54581531 Guide JCT 2005 Design Built REV 2009

8/9/2019 54581531 Guide JCT 2005 Design Built REV 2009

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Design and Build Contract

Guide

DB/G

Design and Build Contract

2 0 0 5

Revision 2009


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Design and Build Contract Guide (DB/G)

This Guide is intended to provide a general introduction to the contract and is not a substitute for professionaladvice.

Published by Thomson Reuters (Legal) Limited (Registered in England & Wales, Company No 1679046)trading as Sweet & Maxwell100 Avenue Road, London, NW3 3PF

First published September 2005Revision 2009 published May 2009

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, inany form or by any means, electronic, mechanical, photocopying, recording or otherwise, except in accordancewith the provisions of the Copyright, Designs and Patents Act 1988, without the prior written permission of thepublisher. Thomson Reuters and the Thomson Reuters Logo are trademarks of Thomson Reuters. Sweet &Maxwell ® is a registered trademark of Thomson Reuters (Legal) Limited.

© The Joint Contracts Tribunal Limited 2009

www.jctcontracts.com


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© The Joint Contracts Tribunal Limited Terrorism Cover Update, December 2009 Page 1

Terrorism Cover UpdateIssued December 2009

JCT’s Works insurance provisions have been updated in relation to Terrorism Cover and the Contractor’s liability for loss ordamage to the Works or Site Materials resulting from terrorism in cases where Insurance Option A applies.

The amendments set out below have been agreed in relation to the Works insurance provisions of the Standard BuildingContract in both its With Quantities (Q) and Without Quantities (XQ) versions. Amendments in substantially the same terms are

required for the Approximate Quantities (AQ) version of that contract and for the Design and Build Contract, ManagementBuilding Contract, Prime Cost Building Contract and Intermediate Building Contract. In the case of the Measured TermContract, similar amendments may also be appropriate.

Clause number andheading

Action

Contract Particulars,6·10 and Schedule 3

Insert new entry:

‘6·10 and Schedule 3 Terrorism Cover – details of the requiredcover(State reference numbers and dates or otheridentifiers of documents setting out therequirements. Unless otherwise stated, Pool

Re Cover is required.)

__________________________________

__________________________________

__________________________________

__________________________________ ’

Contract Particulars,6·11

Delete ‘6·11’ and insert ‘6·12’ (twice)


Delete ‘6·13’ and insert ‘6·14’



Contract Particulars,Part 2 (E) (ii)


Clause 1·1 Funder Rights Particulars: delete ‘6·11’ and insert ‘6·12’P&T Rights Particulars: delete ‘6·11’ and insert ‘6·12’

Clause 4·3·1·3 Delete ‘paragraph A·5·1 of Schedule 3’ and insert ‘clause 6·10·2’

Clause 4·3·3·5 After ‘clause 2·6·2’ insert ‘or 6·10·3’

Clause 4·16·2·1 After ‘3·17’ delete ‘or’ and insert comma;After ‘6·5’ insert ‘, 6·10·2 or 6·10·3’;After ‘paragraph’ delete ‘A·5·1,’

Clause 4·16·2·3 Delete ‘6·10·4·2’ and insert ‘6·11·5·2’

Clause 4·16·3·2 After ‘to the Employer’ insert ‘under clause 6·10·2 or’

Clause 6·8,Excepted Risks

Amend the existing definition by insertion of the words underlined:

‘Excepted Risks: the risks comprise:

(a) ionising radiations or contamination by radioactivity from any nuclear fuelor from any nuclear waste from the combustion of nuclear fuel, radioactivetoxic explosive or other hazardous properties of any explosive nuclearassembly or nuclear component thereof (other than such risk insofar, butonly insofar, as it is included in the Terrorism Cover from time to timerequired to be taken out and maintained under this Contract);,

(b) pressure waves caused by aircraft or other aerial devices travelling atsonic or supersonic speeds; and

(c) any act of terrorism that is not within the Terrorism Cover from time totime required to be taken out and maintained under this Contract. ’


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Action

Clause 6·8,Pool Re Cover

Insert as an additional defined term:

‘Pool Re Cover: such insurance against loss or damage to work executed and Site Materialscaused by or resulting from terrorism as is from time to time generally availablefrom insurers who are members of the Pool Reinsurance Company Limited

scheme or of any similar successor scheme.’

Clause 6·8,Terrorism Cover

Amend the existing definition by deletion of the words crossed through and insertion of the wordsunderlined:

‘Terrorism Cover: Pool Re Cover or other insurance against provided by a Joint Names Policyunder Insurance Option A, B, C for physical loss or damage to work executedand Site Materials (and/or, for the purposes of clause 6·11·1, to an existingstructure and/or its contents) caused by or resulting from terrorism.’

New Clause 6·10 Insert as clause 6·10 the following new clause:

‘Terrorism Cover – policy extensions and premiums

6·10 ·1 To the extent that the Joint Names Policy for the Works and Site Materials excludes (or wouldotherwise exclude) loss or damage caused by terrorism, the Contractor, where InsuranceOption A applies, or the Employer, where Insurance Option B or C applies, shall unlessotherwise agreed take out and maintain, either as an extension to the Joint Names Policy oras a separate Joint Names Policy, in the same amount and for the required period of the JointNames Policy, such Terrorism Cover as is specified in or by the Contract Particulars, subjectto clauses 6·10·4 and 6·11.

·2 Where Insurance Option A applies and the Contractor is required to take out and maintainPool Re Cover, the cost of that cover and its renewal shall be deemed to be included in theContract Sum save that, if at any renewal of the cover there is a variation in the rate on whichthe premium is based, the Contract Sum shall be adjusted by the net amount of the differencebetween the premium paid by the Contractor and the premium that would have been paid butfor the change in rate.

·3 Where Insurance Option A applies and Terrorism Cover other than Pool Re Cover is specifiedas required, the cost of such other cover and of its renewal shall be added to the Contract

Sum.

·4 Where Insurance Option A applies and the Employer is a Local Authority, if at any renewal ofthe Terrorism Cover (of any type) there is an increase in the rate on which the premium isbased, he may instruct the Contractor not to renew the Terrorism Cover. If he so instructs, theprovisions of clauses 6·11·5·1 and 6·11·5·2 shall apply with effect from the renewal date.’

Clause 6·10 Renumber existing clause 6·10 as clause 6·11 and amend the re-numbered clause by deletion ofthe words crossed through and insertion of the words underlined:

‘Terrorism Cover – non-availability – Employer's options

6·1110 ·1 If the insurers named in the any Joint Names Policy, or (where Insurance Option C applies)the insurers named in either or both such policies, notify either Party that, with effect from aspecified date (the 'cessation date'), Terrorism Cover will cease and will no longer be availableor will only continue to be available with a reduction in the scope or level of such cover, the

recipient shall immediately notify the other Party.

·2 The Employer, after receipt of such notification but before the cessation date, shall give noticeto the Contractor either:

·1 that, notwithstanding the cessation or reduction in scope or level of Terrorism Cover, theEmployer requires that the Works continue to be carried out; or

·2 that on the date stated in the Employer’s notice (which shall be a date after the date ofthe insurers' notification but no later than the cessation date) the Contractor’semployment under this Contract shall terminate.


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Action

·3 Where Insurance Option A applies and the Employer gives notice under clause 6·11·2·1requiring continuation of the Works, he may instruct the Contractor to effect and maintain anyalternative or additional form of Terrorism Cover then reasonably obtainable by the Contractor;the net additional cost to the Contractor of any such cover and its renewal shall be added tothe Contract Sum.

·43 If the Employer gives notice of termination under clause 6·1110·2·2, then upon and from suchtermination the provisions of clauses 8·12·2 to 8·12·5 (excluding clause 8·12·3·5) shall applyand, notwithstanding any the other provisions of this Contract, no further sum shall becomedue to the Contractor other than the amounts referred to in clauses 8·12·3·1 to 8·12·3·4 whichrequire any further payment or any release of Retention to the Contractor shall cease to apply.

·54 If the Employer does not give notice of termination under clause 6·1110·2·2, then:

·1 if work executed and/or Site Materials suffer physical loss or damage caused byterrorism, the Contractor shall with due diligence restore the damaged work, replace orrepair any lost or damaged Site Materials, remove and dispose of any debris andproceed with the carrying out of the Works;

·2 the restoration, replacement or repair of such loss or damage and (when required) theremoval and disposal of debris shall be treated as a Variation, without deduction ofRetention and with no reduction in any amount payable to the Contractor pursuant to

this clause 6·11·5 6·10·4 by reason of any act or neglect of the Contractor or of any sub-contractor which may have contributed to the physical loss or damage; and

·3 (where Insurance Option C applies) the requirement that the Works continue to becarried out shall not be affected by any loss or damage to the existing structures and/ortheir contents caused by terrorism but not so as thereby to impose any obligation on theEmployer to reinstate the existing structures or affect the rights of either Party underparagraph C·4·4 of Schedule 3.’

