JCT 2024: a closer look

The official launch of the JCT’s 2024 suite was held last week, focusing on the recently published Design and Build Contract, Sub-Contract and Guide. Updated contracts for the remainder of the suite are to follow over the course of this year. In this Law-Now, we take a detailed look at the new Design and Build Contract and the legal and market developments behind the changes made. We also explore the areas in which these developments have not been addressed.

Modernisation, collaboration and sustainability  

The JCT DB 2024 has given a firm nod to the Construction Playbook and calls for the industry to act in a more collaborative way by taking previously optional supplemental provisions and drawing them up into the contract articles and conditions.  Article 3 requires parties to work with each other and other team members in a co-operative and collaborative manner, in good faith and in a spirit of trust and respect, and to address non-collaborative behaviour.  It remains to be seen how such a duty will be interpreted, but one noteworthy difference with the NEC’s mutual trust and cooperation clause is that the JCT provision applies when the parties “work with each other and with other project team members”  whilst the NEC requirement applies when the parties “act as stated in this contract”. This difference potentially gives the NEC provision greater scope to qualify the other obligations under the contract (as was found by the Scottish Inner House in Van Oord UK Limited v Dragados UK Limited – for our Law-Now on that case please click here). There is also a requirement for senior personnel to meet to negotiate the resolution of disputes (in good faith again), although it is not a condition precedent to taking other steps in a dispute.

Another of the previously optional supplemental provisions dealing with sustainability and the environment has also been absorbed into the conditions, reflecting the importance of such issues in today’s world.  The purpose of the clause is to encourage a contractor to make suggestions for Changes which might improve environmental performance and sustainability, and also to provide the Employer with information on the environmental impact of the materials and goods in the Works.  There is no attempt, however, to introduce any environmental or climate change targets or KPIs.

Whilst the above provisions have been available to practitioners since 2016 (and indeed automatically included unless expressly disapplied), their inclusion in the articles and conditions brings them front and centre and reflects a shift in philosophy.

The JCT DB 2024 has also been busy modernising and future-proofing itself by switching to gender-neutral language throughout, providing guidance on electronic execution, and allowing for electronic communication (with an optional provision to allow for the “important” notices subject to clause 1.7.4 to also be served electronically).

Design and other liability

The Contractor’s design liability at clause 2.17.1 has been re-written to warrant the reasonable skill and care of a qualified and experienced architect (rather than “the same liability [as an architect or other professional designer] in respect of any inadequacy”), which is more in line with similar wording in professional designer appointments. 

Of more significance perhaps is clause 2.17.1.2 which limits, as far as possible by law, the Contractor’s design liability to that standard and makes clear that “under no circumstances” shall the Contractor have any fitness for purpose obligations.  On top of that, there is a new footnote in the JCT DB 2024 against the Contractor’s general obligations which suggests that parties might wish to consider an overall cap on the Contractor’s liabilities and directs users to the accompanying guide for a model clause.  This is in addition to the well-known design liability limit in clause 2.17.3 (although JCT recommends that be deleted if an overall cap is included), and is the first time that JCT has steered its users towards an overall liability cap.  These changes appear to be in response to perceived shifts in the domestic construction market.     

Time and money

The 2024 edition has brought in some changes to Relevant Events (for extensions of time) and Relevant Matters (for loss and expense).  These appear to be largely aimed at avoiding the problems that parties suffered during the Covid-19 pandemic by (i) introducing a specific Relevant Event and Relevant Matter for the effect of an epidemic, and (ii) a widened Relevant Event for changes in law, and an entirely new associated Relevant Matter, which goes as far as to capture “guidance” published by the government or even the Construction Leadership Council.  The inclusion of “guidance” may make sense in view of how Covid-19 was managed, but the market may consider it goes too far where such guidance is not legally binding. The broadly drafted provision will capture guidance issued in respect of both the higher-risk building work regime controlled by the Building Safety Regulator and the new Building Regulations dutyholder regulations which apply to all notifiable building work in England. While the publication of such guidance is a ground for more time, and possibly loss and expense, it is not a “Statutory Requirement” with which the Contractor is obliged to comply. 

It’s worth noting that the Relevant Matters referred to here are optional, to be applied or not in the contract particulars, apparently acknowledging that the general approach has tended to be that these sorts of events are a mutual risk and may attract time, but not money. They have also been repeated in clause 8.11, creating termination rights where works have been suspended for these events, so parties may want to think more about what is an appropriate period of suspension in that case.    

By an expansion of clause 3.15, a Contractor’s right to time and money for the discovery of antiquities and fossils has now been extended to include asbestos or contaminated material (unless it was identified by the Contract Documents or brought onto site by the Contractor) and unexploded ordnance, putting such ground conditions risk, a matter that can often be subject to negotiations, squarely onto the Employer.

Employers (and Employer’s Agents) should note the change to clause 2.25.2 allowing 8 weeks, instead of 12, for an extension of time assessment. Under the JCT DB Sub-contract 2024, this corresponding time limit has been reduced from 16 to 10 weeks.  Employers and main contractors should note that this will allow adjudications in relation to extension of time assessments to be brought earlier, as the response period acts as a buffer preventing the crystallisation of a dispute in the absence of any express rejection (see our Law-Now here for more information on this point).

