaps ‘adjudicator agreements’ would be more accurate). Amendment 18 created a daunting task for those wishing to use JCT 80 as a working document; earlier criticism of JCT 80⁸ was reinforced. The JCT immediately realized the size of the problem and quickly published an amalgamated edition, the subject of this book.

In December 1998 the Joint Contracts Tribunal Limited published a new edition of JCT 80 incorporating all amendments, under the title Standard Form of Building Contract 1998 Edition. Following precedent it seems fitting to refer to the 1998 edition as ‘JCT 98’.

JCT 98 is published as both Private and Local Authorities versions, ‘With Quantities’, ‘With Approximate Quantities’, and ‘Without Quantities’.

1.3 JCT 98: use, style and criticism

1.3.1 Use of JCT 98

Factors to be considered when choosing which of the JCT published forms to use are set out by the JCT in Practice Note 20, Deciding on the appropriate form of JCT Main Contract. The Practice Note classifies projects by design duty (i.e. design by owner’s consultants or by contractor), and by type of work (e.g. major works, maintenance, and minor works). In the cases of minor works and medium size projects, a value range is proposed, although the upper limits of those ranges are not suggested to be a lower limit for the use of the full standard form. JCT 98 falls within the class of ‘Employer-Designed Works’ together with the Minor Works Agreement, the Intermediate Form, the Management Form and the Form of Prime Cost Contract. This class is then subdivided into lump sum contracts (such as the Standard Form With Quantities, and the Standard Form Without Quantities), and others, such as the Prime Cost Form and the Standard Form With Approximate Quantities.

Practice Note 20 identifies the main difference between the ‘With’, the ‘Without’, and the ‘With Approximate’ Quantities versions.⁹ In essence, the ‘Without Quantities’ form is a pure lump sum contract in which the contractor provides a single price for building what is shown on drawings and described in specifications prepared by the building owner or his consultants. The tenderer is required to bear the cost of his own errors in coming to his price, including underestimation of the amount of work involved; conversely overestimation of the work will be to his benefit. The ‘With Quantities’ version is also a lump sum contract, but in order to provide a basis for comparing tenders, the building owner commissions a quantity surveyor to prepare a bill of quantities describing the work required, which the tenderers then price.¹⁰ Where bills are used, the tenderers may rely on the contents at face value in the knowledge that the cost arising out of any errors should be corrected at the building owner’s expense. The JCT advise that bills should be used on projects over a certain value,¹¹ but that bills should still be used under that value if the project is complex. Conversely, bills may not be necessary on high value p...

Table of contents

• Cover
• Title Page
• Copyright Page
• Table of Contents
• Preface
• Glossary of Latin terms
• Abbreviations
• 1. Style of JCT 98, contract execution and related problems
• 2. Participants in the project and their roles under the Contract
• 3. JCT 98 timetable
• 4. Performance Specified Work
• 5. Architect's Instructions
• 6. Variations and provisional sums
• 7. Risks to health and safety: allocation and insurance
• 8. Novation, assignment and domestic sub-contracting
• 9. Nominated Sub-contractors
• 10. Nominated Suppliers
• 11. Delays, extension of time and liquidated damages
• 12. Claims for damages and contractual claims: an overview
• 13. Contractual money claims under JCT 98
• 14. Fluctuations
• 15. Payment
• 16. Determination
• 17. Dispute resolution
• Table of Cases
• Table of Clause References
• Table of Statutes
• Subject Index