Clause 6·11 Renumber existing clause 6·11 as clause 6·12

Clause 6·12 Renumber existing clause 6·12 as clause 6·13;Delete ‘6·11’ and insert ‘6·12’

Clause 6·13 Renumber existing clause 6·13 as clause 6·14;Delete ‘6·14 to 6·16’ and insert ‘6·15 to 6·17’


Clause 6·15 Renumber existing clause 6·15 as clause 6·16;Delete ‘6·15·1·2’ and insert ‘6·16·1·2’ (four instances)


Clause 8·12 Delete ‘6·10·2·2’ and insert ‘6·11·2·2’

Schedule 3,paragraph A·4·2

Delete ‘6·10·4·2’ and insert ‘6·11·5·2’

Schedule 3,paragraph A·4·6

After ‘Joint Names Policy’ insert ‘or payable to him under clause 6·11·5·2, where applicable’

Schedule 3,paragraph A·5

Delete the whole of paragraph A·5 and its heading

Schedule 3,paragraph B·3·2


Schedule 3,paragraph C·4·2


Schedule 5, Part 1,paragraph 5


Schedule 5, Part 2,paragraph 9



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Guidance Notes to the Terrorism Cover Update

JCT has previously highlighted through contract footnotes and guides certain possible issues regarding the extent of TerrorismCover and compliance with the requirements of Insurance Options A, B and C.

This Update is intended to rationalise the position, in particular with respect to the Contractor’s liability for loss or damage to theWorks and Site Materials in cases where Insurance Option A applies.

In the absence of any relevant limitation or exclusion, the Contractor’s underlying obligation to restore, replace or repair any fire

or other damage to the Works under that Insurance Option in effect meant that he bore the risk of any such loss or damage tothe extent that it fell outside Pool Re or other terrorism cover that he ‘bought back’, whether by way of an extension to his CARor specific Works Insurance policy or through a separate policy.

Originally the risk was substantially covered by the buy-back of cover under the Pool Re scheme established by theReinsurance (Acts of Terrorism) Act 1993 (‘the 1993 Act’), since insurers’ original exclusions of terrorism risk and Pool Recover were both based on that Act’s definition of terrorism. The gap between exclusion and cover arose after the passing of theTerrorism Act 2000 (‘the 2000 Act’). In the 2000 Act, terrorism was defined as including not only acts connected toorganisations with activities directed towards overthrowing or influencing any government by force or violence (the 1993 Actdefinition) but also acts of individuals (alone or on behalf of any organisation) committed for political, religious, ideological orsimilar purposes, not only where directed towards the overthrow or influencing of governments but also any intended to put anysection of the public in fear. Adoption of the wider definition by insurers enlarged their standard terrorism exclusion beyond the1993 Act risks covered by Pool Re but Pool Re cover was not extended in this respect. The gap was illustrated by the‘Unibomber’ Soho bombing and Huntingdon Life Sciences cases.

Not all insurers adopted the wider exclusion and an alternative to Pool Re, Lloyds market cover, has been available to cover

the wider 2000 Act risks. Unlike Pool Re cover, however, that alternative cover does not extend to chemical or biologicaldamage in commercial cases and also normally requires an extension for nuclear risks. The JCT has therefore agreed that boththe Contractor’s liability (where Insurance Option A applies) and, for each Insurance Option, the contractual obligation of therelevant Party to obtain Terrorism Cover should be limited to the risks insured by Pool Re or by such other insurance cover asis specified in the Contract Particulars for clause 6·10. Pool Re cover is the default position.

A new clause 6·10 sets out the underlying obligation to effect Terrorism Cover. This is coupled with an extension to the clause6·8 definition of Excepted Risks, which operates through the clause 6·6 exclusion of Contractor’s liability for those risks andalso limits the required ambit of All Risks Insurance, as defined in clause 6·8.

Where the Contractor is to obtain the Works Insurance and Pool Re Cover is required, the anticipated cost is intended to beincluded in the Contract Sum as tendered (clause 6·10·2), subject to adjustment for changes in renewal costs. Where TerrorismCover other than Pool Re is required, the costs of effecting and renewing cover are treated as an addition to the Contract Sum,since at present the cost may not be as predictable as that of Pool Re (see clause 6·10·3). Clauses 6·10·2 and 6·10·4incorporate the provisions formerly in paragraph A·5 in Schedule 3.

Clause 6·11 (the former clause 6·10) retains the provisions regarding non-availability at the renewal date and the Employer’sconsequent option to terminate. However, it also now extends the provision to cover any reduction in the scope or level of coverby insurers and contains an option for the Employer, where the Contractor is responsible for Works Insurance, to require him toswitch to any alternative form of Terrorism Cover reasonably available at the renewal date.

It will be noted that in the case of residential property, i.e. houses and blocks of flats and other dwellings insured in the name ofa private individual, Pool Re continues to exclude nuclear, chemical and biological risks.

In all cases Pool Re Cover requires annual renewal: Lloyds market cover may be available for the duration of the project.

Effecting Terrorism Cover may still be difficult in certain situations. The JCT would again stress that relevant details of this,and of Works insurance generally, require discussion and agreement between the Parties and their insurance advisersprior to entering into the Contract.

Use of Terrorism Cover Update

Either amend the contract in accordance with this Update and execute it as so amended. Each amendment should beinitialled by or on behalf of the parties.

or attach this Update to the Agreement; and insert in the Articles an additional Article which states:

“Article *…..: Terrorism Cover Update – incorporationThe Conditions shall have effect as modified by the amendments in the attached Terrorism Cover Update.”

* Allocate the next available Article number.


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© The Joint Contracts Tribunal Limited 2009 DB/G (2009) Page i

Introduction

GeneralRevision 1Revision 2FormatRisk allocationContent of the Guide

Page 1

New Supplemental Provisions 3

Articles of Agreement 6

Recitals

Articles

Contract Particulars

Attestation

6

6

6

7

Conditions 9

Section 1 Definitions and Interpretation

Definitions (clause 1·1)Interpretation (clauses 1·2 to 1·10)

Section 2 Carrying out the Works

Contractor s obligations (clauses 2·1 and 2

·2)

Possession (clauses 2·3 to 2·6)Supply of Documents, Setting Out etc. (clauses 2·7 to 2·9 and Schedule 1 (Contractor s DesignSubmission Procedure)Discrepancies and Divergences (clauses 2·10 to 2·16 and Supplemental Provision 3)Design Work (clause 2·17)Fees, Royalties and Patent Rights (clauses 2·18 to 2·20)Unfixed Materials and Goods (clauses 2·21 and 2·22)

Adjustment of Completion Date (clauses 2·23 to 2·26)Practical Completion, Lateness and Liquidated Damages (clauses 2·27 to 2·29)Partial Possession by Employer (clauses 2·30 to 2·34)Defects (clauses 2·35 and 2·36)Contractor s Design Documents (clauses 2·37 and 2·38)

Section 3 Control of the Works

Access and Representatives (clauses 3·1 and 3·2 and Supplemental Provision 1)Sub-Contracting (clauses 3·3 and 3·4 and Supplemental Provision 2)Employer s instructions (clause 3·5 to 3·15 and Schedule 4)CDM Regulations (clauses 3·16 and 3·17 and Supplemental Provision 8)

Section 4 Payment (and Schedule 6 Forms of Bonds)

Contract Sum and Adjustments (clauses 4·1 to 4·3)Payments (clauses 4·4 to 4·12)Gross Valuation (clauses 4·13 and 4·15)Retention (clauses 4·16 to 4·18)Fluctuations (clause 4·19 and Schedule 7)

Loss and Expense (clauses 4·

20 to 4·

23)

9

9

13

14

Contents


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Page ii DB/G (2009) © The Joint Contracts Tribunal Limited 2009

Section 5 Variations

General (clauses 5·1 to 5·3 and Schedule 2)The Valuation Rules (clauses 5·4 to 5·7)

Section 6 Injury, Damage and Insurance (and Schedule 3 Insurance Options)

Injury and property damage indemnity and insurance (clauses 6·1 to 6·6)

Works insurance (clauses 6·7 to 6

·10 and Schedule 3)Professional Indemnity insurance (clauses 6·11 and 6·12)

Joint Fire Code (clauses 6·13 to 6·16)Financial Services and Markets Act 2000

Section 7 Assignment, Third Party Rights and Collateral Warranties (and Schedule 5 Third Party Rights)

Section 8 Termination

General (clauses 8·1 to 8·3)Termination by the Employer (clauses 8·4 to 8·8)Termination by the Contractor (clauses 8·9 and 8·10)Termination by either Party (clause 8·11)Consequences of Termination under clauses 8·9 to 8·11, etc. (clause 8·12)

Section 9 Settlement of Disputes

Mediation (clause 9·1) and ADR Adjudication (clause 9·2) Arbitration (clauses 9·3 to 9·8) and litigation (Article 9)

16

16

19

20

21

Appendix A Amendment 1 (DB) 23

Appendix B Revision 2 changes 27

Appendix C DB User Checklist 29

Appendix D Related Publications 35


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© The Joint Contracts Tribunal Limited 2009 DB/G (2009) Page 1

General

1 This edition of the Guide to the 2005 edition of the Design and Build Contract (DB 2005) is being issuedcontemporaneously with the publication of Amendment and Revision 2 to DB 2005.

