JCT 2024 – What is new and what is missing? from Clarion Solicitors

One of the major changes expected was the potential introduction of the provisions which dealt with the obligations imposed by the Building Safety Act 2022 (“BSA”).

The JCT 2024 has recognised the dutyholder regime introduced by the BSA which applies to all projects to which the Building Regulations 2010 apply by incorporating obligations on the parties to comply with their duties under the BSA.

These provisions include:

• The inclusion of an Article where the details of the Principal Designer and the Principal Contractor for the purpose of the BSA dutyholder regime are to be set out.
• An obligation on the Employer to provide the Contractor with building information (being the information held or obtainable by the Employer that is relevant to the design or construction of the project) as required by the BSA.
• A general obligation on both parties to comply with their respective duties as dutyholders. Failure to comply with these obligations will entitle the innocent party to terminate the contract.

For further details on the roles of duty-holders please see our blog on Building Safety Act: Duties of a Duty Holder – Client, Principal Designer or Principal Contractor.

Otherwise, not much else has been added to the JCT 2024 in relation to the BSA. This has been acknowledged by the JCT who have confirmed that “JCT has not included contract terms that cover the regulatory regime applicable to HRBs’. As a result, where works are being undertaken that relate to a Higher Risk Building, the Schedule of Amendments will need to include provisions which consider the new approval regime, the Golden Thread, the competency of the Contractor as the Principal Designer and/or Principal Contractor and Mandatory Occurrence Reporting.

For further details on the new approval regime please see our blogs on the BSA: New Gateway Regime – Completion Certificates.

In respect of the Contractor’s design liability, the JCT 2024 includes a provision which requires the Contractor to carry out the design with the reasonable care and skill of a qualified Architect or other relevant designer.

It also, to the extent permitted by statutory requirements, sets out that the Contractor will have no greater duty that to exercise reasonable skill and care and will not be subject to a fitness for purpose obligation.

This amendment has likely been introduced as a result of cases such as Højgaard [2017] UKSC 59 where the Court concluded that a fitness for purpose obligation which required the Contractor to construction foundations that would last for 20 years which were set out in the technical documentation and formed part of the Contract Documents resulted in the contractor being under a contractual duty to ensure that the works were designed to last for the specified design life period. This was despite there being an obligation on the Contractor to exercise reasonable skill and care in providing the design. Until this case it was thought that the reasonable skill provision tempered all of the Contractor’s obligations. As a result, provisions which ensured that any fitness for purpose obligations included in the technical documents would not bind the Contract were often drafted into the Schedule of Amendments.

The above mentioned provisions in relation to the Contractor’s design liability are stated to be subject to the Contractor’s liability under the Defective Premises Act. This being the requirement on the Contractor to ensure that, when carrying out work in relation to the provision of a dwelling or works to an existing dwelling, that the dwelling is fit for habitation meaning that the dwelling must be capable on completion of the works of being occupied for a reasonable time without risk to the health or safety of the occupants and without undue inconvenience of discomfort to the occupants.

Notwithstanding this, it is notable that the JCT 2024 does not seek to extend the liability period in which claims may be brought under the contract or the period which the Contractor is required to maintain PI insurance to mirror the extended potential liability under the Defective Premises Act 1972 which was extended from 6 years to 15 years for prospective claims by the BSA. This may be as a result of insurers not currently providing 15 year PI policies. However we suggest that queries are put to the insurers as to the availability of 15 year PI policies before entering into a Contract. In the event that insurers are providing 15 year PI policies, we suggest that the liability period and PI insurance period is amended to 15 years to mirror the period within which a claim may be brought against the Contractor under the terms of the Defective Premises Act 1972.

For further details on the changes to the Defective Premises Act 1972 please see our blog on Building Safety Act 2022 – changes to the Defective Premises Act 1972.

Although the JCT 2016 was silent with regards to ground condition risk other than in the relation to the discovery of antiques which resulted in the risk of unforeseen ground conditions remaining with the Contractor was imposed, the JCT 2024 has extended this to the discovery of asbestos, contaminated material and unexploded ordinances.

As a result, the discovery of asbestos, contaminated material or unexploded ordinances are listed as a Relevant Event and a Relevant Matter which may entitle the Contractor to an extension of time and/or loss and expense.

We would recommend that the JCT 2024 is amended so that the liability for ground conditions is allocated to the party best able to deal with this.

A new Article (Article 3) has been added which requires the parties to collaborate with each other. Previously, under the JCT 2016 D&B the collaborative working obligation was included as an optional supplemental provision. The wording used in the JCT 2024 D&B is identical to the wording used in the supplemental provision to the JCT D&B 2016.

Supplemental Provision 8 to the JCT 2016 D&B being ‘Sustainable development and environmental considerations’ has been moved to the main body of the JCT 2024 with the wording only slightly being widened to cover sustainability and reduced environmental impact as well as environmental performance.

Similarly, the notification and negotiation of disputes provision in the supplemental provisions in the has been moved to clause 9.1 in the JCT 2024 meaning that there is a greater emphasis on the parties to seek to negotiate and settle disputes.

The significance of moving these provisions to the main body of the Contract should not be disregarded. These impose obligations which will have an impact on how the works are carried out and on how disputes are resolved.

It is worth noting that there is no common law obligation on parties to work collaboratively or in good faith with each other. So this obligation which mirrors similar provisions in the NEC Contracts imposes a new obligation on the parties.

• The JCT 2016 requires that any subcontracts entered into by the Contractor contain provisions which ensure that the automatic termination of the subcontract following the termination of the main contract is subject to any step in rights that may exist in favour of the Employer or a Funder. The subcontract must entitle the subcontractor to suspend performance of the subcontract works upon termination of the main contract whilst it waits to see whether a step in notice is served. If no such notice is served then the subcontract terminates.
• The liquidated damages (LDs) for delay to the Works provisions have been updated to clarify the position regarding the Employer’s ability to levy LDs if the Contractor’s engagement under the contract is terminated.
• Additions to the list of Relevant Events and Relevant Matters to include the impact of an epidemic on the Works and the widening of the Relevant Event and Relevant Matter in relation to the Government exercising its statutory powers to include ‘the publication of any guidance’ by the UK Government, Local Authorities and also the Construction Leadership Council both of which have been included as a result of the COVID-19 pandemic.

The JCT 2024 does not depart in form or dramatically in terms of substance from the JCT 2016 and represents more of a light modernisation of the Design and Build Contract.

Parties will need to ensure that risks are properly considered during the drafting and negotiation of the Contract.

These risks include:

• The duties and responsibilities under the Building Safety Act.
• Ground Conditions not already covered by the JCT 2016.
• The standard of care owed by the Contractor.
• The liability period under the Contract.
• The length of time that the Contractor is required to maintain PI insurance.

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