What’s new in the JCT Minor Works Building Contract 2016?

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

The next few months see the roll-out of the next major update of the popular standard form construction contracts produced by the Joint Contracts Tribunal. The various contracts are being launched in stages.

First out of the box is the JCT’s Minor Works “family”. This includes the Minor Works Building Contract 2016 and the Minor Works Building Contract with contractor’s design 2016. As their names suggest, the difference between these forms is whether or not the contractor is responsible for any design of the project. While the JCT doesn’t break out sales figures, anecdotal evidence suggests the Minor Works forms comprise the publisher’s bestselling commercial contracts. Rounding off the group is the Minor Works Sub-Contract with sub-contractor’s design 2016.

Richard Saxon CBE, Chair of the JCT, stated when the 2016 editions were formally announced at Olswang’s Construction Law Conference in February that there would be no ground-breaking differences between 2016 and the earlier 2011 versions. Even so, from what we’ve seen there are a sufficient number of welcome updates to justify the new release.

We’ve reviewed the two Minor Works Building Contract forms and highlight the main areas of interest.

Payment

This has been simplified and useful detail added in an attempt to meet the expectations of the government’s Fair Payment Charter. The contracts no longer distinguish between interim payments due before practical completion and after practical completion. Previously, the period between interim certificates during the Rectification Period was two months rather than one month.

It is now clear that the Contractor has the right to issue an application stating the sum it considers to be due to him. Before, the contracts left payment notices under the remit of the Architect/Contract Administrator, which could lead to Contractors sweating over whether they would be paid in good time.

Section 4 attempts to revise and simplify the payment structure used under the 2011 version, via the introduction of Interim Valuation Dates (as determined by reference to the Contract Particulars). If the Contract Particulars aren’t completed, then the first Interim Valuation Date is one month after the Works commencement date and thereafter at monthly intervals. The new payment provisions should provide additional flexibility over the previous regime, where interim payments became due by reference to 4 week intervals from the “Date for Commencement of the Works”, as it was then known. As before, each valuation is then subject to any pre-agreed fluctuation provisions. However, payment is then due in each case, seven days after the relevant Interim Valuation Date.

Following practical completion (rather than the period stated in the Contract Particulars), the Contractor now issues a certificate for final payment. The issuance of this final certificate is now expressly stated as having no effect on unpaid interim payments and requires the application of fluctuations and deductions.

Injury, Damage and Insurance

A longstanding criticism of the JCT forms is that, where the works entail existing structures, “Option C” insurance assumed that the Employer controlled the relevant buildings insurance for those structures. This was particularly odd, given that the Minor Works family is often used by commercial building tenants for their fit out and refurbishment projects.

The new contracts include more flexible wording to deal with insurance of the Works and existing structures. A new clause provides for insurance of the Works and existing structures by “other means”, which may include a tenant Employer involving his insuring landlord. There are other tweaks to the insurance provisions, and material loss or damage to an existing structure is now expressly listed as a circumstance which may give rise to a right to terminate the Contractor’s employment, if it is just and equitable and the Employer chooses not to reinstate that structure.

Public Sector Amendments

Various new provisions have been added to ensure that the contracts are public sector friendly without having to make additional bespoke amendments, and it now specifically incorporates the requirements of the Freedom of Information Act 2000, where the Employer is a Local or Public Authority, or that Act applies to the Contract in question. It also incorporates The Public Contracts Regulations 2015 for such parties.

Other Legislative Updates

As expected, the contracts have been updated to refer to the 2015 version of The Construction (Design and Management) Regulations and it now specifically refers to the ”Principal Designer” (this was previously dealt with by last year’s “Amendment 1” supplement). There is also explicit notice that the Contractor cannot pass on the costs of complying with the CDM Regulations or rely upon the time spent in complying with the CDM Regulations in an application for an extension of time.

Other Changes

Other changes/tweaks to the contract include the:

• simplification of the insolvency test by reference, inter alia, to Section 113 (2) – (5) of the Housing Grants, Construction and Regeneration Act 1996 (this is a definition often used in bespoke construction contracts);
• introduction of new defined terms for “Contractor’s Persons” and “Employer’s Persons” to simplify the text;
• introduction of a new definition of “variation” albeit rather oddly in lower case and without inclusion in the “Definitions and interpretation” section;
• introduction of a new clause which is intended to provide a general default position where any party’s consent is expressly required, such that the consent is not to be unreasonably delayed or withheld. Exceptions to this include when dealing with defects and rights to assign;
• inclusion of a new provision which potentially enables the Employer to instruct a deduction from the Contract Sum to cover the cost of defects, shrinkages or other faults in the Works appearing within the Rectification Period, rather than having to rely on the Contractor to make good such defects, shrinkages or other faults entirely at his own cost;
• removal of the strict requirement for the Architect/Contract Administrator to follow up oral instructions with written instructions, within 2 days. Written confirmation is still required, but any potential confusion caused by any failure to do so within the previously specified time period has been removed.

Conclusion

The latest updates are to be welcomed for the improved ease of use they confer on the JCT’s bestselling contracts. There are no specific amendments to deal with BIM or other communications protocols, as some may have expected; other than a provision in the design version requiring drawings and other documents to be supplied by such means and in such format, if any, as are specified in the Employer’s Requirements. There is also a footnote to clarify that any such applicable protocols are to be included in the Employer’s Requirements. Nor are there any specific amendments introducing a requirement for the Contractor to provide additional security and/or collateral warranties or third party rights, as some might have liked to see; but it probably comes as little surprise to most users, bearing in mind that these are, after all, part of the minor works suite. This also tallies with the JCT’s comments that there have been no significant changes to risk and obligations from the previous edition.

The contracts can be purchased either in hard copy from the usual construction industry booksellers or in digital formats at www.jctltd.co.uk/jct-on-demand.

Tom Pritchard, Trainee Solicitor, assisted in writing this article.