2 DB 2005 is primarily appropriate for larger works where the Employer has defined his requirements and wherethe Contractor is not only to carry out the works, but also to complete the design for them in accordance withthose requirements. It retains the provisions designed to meet the needs of both the Private and Local Authoritysectors and allows for the works to be carried out in sections.

3 For the purpose of contract administration, DB 2005 requires the appointment of an Employer s Agent; thatagent may be either an external consultant or an appropriate member of the Employer s staff.

Revision 1

4 Revision 1 to DB 2005 was published in June 2007 and incorporated Amendment 1, issued in April that year.

The principal purpose of that Amendment was to reflect the coming into effect on 6 April 2007 of theConstruction (Design and Management) Regulations 2007; it also reflected the publication of the JCT Sub-Contractor Collateral Warranty for Employer (SCWa/E) and made certain other minor updates and corrections. Acopy of the Amendment 1 documentation forms Appendix A to this Guide.

Revision 2

5 The principal purposes of Revision 2 are:

(a) to introduce into DB 2005, and most other JCT contracts, additional provisions which build upon thetraditional JCT approach and reflect principles adopted by the Office of Government Commerce in its

Achieving Excellence in Construction (AEC) initiative;

(b) to simplify the provisions of section 4 (Payment), at the same time including the standard JCT RetentionBond option and a minor modification of the provisions relating to payment applications after practicalcompletion; and

(c) to recognise the increasing importance of sustainability.

6 The additional provisions relating to AEC principles are:

AccelerationCollaborative workingHealth and safetyCost savings and value improvementsSustainable development and environmental considerationsPerformance Indicators and monitoring, andNotification and negotiation of disputes.

7 Revision 2 also makes certain textual refinements. These include wider usage of defined terms, a consolidatednotices and communications provision at clause 1·7, which helps to simplify the text generally, and more detailedparticulars with respect to Professional Indemnity insurance requirements.

Format

8 The section-headed format adopted for DB 2005 was aimed at greater standardisation over the JCT range of contracts and greater adaptability to change.

9 Revision 1 resulted in the deletion of only one clause (7F). In the case of Revision 2, four existing clauses havebeen deleted or renumbered (clauses 1·8, 3·16, 3·17 and 7·3) and a single new clause (4·17) added, together with two new recitals (the Sixth and Seventh). The additional provisions reflecting AEC principles have beenincluded as Part 2 of Schedule 2 (Supplemental Provisions), alongside the existing provisions (now Part 1). Thestandard form of Retention Bond has been included as Part 3 of Schedule 6. The format therefore remains

substantially unchanged.

Introduction


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Page 2 DB/G (2009) © The Joint Contracts Tribunal Limited 2009

Risk allocation

10 In JCTs view, none of the Revision 2 changes has a material effect on the current allocation or balance of risk.The general thrust of the AEC principles and the new Supplemental Provisions is to reduce cost and avoidablerisk; most of the related provisions are in substance a statement and reflection of good management practicethat is already common in many sectors. Similarly, none of the ancillary changes affects the status quo in termsof risk. Of the deletions mentioned, the substance of clause 1·8 (Electronic communications) is included inclause 1·7·2, clause 3·16 (Instructions on antiquities) is merely renumbered as clause 3·15·2 and clause 3·17

(Loss and expense arising) is included in the general loss and expense provision at clause 4·

21·

3. In view of theminor alterations to Part 2 of the Contract Particulars referred to below, clause 7 ·3 is now superfluous.

Content of the Guide

11 This Guide reviews the new, Revision 2 Supplemental Provisions and then deals sequentially with the other provisions of DB, starting with the Articles of Agreement, followed by the Conditions. The commentary indicatesthe principal drafting and other ancillary Revision 2 amendments and deals with the Schedules (includingexisting Supplemental Provisions) in conjunction with the sections or sub-sections to which they most closelyrelate. The commentary is followed by:

Appendix A Amendment 1

Appendix B Revision 2 changes

Appendix C DB User Checklist

Appendix D Related Publications.

12 Appendix C is a straightforward listing, by reference to relevant provisions of the Articles of Agreement, of theinformation and decisions on options that are required to complete the DB 2005 contract form; Appendix D liststhe other JCT documents that comprise the DB 2005 suite of documents or that can readily be used inconjunction with the Contract.


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13 AEC or similar principles are already incorporated in the JCT Framework Agreement. The intention of Revision 2is to incorporate those principles into DB 2005 either where there is no applicable framework or frameworkprovision, or where there is no other contractual coverage of the particular issue. As indicated above, theprovisions that give effect to those principles are now set out in Part 2 of Schedule 2, alongside the existingSupplemental Provisions which now form Part 1 of that Schedule.

14 The existing Supplemental Provisions comprise: Site Manager; Named Sub-Contractors; Bills of Quantity;Valuation of Changes Contractor s estimates; and Loss and Expenses Contractor s estimates. (It will benoted that in these cases the headings have now been abbreviated, but they remain substantially in their originalform.)

15 The new Supplemental Provisions comprise the seven principles listed at paragraph 6 above, i.e. acceleration,collaborative working, additional illustrative Health and Safety requirements, an outline procedure governingContractor s value engineering suggestions, general sustainable development and environmental provisions, aprovision for KPI monitoring and additional provisions for dispute resolution.

16 The Sixth Recital provides for any applicable Framework to be recorded in the Contract Particulars and theSeventh incorporates into the Contract those Supplemental Provisions identified in the Contract Particulars.

17 It should be noted that the Contract Particulars contain different default positions for Parts 1 and 2 of Schedule2. The existing Supplemental Provisions apply only where they are stated to apply, but the new SupplementalProvisions apply unless stated not to apply; they are generally intended to be disapplied only where there is aFramework Agreement or other contract documentation that covers the same ground. More detailed coverage of such issues is commonplace and is often quite properly contained in the Preliminaries rather than the contractconditions; Revision 2 is not intended to discourage more detailed coverage.

18 In terms of the new Supplemental Provisions, the following points merit mention:

Acceleration

19 This consists of an acceleration quotation procedure based on those in several existing JCT contracts. In thiscase it is not combined with the Variation Quotation procedure, for which there is an existing SupplementalProvision in Part 1 of Schedule 2 (paragraph 4).

20 With a view to an earlier date of practical completion, the Employer may ask for an Acceleration Quotation at anytime and may on or before receipt seek revised proposals; the Contractor is not bound to make such a quotation,but, if he is unwilling to make one, he is required to explain why acceleration is impracticable.

Collaborative working

21 This is a simple restatement of the principle that in effect underpins most of the other AEC principles.

Health and safety

22 DB 2005, like all other JCT contracts and sub-contracts, already contains an express undertaking to comply withthe Statutory Requirements (clause 2·1). This by definition covers Health and Safety legislation. The Contractalso makes specific provision with respect to CDM Regulations (clauses 3·16 and 3·17). This SupplementalProvision (at paragraph 8·2·1 in Part 2 of Schedule 2) adds an obligation to comply with non-statutory HSE andHSC approved codes, which is clearly good practice, and, as a useful complement to the existing DB 2005clauses, goes on to highlight specific training and consultation aspects of the legislation.

Cost savings and value improvements

23 Consultants generally are professionally bound to report potential value improvements of which they are aware.It is obviously right that contractors should be encouraged to do the same; it is not unreasonable that theyshould receive a fair share of the benefit for doing so. When making suggestions, however, care should be takenabout the possible assumption of design liabilities.

24 It is of course during the pre-construction period, not during the construction phase covered by DB 2005, that theEmployer, assisted by the Contractor and relevant specialists as well as his consultant team, is able to derive thegreatest benefit from value-engineering exercises. It is to cover that earlier period that the JCT has recently

New Supplemental Provisions


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produced its two Pre-Construction Services Agreements, PCSA (between Employer and Main Contractor) andPCSA/SP (between Employer or Main Contractor and a Specialist contractor).

25 However further opportunities for value engineering do arise, often in the context of prospective variations.

26 It should be recognised that provisions of this type are not straightforward. On the one hand, for instance, theContractor will wish to be paid his share of the benefits before Final Statement, while on the other hand it may bedifficult for several perhaps many years to establish the true benefit to the Employer, in particular where it

consists in lower operating or life-cycle costs. It is difficult to prescribe particular sharing arrangements coveringsuch a wide field of possible benefits. Adjustments also have to be made for the value/cost of the additional workinvolved and/or the saving to the Employer from any resultant omissions.

27 In commercial terms, the provision is therefore limited to giving the Contractor a measure of protection for proposals that he originates and puts forward under this Supplemental Provision by making any instruction toimplement them conditional upon those terms being agreed. As there is no standard approach, there is no entryin the Contract Particulars covering methodology or share of benefits.

28 In areas where the scope for further value engineering is clear and benefits can more readily be established,there is nothing to prevent agreement between the Parties on benefit shares at an earlier stage. However, asindicated above and by the paragraph 9·3 reference to negotiations, there may then be several other interrelatedmatters to be agreed not only in terms of price but also matters such as design liability (on which a Contractor may wish to reserve his position in making the proposal). In the context of this provision, the paragraph 9 ·2reference to the Contractor s quotation is intended to connote a considered, bona fide estimate rather than a

complete, legally binding offer.

Sustainable development and environmental considerations

29 This Supplemental Provision may often be linked to the previous provision. The legislative framework hashistorically been the principal driver for sustainable development and on environmental issues generally but, for many clients, sustainability is now becoming an increasingly important commercial factor. Decisions on thesematters are principally matters for the client and his professional team which generally fall to be made during thepre-construction period; the Contractor s obligations to comply with the Employer s Requirements andinstructions, combined with clauses 2·2 and 2·8, are intended to give the Employer continuing control over further design work and selection of materials by the Contractor during the construction period. However, theJCT, which has taken and continues to take an active role in establishing common ground on contractualprovisions, recognises both the need for positive continuing dialogue reflected in paragraph 10·1 and, in terms of paragraph 10·2, the importance of proper information on the environmental impact of materials and goods

selected by the Contractor being available as part of the clause 2·2 and clause 2

·8 approval processes.

Performance Indicators and monitoring

30 Performance indicators are generally most relevant to Framework or other longer-term agreements betweenEmployer and Contractor where there is benchmarking of performance against competitors as part of contract-allocation or other incentive arrangements. However, those indicators may also perform a valuable role inindividual contracts, for project-specific incentives, (pre-)qualification purposes and the like.

31 It is important that the indicators and targets should be clearly stated or identified, normally as part of thePreliminaries, that performance should be regularly and properly monitored and that assessments should bemade strictly in accordance with the indicators/targets.

Notification and negotiation of disputes

32 In terms of avoidance or early resolution of actual or potential disputes, it makes obvious sense that each Partyshould notify disputes promptly and nominate an employee of sufficient seniority and authority with a view toresolving them quickly. Such provisions have for many years been commonplace in the field of generalcommercial agreements, frequently coupled with express agreement that a specified period will be allowed to theParties appointees to resolve the matter before steps are taken to initiate any external dispute resolutionprocedure.

33 As indicated by the reference to Article 7 at the beginning of the provision, section 108 of the HGCR Act 1996[1]

requires that a construction contract should enable a party to give notice at any time of his intention to refer adispute to adjudication, so that there cannot in construction contracts (within the meaning of the Act) be anyprescribed period of delay in respect of any reference to adjudication.

[1] The Housing Grants, Construction and Regeneration Act 1996


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34 The costs of adjudication are generally less than those of litigation or arbitration, but they are not inconsiderableand are often not recoverable. If a dispute arises, whether or not this Supplemental Provision applies, the Partiesshould consider whether to allow a reasonable period for negotiation before recourse to adjudication or other external means of resolving the dispute.


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35 DB 2005 retains the traditional form of Articles of Agreement, comprising the Recitals, Articles and the

Attestation clause, but also includes within them the Contract Particulars, comprising, as Part 1, the Generalparticulars that are required and, as Part 2, the entries for Third Party Rights and Collateral Warranties.

Recitals

36 The sole alteration to the DB 2005 Recitals has been the Revision 2 insertion of the new Sixth and SeventhRecitals (Framework Agreement and Supplemental Provisions). Entries are provided against the references tothem in Part 1 of the Contract Particulars.

37 The only insertion required by the Recitals is a brief description of the Works; division of the Works into Sectionsis dealt with by the Contract Particulars for the Fifth Recital and the identifiers of the documents comprising theEmployer s Requirements, the Contractor s Proposals and the Contract Sum Analysis are for insertion againstthe Contract Particulars entries for Article 4.

38 As indicated by the footnote to the Third Recital, the JCT would stress the need for proper identification of thedocuments that are to comprise the Employer s Requirements and Contractor s Proposals respectively and theneed for consistency between them. Last minute changes are often inevitable but the constituent documentsneed to be checked before execution; the fact that identifiers are not always changed to reflect a change in therelevant drawing or document reinforces the desirability of initialling or signing the constituent documents.

Articles

39 The Articles remain substantially the same as they were in the 2005 edition, subject only to the Revision 1change in Article 5 (CDM Co-ordinator) to reflect the 2007 CDM Regulations and the Revision 2 abbreviation of

Article 8 (Arbitration), which can now safely be made following a 2007 decision of the House of Lords[2]

.

40 Articles 1 and 2 summarise the primary obligations under the Contract; Articles 3 to 6 deal with relevantcontractual and CDM appointments and Articles 7 to 9 with dispute resolution.

41 In terms of Article 7 (Adjudication) and clause 9·2 of the Conditions, care needs to be taken when DB 2005 isused for a contract to be let by a residential occupier within the meaning of section 106 of the HGCR Act 1996(i.e. a contract which principally relates to operations on a dwelling which one or more of the parties to thecontract occupies, or intends to occupy, as his or her residence). Part 2 of that Act does not apply to contractswith residential occupiers, so that any Employer who is a residential occupier should take advice on the point, inparticular with respect to adjudication and the question of whether or not to delete that Article and clause.

42 Article 8 (Arbitration) applies only if the Contract Particulars specifically state that it and clauses 9·3 to 9·8 apply.If they do not apply (and subject to either Party s right to refer any dispute to adjudication or subsequently toagree to arbitration) final resolution of disputes is a matter for the courts.

Contract Particulars

43 Both Part 1 (General) and Part 2 (Third Party Rights and Collateral Warranties) remain substantially in their original DB 2005 form, with only minor adjustments. In the case of Part 1, those include five new or extendedentries or groups of entries and the deletion of one existing entry; in the case of Part 2, they consist of a fewminor deletions only.

Part 1

44 In Part 1, an entry has been included for the Sixth Recital (Framework Agreement) and the SupplementalProvisions entries are now by reference to the Seventh Recital. The entries for the existing SupplementalProvisions (those in Part 1 of Schedule 2) have been expanded to allow for the selection of each of thoseprovisions separately; previously it was envisaged that all or only the first of those provisions (Site Manager)

[2] Fiona Trust v. Privalov [2007] UKHL 40

Articles of Agreement


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would apply. In contrast to those entries, the default position for each of the new Supplemental Provisions is thatit applies unless otherwise stated. Where there is no Framework Agreement or contractual provision thatoverlaps with any of the Supplemental Provisions, no entry need be made. If there is an overlap either throughan applicable Framework Agreement or other intended contractual provision (whether in the Preliminaries or elsewhere) the Parties should consider removing that overlap by disapplication of the Supplemental Provision. Inthe case of Supplemental Provision 12 (Notification and negotiation of disputes), there is a further entry for nominated employees. There are new entries for the Retention Bond (clause 4 ·17) and Daywork (clause 5·5).

45 In relation to clause 6·11 (Professional Indemnity insurance) and in line with market realities, the default position

with respect to pollution and contamination cover is no longer that the required limit of indemnity is the amount of the general cover under the policy; the limit for pollution and contamination claims must be expressly specified if such cover is required. There are also new, separate entries for asbestos and fungal mould cover, with a cover limit for the asbestos claims. Coverage of these specific categories of risk, which may not be required in certaincases, is intended to be within the overall policy, not as separate insurances in their own right, and cover levelsare intended to be sub-limits of the general level of cover. (Where there is fungal mould cover, it is understoodthat there is normally no separate cover limit.) The required cover levels should in each case be reasonable.

Part 2

46 Prior to Revision 2, Part 2 commenced with a preliminary entry which expressly envisaged that the requireddetails of Third Party Rights or Collateral Warranties might for convenience be set out in a separate identifieddocument (or Annex), as did an entry at the beginning of (E) (Collateral Warranties from Sub-Contractors).Those have now been omitted.

47 The JCT considers that wherever possible the required details be included in the Contract Particularsthemselves. That is considered desirable not least because the Design and Build Sub-Contract is predicatedupon these (Main) Contract Particulars being made available in substantially completed form for sub-contracttendering purposes and it is clearly good practice, so far as is reasonably practicable, to reduce the number of tender documents involved. (In that connection, it will be noted that certain sub-contractor details required for (E)are linked to details given at (B) and (C) and that the Table (E) now requires an entry indicating the types of warranty required from each specified sub-contractor.) Where warranties are required from consultants who aresub-contracted to the Contractor a form of warranty other than the specified JCT warranties may be necessary.

48 If Employers nevertheless consider it easier to retain separate, standard documentation which they use for thepurpose of third party rights or warranty requirements, or if in hard copy cases inclusion of those details isphysically difficult, an appropriate entry can still be made in the Tables at (A) and (E) stating that the requiredparticulars are set out in the separate, identified document.

49 Further comments on the requirements are made below in the context of section 7. However, to avoid later disputes and delays, it is important that full details of the requirements be given to prospective contractors andsub-contractors in the tender process and properly incorporated in the Contract.

Attestation

General

50 The attestation provisions are in the revised standard JCT layout introduced as from 1 April 2008. This retainsseparate forms for execution under hand and execution as a deed. For execution as a deed by a company,these now include entries for the additional, Companies Act 2006 method of execution as a deed throughsignature by a single director signing in the presence of an attesting witness. Different attestation provisions arestill required under the law of Scotland (for which the Scottish Building Contract Committee Limited issuesScottish contract forms); other attestation clauses may also be needed in the case of certain housingassociations, partnerships and possibly, as discussed below, foreign companies.

Execution under hand or as a deed

51 The primary factor governing the decision to execute the Contract under hand or as a deed is whether thelimitation period for instituting proceedings is to be 6 years, as in the case of execution under hand, or 12 years,where the Contract is executed as a deed. The mode of execution of the Contract will also determine the modeof execution of collateral warranties (clause 7·4) and (for both third party rights and collateral warranties) thelimitation period that applies to them.

Foreign companies

52 Many foreign companies involved in development and construction now themselves carry on business in the UK,

rather than operating here through UK subsidiaries.


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53 Under the Companies Act 1989, as applied by the Foreign Companies (Execution of Documents) Regulations1994 and the 1995 amendments to those regulations, a foreign company can execute deeds either:

• by affixing its common seal or any manner of execution permitted under the laws of its place of incorporation; or

• by expressing the document to be executed by the company under the signature of persons authorised tosign on its behalf in accordance with its domestic law.

54 Many foreign companies do not have a seal and the authority of relevant signatories needs to be checked but if there is any doubt, professional advice should be obtained.

55 To avoid complications in the service of claims or notices outside the jurisdiction, consideration should also begiven to inserting an obligation on the foreign company for the duration of the Contract to maintain an agent for service within England and Wales or within Scotland or Northern Ireland, where appropriate.


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Section 1 Definitions and Interpretation

Definitions (clause 1·1)

56 Clause 1·1 contains few changes from the DB 2005 original. The changes introduced by Revision 2 primarilycomprise the insertion of the Acceleration Quotation and Confirmed Acceptance definitions, the deletion of references to Final Account in relation to the Final Statement and consequential changes in certain cross-references. The Joint Fire Code definition, as a corollary of the point reinforced in clause 6·14, now takes theBase Date as its starting point; it has also been abbreviated. For consistency and brevity, the term SiteMaterials, originally used only in the context of insurance, is now used throughout.

Interpretation (clauses 1·2 to 1·10)

57 In the Interpretation sub-section, the primary change is that previously referred to, i.e. the revised and extendedclause 1·7 (Notices and other communications), coupled with the deletion of the existing clause 1·8 (Electroniccommunications), a matter now dealt with in clause 1·7·2.

58 At clause 1·7·1 there is a requirement that all notices and other communications between the Employer (or Employer s Agent) and the Contractor that are referred to in the Articles of Agreement or Conditions are to be inwriting. This simplifies the text of the Conditions and now applies across the range of JCT contracts and sub-contracts, apart from the Minor Works Building Contracts and the other, shorter contracts and sub-contracts thatcontain few express notification procedures.

59 Clause 1·7·4 retains a formal hand delivery/Recorded Signed for or Special Delivery post requirement for keynotices, e.g. those relating to defaults/termination and third party rights/collateral warranties. (Reference to handdelivery is now used in place of the traditional actual delivery; this reflects recent case law indicating a wider,unintended construction that may be given to the traditional expression.)

60 In relation to electronic and other communications, and as indicated by the footnote to clause 1·7·2, the Partiesare encouraged to agree a communications protocol as early as possible, preferably on or before execution of

the Contract, so that it can from the outset be applied to the supply chain generally. There is nothing to preventthe basic document being included in the Preliminaries or in other tender documents, with adjustment for particular aspects at a later stage. It is clearly important that appropriate arrangements are in place before theflow of Contractor s detailed design work commences. Once the protocol is in place, there needs to be regular updating of relevant contact points, e-mail addresses and so forth.

61 Where design or other contractual information flows are still in whole or in part to be in hard copy form, it shouldbe noted that Revision 2 has eliminated several traditional references to numbers of copies to be supplied, sothat a protocol may be useful in this area also, particularly if any wider direct distribution of hard copy documentsis required.

62 There are two other minor changes in the Interpretation sub-section. The first, at clause 1·3, reflects theoverriding nature of the building contract, which is recognised in the JCT Framework Agreement and also bymany other such agreements. The second, the abbreviation of what is now clause 1·8, merely reflects the

simplification of Final Statement terminology.

Section 2 Carrying out the Works

63 Section 2 remains substantially in its original DB 2005 form, dealing sequentially with various aspects of theconstruction process, starting with the Contractor s basic obligations with respect to the carrying out andcompletion of the Works.

Contractor s obligations (clauses 2·1 and 2·2)

64 Clause 2·1·1 develops the Contractor s principal obligation under Article 1. It requires that the Works be carriedout in a proper and workmanlike manner and in compliance not only with the Contract Documents but also withthe Construction Phase Plan and other Statutory Requirements, e.g. development control requirements, local

bye-laws and health and safety legislation generally, including CDM Regulations. It also requires completion of the design, including specifications and standards for materials, goods and workmanship that have not alreadybeen established by the Employer s Requirements or Contractor s Proposals. In addition, the Contractor is to

Conditions


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give all necessary notices under the Statutory Requirements, e.g. those under building regulations, those to thelocal authority in relation to the operation of the site and any required in relation to health and safety matters,including incident reports. (Clause 2·1·2 may in certain circumstances modify the Contractor s contractual liabilityto the Employer in relation to the Statutory Requirements, but does not of course affect his position and dutyunder general law.) Clause 2·1·4 then sets out the Contractor s duty of compliance with the Employer sinstructions and decisions.

65 Clause 2·2 makes further provision with regard to materials, goods and workmanship, to the effect that, where

the relevant kinds or standards are not established by the Employer s Requirements or Contractor

s Proposals,they are to be established through the Contractor s Design Submission Procedure under clause 2·8 and

Schedule 1. Samples are to be provided where the Employer s Requirements or Contractor s Proposals reservethat right, and the Employer also has a right to reasonable proof of conformity.

Possession (clauses 2·3 to 2·6)

66 The next sub-section covers the transfer to the Contractor of possession and, in effect, control of the site. Thiscovers the period up to practical completion, subject to:

• the Employer s possible option to defer giving possession for a specified period not exceeding 6 weeks (TheContractor is entitled to recover any loss and/or expense arising from a permitted deferral; deferral wherethe option does not apply or for longer than the permitted period is a breach.);

• the Contractor s obligation not unreasonably to refuse the Employer the right to use or occupy the site or part of it for storage or other purposes prior to practical completion, if the Works insurers consent; and

• the Contractor s obligations to allow the Employer or other contractors on the latter s behalf to carry outother work on site where the requirement has been sufficiently described in the Contract Documents, andnot unreasonably to withhold or delay his consent to such work being carried out even where sufficientinformation has not been given to him in advance.

(Employer s use or occupation for storage or other purposes under clause 2 ·5 should be distinguished frompartial possession being retaken by the Employer under clause 2·30; the latter is treated as practical completionof the part repossessed. If there is any part of the Employer s land adjacent to the Works which the Contractor may require to use on a purely temporary basis and not for the full duration of the Works or a Section, thatshould generally be excluded from the site for these purposes; its use (and any necessary insurancearrangements) should be the subject of a separate arrangement.)

Supply of Documents, Setting Out etc. (clauses 2·7 t o 2·9 and Schedule 1 (Contractor s DesignSubmission Procedure))

67 This sub-section at clause 2·7 covers the Contract Documents, access to them and confidentiality.

68 Clause 2·8 then provides for the supply of the Contractor s Design Documents, which are to be provided as andwhen necessary and in accordance with the Contractor s Design Submission Procedure set out in Schedule 1 or as otherwise stated in the Contract Documents. The procedure can be tailored to the particular project but it isextremely important that the Contractor should not undertake work to which particular designs relate until he hascomplied fully with the procedure. If he fails to do so, he risks not being paid for the work in question (seeparagraph 6 of Schedule 1).

69 Clause 2·9 makes the Employer responsible for defining site boundaries: the consequences of a divergence inthat definition are set out in the following sub-section.

Discrepancies and Divergences (clauses 2·10 to 2·16 and Supplemental Provision 3)

70 The sub-section deals in detail with the requirements for notification of errors, discrepancies and divergencesdiscovered in Contract Documents, Contractor s Design Documents and instructions, either in or betweenthemselves or in relation to the Statutory Requirements, and the cost of remedial action. The Employer isrequired to give instructions. Supplemental Provision 3 (Bills of Quantities), if it applies, also makes provision for errors in any bills contained in the Employer s Requirements.

71 Subject to certain exceptions, the general principle on cost is simple; it is borne by the Party responsible for thedocument in question. If there are inadequacies in the Employer s Requirements (or in designs contained inthem) which are not dealt with in the Contractor s Proposals or a divergence between those requirements andthe definition of site boundaries, the Employer is responsible for the cost of the necessary Change; theContractor is responsible for errors, discrepancies and divergences in the Contractor s Proposals, in his ContractSum Analysis and in the Contractor s Design Documents. Under clause 2·15·2·2, the Contractor may also berequired to allow for amendment to the Contractor s Proposals necessitated by Development Control decisions.


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72 The exceptions arise in relation to divergences from the Statutory Requirements. The first, under clause 2·15, isthat the Contractor is responsible for checking that the Employer s Requirements and any instructions conform tothe Statutory Requirements in the same way as Contractor s Design Documents. However, by further exceptions, the Employer assumes the risk of any divergences between the Statutory Requirements and theEmployer s Requirements (including any Change) or the Contractor s Proposals, if:

• the divergence arises from a change in Statutory Requirements after the Base Date and that changenecessitates an alteration to the Works, or

• if an amendment to the Contractor s Proposals is necessitated by the terms of any Development Controlpermission or approval issued after the Base Date, or

• if there is any necessary change to any part of the Employer s Requirements which is expressly stated tocomply with the Statutory Requirements.

Design Work (clause 2·17)

73 The clause follows on from clause 2·2 and deals with the Contractor s liability in respect of his design work.Under JCT contracts, this is intended to be the same as that of any independent architect or other professionaldesigner employed by the Employer. There is, under clause 2·17·3, an optional provision for an overall cap onliability for loss of use, loss of profits and other consequential loss arising from any inadequacy in theContractor s design work: this does not limit or affect liability for direct loss, including the cost of remedial workor, where the consequences of that inadequacy are irremediable, the resultant diminution in value of the Works.

Fees, Royalties and Patent Rights (clauses 2·18 to 2·20)

74 Statutory fees, e.g. building regulation notification and inspection fees, are under clause 2·18 to be paid by theContractor and are his liability unless they are stated by way of a Provisional Sum in the Employer sRequirements, in which case the Contract Sum is adjusted for any difference.

75 In the case of the Works as originally designed or specified, any patent or design-related royalties or other payments to third parties are deemed to be included in the Contract Sum; it is only where supply or use of patented items is required by a subsequent instruction that the Contractor has right to reimbursement. Suchcases are rare; if there is any question as to whether a requirement may involve use or infringement of thirdparty patent or other intellectual property rights, the matter should be raised with the Employer before entry intothe Contract or implementation of the instruction, as the case may be.

Unfixed Materials and Goods (clauses 2·

21 and 2·

22)

76 The sub-section concerns the transfer to the Employer of property in Site Materials and Listed Items on paymentto the Contractor and the concomitant restriction on removal from site. This in practice is a matter which in amajority of cases involves sub-contractors, so that the flow-down of these conditions required by clause 3·4·2 isgenerally essential in cases of sub-contracts for work and materials. For Listed Items, the pre-conditions of payment are set out in clause 4·15.

Adjustment of Completion Date (clauses 2·23 to 2·26)

77 The sub-section sets out the provisions governing extensions of time in all cases other than those where there isa Pre-agreed Adjustment within clause 2·23·2, i.e. agreement on an extension of time under SupplementalProvision 4 or for acceleration under Supplemental Provision 6.

78 Following the clause 2·23 definitions, clause 2·24·1 sets out the Contractor s obligation to notify: it will be seen

that the obligation arises not merely when progress is being delayed but when it becomes reasonably apparentthat it is likely to be delayed, and also that it arises in relation to any cause of delay or likely delay. The obligationis not restricted merely to Relevant Events (i.e. those listed in clause 2·26) that entitle the Contractor to anextension nor, where that likelihood exists, is it limited to events that have already occurred.

79 The obligation is to notify all the material circumstances, including the expected effects (clause 2·24·2) andthereafter to update the information given, as well as supplying any further information reasonably required(clause 2·24·3). The Contractor must also use best endeavours both to prevent delay (or further delay) and, if that occurs, do everything reasonably required to proceed (clauses 2·25·6·1 and 2·25·6·2). As will be seen fromclause 2·26, the first five Relevant Events listed and that in clause 2·26·12 are matters for which loss and/or expense may generally be claimed under clause 4·20: the remainder are not.

80 On being duly notified, the Employer has power and, where appropriate, a duty to grant extensions under clause2·25·1, though it is only to grant such extension as he considers fair and reasonable. In other words, he may

take account of concurrent or overlapping causes of delay that are not Relevant Events. The Employer shouldreach a decision as soon as reasonably practicable (clause 2 ·25·2). Where there has been a Relevant Omission,as defined in clause 2·24·3, he also has power under clause 2·25·4 to fix an earlier Completion Date. However


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he can exercise the latter power only where there has already been an extension of the original CompletionDate, either through an earlier decision or by a Pre-agreed Adjustment, and cannot do so in such a way as toaffect the length of any Pre-agreed Adjustment unless the omission is from the work that formed the subject of the Pre-agreed Adjustment (clause 2·25·6·4). In no circumstances may the date fixed by such a decision beearlier than the Date for Completion given in the Contract Particulars.

81 Under clause 2·25·5, the Employer in addition has not merely the power (as from the Completion Date) but alsothe duty, immediately following practical completion, to review the overall position with respect to extensions of

time. In that review he may look at all the circumstances, including Relevant Events that may not have beenspecifically notified under clause 2·24·1 and has power to do what he considers fair and reasonable, either byfixing a later or (for Relevant Omissions) an earlier Completion Date or by confirming the date previously fixed.(The same restrictions apply with respect to any earlier date.)

82 The provision for overall review appears frequently to be overlooked. It provides an opportunity for proper reflection and assessment and is, in the JCT s view, essential. Without it, decisions made in the course of theWorks, sometimes in a short space of time and without a full knowledge of the facts and effects of the variouspossible causes of delay, inevitably risk giving rise to precisely the expensive and wasteful disputes that AECprinciples seek to avoid.

Practical Completion, Lateness and Liquidated Damages (clauses 2·27 to 2·29)

83 The sub-section requires issue by the Employer of a Practical Completion Statement or Section CompletionStatement when the Works or a Section achieves practical completion and the Contractor has fulfilled his

obligations with respect both to as-built drawings and to health and safety file matters (clause 2·27). Where there

are Sections, good practice dictates issue of the Practical Completion Statement for the Works at the same timeas the last Section Completion Statement; there is no reason why these should not form a single document.

84 The sub-section also requires the issue of a Non-Completion Notice if the Contractor fails to achieve practicalcompletion by the relevant Completion Date (clause 2·28). In the event of such failure, liquidated damages willbecome payable or deductible on notice from the Employer in accordance with clause 2·29·2 provided both thata subsisting Non-Completion Notice has been issued and that the Employer himself has notified the Contractor in advance that he may require payment or make a withholding or deduction of such damages (clause 2 ·29·1).

85 Grant of an extension of time requires cancellation of a Non-Completion Notice and the appropriate repaymentwithin a reasonable time of liquidated damages relating to the period of extension that have by then been paid or withheld; it also requires the issue of a further notice in respect of any residual period of default. Users shouldnote the time limits for service both of the warning notification (clause 2·29·1·2) and the notice of withholding

and/or deduction (clause 2·29

·1, hanging paragraph); they should also note the requirement for compliance with

section 111 of the HGCR Act 1996 (Withholding Notices) reflected in clauses 4 ·10·4 and 4·12·6.

Partial Possession by Employer (clauses 2·30 to 2·34)

86 As indicated above, there is provision at clauses 2·5 and 2·6 whereby the Contractor may during the progress of the Works be obliged to accommodate use and occupation of parts of the site by the Employer for storage or other purposes and work by others that falls outside the Contract. Clause 2 ·5 contains a pre-condition as toinsurance, but the clauses otherwise have no effect on the operation of other terms of the Contract.

87 Clause 2·30, on the other hand, is concerned with outright repossession of part(s) of the site in advance of practical completion, which has the consequences set out in clauses 2·3 1 t o 2·34, i.e. deemed practicalcompletion of the relevant parts, commencement of the Rectification Period in respect of them, followed by aseparate Notice of Completion of Making Good, responsibility for insurance of the part(s) in question immediately

passing to the Employer and a reduction (pro rata to value) in the rate of liquidated damages.

88 Clause 2·30 is a provision which can be of benefit to Employers in relation to discrete areas of the site, whereuse and occupation will not impede the Contractor in managing the site and his completion of the Works as awhole, but it should not be invoked without proper liaison and due consideration of its possible effects.

Defects (clauses 2·35 and 2·36)

89 Clauses 3·12 to 3·14 set out the Architect/Contract Administrator s powers with regard to actual and suspecteddefects and faults arising during the progress of the Works: this sub-section gives him power to specify andrequire remedial action in respect of defects and faults arising in the Rectification Period. This power isexercisable both through an overall schedule of defects (clause 2·35·1) and by instructions in respect of individual defects (clause 2·35·2). The notice or schedule in each case must be given or delivered not later than14 days after the expiry of the Rectification Period. It should be noted that, when given, the schedule of defectsshould be comprehensive: in the interests of a properly managed rectification programme, the clause 2·35·2

power in respect of individual defects ceases when that schedule is served.


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90 Clause 2·36 then sets out the Employer s obligation to issue the Notice of Completion of Making Good. Under clause 4·9, unless the Parties are in the happy position of there having been no defects requiring the issue of instructions or a schedule of defects, it is the issue of this notice that permits the final Application for InterimPayment and final release of Retention (see clause 4·18·3).

Contractor s Design Documents (clauses 2·37 and 2·38)

91 The sub-section deals first with the supply of as-built drawings. This, as noted in the context of clause 2·27, is apre-condition to issuance of the Practical Completion Statement or a Section Completion Statement and the sub-

section then sets out the terms and conditions relating to the Employer s licence to use Contractor s DesignDocuments generally. The licence is in substantially the same terms as the licence granted to Purchasers,Tenants and a Funder under section 7, either as third party rights or by collateral warranty; it is conditional uponthe Contractor having been paid in full.

Section 3 Control of the Works

92 This section deals with most of the principal control issues other than performance and payment-related matters,which are dealt with in section 2, in the case of performance, and in section 4 as respects payment. It consists of four sub-sections, namely Access and Representatives; Sub-Contracting; Employer s instructions; and CDMRegulations.

Access and Representatives (clauses 3·1 and 3·2 and Supplemental Provision 1)

93 For the purpose of inspecting work and the conditions under which it is being undertaken, clause 3·1 requiresreasonable access to the Works and the Contractor s premises for the Employer s Agent and his nominees and,so far as practicable, similar access to sub-contractors premises (a point reflected in clause 3·4·2).

94 Under clause 3·2, the Contractor is obliged to maintain a competent person-in-charge on site, who is alsorequired to act as his agent there for receiving instructions and directions.

95 Where Supplemental Provision 1 (Site Manager) applies, it takes the place of clause 3·2. The Site Manager isintended to have a similar but wider representative function on behalf of the Contractor. His removal or replacement requires the Employer s consent and there are express provisions for his attendance at Sitemeetings and for record keeping.

Sub-Contracting (clauses 3·3 and 3·4 and Supplemental Provision 2)

96 Sub-contracting by the Contractor requires Employer s consent whether it concerns the whole or part of theWorks or their design, though it is not to be unreasonably delayed or withheld (clause 3·3). The giving of consentby the Employer does not in any way affect the Contractor s responsibilities under the Contract.

97 Supplemental Provision 2 (Named Sub-Contractors) is an optional provision which allows the Employer torequire that work be carried only by a sub-contractor named in the Employer s Requirements but does not givehim power to nominate a replacement in any Change necessitated by termination of the resultant sub-contract.That can only be done by an instruction excluding the relevant work from the Contract. If he wishes theContractor to be responsible for completing that work, the Contractor s choice of sub-contractor is subject to hisapproval, but that is not to be unreasonably delayed or withheld.

98 Unlike SBC 2005, there is in DB 2005 no provision for a list of sub-contractors from whom the Contractor mayselect his sub-contractor but even where the Employer s pre-named specialist is acceptable to the Contractor, itis desirable that there should also be the measure of agreement between the Parties as to possible alternativesof the type that the SBC 2005 list of three procedure inherently involves. There is always the possibility(particularly in the case of work later in the programme) that, by the time that the sub-contract is due to beentered into, the pre-named specialist may have other priorities, may have undergone an unwelcome change of control, may have lost key personnel or capabilities and/or be materially less secure in financial terms. (The JCTcontinues to keep the question of pre-selection under review.)

99 Clause 3·4 sets out the minimum conditions that are required of any sub-contract, namely automatic terminationof the sub-contractor s employment upon termination of the Contractor s employment and sub-contractprovisions that are compatible with the main contract with respect to vesting and control of Site Materials, accessto workshops, CDM Regulations, interest on late payments and execution of sub-contractors collateralwarranties.

Employer s instructions (clause 3·5 to 3·15 and Schedule 4)

100 The sub-section commences with the general requirement (clause 3·5) that the Contractor should forthwith

comply with all instructions. In clause 3·6 it outlines the consequences of failure to do so in terms of liability for the Employer s additional costs. It then sets out in clauses 3·7 and 3·8 the procedures to be followed if the


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Employer gives oral instructions or if there is in the Contractor s view doubt as to the Employer s power to issuethe instruction in question.

101 The only express exceptions to the requirement for immediate compliance are clauses 3·5, 3·9·1 and 3·9·4. Thefirst of those applies where the instructions relate to a Variation within clause 5 ·1·2 (i.e. one that relates to siteaccess, imposes any limitation on working space or hours or affects the order of working) and operates if theContractor makes reasonable written objection to compliance; the second relates to instructions that alter or modify the design of the Works (instructions which under this Contract require the Contractor s consent, albeit

not to be unreasonably delayed or withheld). The third relates to CDM aspects of instructions for Changes andfor Provisional Sum expenditure where notice of objection is given.

102 The sub-section then lists the Employer s powers and duties in relation to specific types of instruction. Provisionfor instructions to resolve discrepancies and divergences and those relating to defects have already been madein section 2 (see clause 2·13).

103 Those contained in section 3 relate to the other key instructions, i.e. the power to instruct Changes andpostponement, the duty to give instructions on Provisional Sums, the powers in relation to opening up andtesting, non-compliant work or workmanship, and also in relation to finds of antiquities. Where work, materials or goods are not in accordance with the Contract, the Employer, if he wishes to issue instructions under clause3·12 for opening up and testing to establish whether there is more extensive non-compliance, is required byclause 3·13·4 to have regard to the Code of Practice set out in Schedule 4.

104 As respects antiquities, Revision 2 provides for loss and expense arising from necessary steps or instructions

now to be covered as a Relevant Matter under clause 4·21

·3.

CDM Regulations (clauses 3·16 and 3·17 and Supplemental Provision 8)

105 The sub-section provides contractual cross-undertakings by the Parties to comply with their respective dutiesunder the regulations. They highlight certain of those duties, e.g. the Principal Contractor s obligations withregard to welfare facilities and the obligation to inform him of sub-contracting arrangements; they also provide for the supply of necessary information to the CDM Co-ordinator and Principal Contractor at no cost to theEmployer.

106 Further details of the 2007 Regulations and consequent Revision 1 amendments are contained in Appendix A tothis Guide. As previously mentioned, general Health and Safety considerations are now further amplified bySupplemental Provision 8, if it applies.

Section 4 Payment (and Schedule 6 Forms of Bonds)

107 The section remains divided into six sub-sections Contract Sum and Adjustments; Payments; Gross Valuation;Retention; Fluctuations; and Loss and Expense.

108 Revision 2 simplifies the text in certain areas, notably in clauses 4·12 to 4·15; the optional provision for aRetention Bond has been added as clause 4·17 and loss and expense relating to Antiquities added as aRelevant Matter at clause 4·21·3. The form of the Retention Bond is set out in Schedule 6, along with thoserelating to Advance Payment and Listed Items. Employer s approval of the proposed surety for each bondrequired should wherever practicable be obtained before the Contract is executed.

Contract Sum and Adjustments (clauses 4·1 to 4·3)

109 This sub-section deals with the basic principles of adjustments to the Contract Sum. Clause 4·1 limits

adjustments to those expressly provided for by the Conditions; clause 4 ·2 continues for convenience to list thevarious adjustments that are provided for and clause 4·3 provides for the amount of each adjustment, whenascertained, to be reflected in the next Interim Payment. This is intended to apply both to monthly payments andto stage payments.

Payments (clauses 4·4 to 4·12)

110 Following the standard JCT provisions with regard to VAT and the CIS and the optional provisions for anadvance payment and bond, clause 4·7 provides for Interim Payments to be calculated in accordance withwhichever method of Gross Valuation applies Alternative A, set out in clause 4·13, which relates to stagepayments or Alternative B (clause 4·14) which relates to monthly payments and clause 4·8 sets out thedeductions to arrive at the net amount in each case. Clause 4·9 provides for the Contractor s Applications for Interim Payment; Revision 2 now provides for post-practical completion applications to be made at intervals of 2

months (or other agreed intervals) rather than simply as and when further amounts are ascertained. (This is alsoreflected in the DB Sub-Contract.)


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111 Clause 4·10 provides that the final date for an Interim Payment is 14 days from receipt of the application andthen makes express provision for the issue of payment notices and withholding notices that mirrors sections 110and 111 of the HGCR Act 1996. Clause 4·11 sets out the Contractor s right of suspension under section 112 of the Act, exercisable after a warning notice.

112 In terms of final accounting, clause 4·12 provides that the Contractor should submit the Final Statement to theEmployer within 3 months of practical completion of the Works. If he fails to do so either within that period or within 2 months of a reminder notice from the Employer, the Employer may issue the statement. Either way,except to the extent that the final balance shown is disputed by notice from the other Party within one month of

receipt of the statement (or if later, from the end of the Rectification Period or Notice of Completion of MakingGood), the Statement then becomes conclusive as to the final balance. Subject to the provisions of clause 1·8, italso then has the further conclusive effects mentioned in the latter clause.

Gross Valuation (clauses 4·13 to 4·15)

113 Clause 4·13 or 4·14, dependent upon whether stage or periodical payments apply, provides a straightforwardbasis for calculating amounts that have fallen due under the Contract. Each makes a simple division for thepurposes of clauses 4·8 and 4·16 as between items that are subject to Retention, i.e. work materials and goods(excluding insurance repair items), and those additional amounts that are not subject to Retention; each thennets off any applicable deductions provided for in the Conditions that have been ascertained or fixed, excludingany that arise under clause 6·15.

114 Clause 4·15 sets out the pre-conditions for the inclusion of Listed Items in the valuation.

Retention (clauses 4·16 to 4·18)

115 Clause 4·16 sets out the fiduciary basis of retentions, coupled with the accounting requirements and theContractor s option (other than in Local Authority cases) of requiring a separate bank account for any retention.

116 Clause 4·17 then sets out the terms governing the alternative option of a Retention Bond, for which there is anappropriate entry in the Contract Particulars.

117 Clause 4·18 sets out the default percentage rates of retention and the periods applicable to them. Under Revision 2 there is a minor addition to the Contract Particular for alternative rates that allows also for thosecases where it is agreed there should be no retention.

118 Application of the rules in clauses 4·18·2 and 4·18·3 in conjunction with clauses 4·8 and 4·13 or 4·14 shouldresult in the release of one half of the Retention in the interim payment made on or immediately followingpractical completion and of the remaining half in the payment made upon issue of the Notice of Completion of Making Good.

Fluctuations (clause 4·19 and Schedule 7)

119 All three Fluctuations Options have been retained, without material amendment.

Loss and Expense (clauses 4·20 to 4·23)

120 Clause 4·20 expressly entitles the Contractor by written application to claim loss and expense that he incurseither as a result of any deferment of possession under clause 2·5 or (subject to express exclusions in theConditions) because the regular progress of the Works or any part of them has been or is likely to be materiallyaffected by any of the Relevant Matters.

121 The Relevant Matters are listed in clause 4·21. They include Changes, other than those where the value is

agreed under Supplemental Provision 4 (since loss and expense is to be included in the value). They alsoinclude instructions for postponement, expenditure of provisional sums, opening up or testing (except whererequired to be provided for or in cases of non-compliant work, etc.), or in relation to discrepancies or divergences; actions and instructions relating to antiquities; suspension under clause 4·11; unavoidableDevelopment Contract delays; and impediment, prevention or default on the part of the Employer or those for whom he is contractually responsible.

122 Loss and expense ascertained under clause 4·20 is added to the Contract Sum. The provisions do not affect anyother rights or remedies of the Contractor but in relation to claims under clause 4 ·20 he is obliged, in similar fashion to extension of time claims, to make his application as soon as the likelihood of an effect on progresshas become (or should have become) apparent and on request to supply such further information as isreasonably required.


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Section 5 Variations

123 The section is divided into two sub-sections, the first a General sub-section which includes at clause 5·1 thedefinition of Changes, and the second comprising the Valuation Rules.

General (clauses 5·1 to 5·3 and Schedule 2)

124 The clause 5·1 definition of Changes divides into two parts: the first, in clause 5·1·1, consists in alteration or

modification of the design, quality or quantity of the work; the second, the imposition or alteration of obligationsor restrictions affecting either access or time, method or order of working. (The Contractor s clause 3·5 right of reasonable objection, excusing immediate compliance with instructions, arises only in relation to the secondcategory.)

125 Clause 5·2, in addition to Changes, covers work which is to be treated as a Change and work under instructionsas to the expenditure of Provisional Sums. In each case the value may be pre-agreed by the Employer and theContractor, for which purpose they may use the estimates procedure under Supplemental Provision 4. If they donot agree the value, then, unless they agree on some other method of valuing the work, it is a matter for aValuation, i.e. a valuation by or on behalf of the Employer in accordance with the Valuation Rules. This appliesequally if the Contractor makes reasonable objection to producing estimates under Supplemental Provision 4 or if those estimates are not accepted, but the instruction stands.

The Valuation Rules (clauses 5·4 to 5·7)

126 Clause 5·4 (Measurable Work) requires the valuation of additional or substituted work to be on a basis consistentwith the Contract Sum Analysis (and of any omissions to be in accordance with that analysis), with appropriateallowance for adjustments in the amount of design work and site costs involved. (There are minor modificationsto the rules where Supplemental Provision 3 (Bills of Quantities) applies.

127 Clause 5·5 makes provision for valuing Daywork: the document setting out the Percentage Additions and any All-Inclusive Rates applicable should be identified in the new Contract Particular provided for that purpose.

128 Clause 5·6 makes consequential provision for any resultant changes in conditions under which other work,outside the direct scope of the instruction, is executed, with a safety-net provision at clause 5·7·1.

Section 6 Injury, Damage and Insurance (and Schedule 3 Insurance

Options)

129 The section takes the form of five sub-sections: Injury to Persons and Property; Insurance against PersonalInjury and Property Damage; Insurance of the Works; Professional Indemnity Insurance; and Joint Fire Code compliance.

130 In terms of the Works insurance, the three Insurance Options (A, B and C) are set out in Schedule 3.

Injury and property damage indemnity and insurance (clauses 6·1 to 6·6)

131 Clauses 6·1 and 6·2 set out the Contractor s liability for personal injury and for injury or damage to property,coupled with his indemnity to the Employer, subject to the clause 6 ·2 and clause 6·3 exclusions. As part of theoverall insurance scheme, clauses 6·2 and 6·3 exclude liability for loss or damage to the Works, executed workand Site Materials and, where Option C applies, liability for damage by any of the Specified Perils to the

Employer s existing structures/contents pri

54581531 Guide JCT 2005 Design Built REV 2009

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