Legislative changes and legal developments

JCT DB 2024 has made a few changes to deal with some legislative changes since its last incarnation, as well as some legal developments.  The definition of “Insolvent” in the termination provisions has been expanded to capture actions that may be taken under the Corporate Insolvency and Governance Act 2020; there are new mechanisms around the termination account to ensure that it is fully compliant with the Housing Grants Construction and Regeneration Act 1996; the extension of the Defective Premises Act 1972 to the refurbishment of dwellings is addressed in the design liability provisions; and recognising the Supreme Court’s decision in Triple Point Technology Inc v PTT Public Company Ltd, liquidated damages will stop running at termination if that happens before practical completion, and the Employer’s rights to general damages thereafter are preserved (for our Law-Now on the Triple Point decision, please click here).

Regular readers will have seen our publications on recent English and Scottish decisions that affect the interpretation of JCT contracts in the context of termination rights (see here) and the notification of loss and/or expense claims (see here)– the impact of these decisions will not be affected by the amendments in the JCT DB 2024. 

Despite the significant industry wide changes brought about by the Building Safety Act 2022, its extensive secondary legislation and guidelines, the JCT DB 2024 was not expected to offer extensive amendments in this regard. Indeed, the new contract form does even less than expected, particularly with regard to the new Building Regulations dutyholder roles and obligations for which there is minimal provision. The amending provisions are unhelpfully joined with the previous obligations under the CDM Regulations, with the terms Principal Designer and Principal Contractor under the different regulatory regimes used interchangeably unless specified. Amendment will be required in the event that the Contractor does not assume the respective principal dutyholder roles under both regulations. Notwithstanding use of the same names for the new dutyholder roles, their obligations arise under separate regulations with potentially very different consequences, including sanctions for non-compliance in the event of a statutory breach. The Contractor’s sub-contractors must also comply with the new dutyholder provisions under the Building Regulations.

The JCT DB 2024 default position, unless specified otherwise in the Contract Particulars, automatically allocates the Contractor as both Principal Designer and Principal Contractor under and for the purposes of both regulations. However, the Employer must assess competence to take on these different statutory roles on a case by case basis and comply with additional requirements under the Building Regulations in making this assessment in the case of higher-risk building work. In respect of these statutory appointments, the JCT DB 2024 Guide concedes: “Professional advice should be sought as to whether this is appropriate in any given project”. There will be instances where the Contractor may not have the necessary competence for the Building Regulations Principal Designer role, in particular. Notably, failure to comply with these varied duties under the CDM Regulations, and now also under Part 2A of the Building Regulations, may constitute grounds for termination for either party.

No specific obligations under the new dutyholder provisions are addressed, save that the Employer (as ‘client’ dutyholder) must provide “building information”, as broadly defined in the Building Regulations, to the Contractor immediately after execution of the Contract. This is information in the Employer’s possession (or reasonably obtainable by it or on its behalf) which is relevant to the building or design work, including about project planning and management and issues relating to compliance with relevant Building Regulations. The regulations require the Employer to provide this information to every “designer” and “contractor” on the project as soon as practicable. Arguably, in the case of a design and construct Contractor, provision could have been made for this obligation, and certain other obligations imposed on the Employer under the new dutyholder regulations, to be contractually delegated to the Contractor to fulfil. Both parties are likely to expect new dutyholder related amendments to the contract, such as warranties in respect of the Contractor’s competence and capability to undertake its dutyholder roles.

Amendments will inevitably be required to the JCT DB 2024 in relation to higher-risk building work. It is perhaps understandable that the JCT drafting committee did not make special provision for such works, particularly with little industry experience of the new Building Safety Regulator and higher-risk building regime. It remains to be seen the manner and extent to which the parties will be willing to apportion the risk of time and cost consequences of ‘neutral’ delays occasioned by the Regulator’s assessment of the new gateways and change control requirements during the course of higher-risk building work. Provision must also be made for mandatory occurrence reporting, the golden thread of information, completion requirements to ensure occupation with minimal delay, and those other matters which are primarily in the Contractor’s control or are consequent on the carrying out of the work.  

Other practicalities

Other updates appear to have been included to reflect changes in the market. The PII levels in the contract particulars no longer refer just to sub-limits on pollution and contamination, but anticipate that there might be other sub-limits or exclusions, for example the fire and cladding limits that are becoming ever more common; the Contractor must maintain PII if available at both commercially reasonable rates and “terms”, with similar amendments made in the Third Party Rights Schedules;  sub-contract terms no longer require that sub-contracts terminate automatically on contract termination, but allow for step-in provisions in collateral warranties to be operated; and “Statutory Undertakers” have been replaced by “Statutory Providers” to acknowledge the privatisation in the market.

It is intended that the Scottish versions of these contracts will be published by the Scottish Building Contracts Committee (SBCC).

Future releases

As mentioned at the recent JCT DB 2024 launch event, the JCT have confirmed that the JCT Minor Works suite will be the next 2024 update to be released. It will be published on 15 May 2024, with the remainer of the 2024 contracts to be made available on a rolling basis throughout the year. The new JCT Target Cost suite was also discussed at the launch event. It will be based on the Design & Build Contract and is an eagerly awaited alternative and possibly rival to NEC’s popular Target Cost form which currently dominates the market.

Conclusion

Save for a few key changes, including in relation to the extension of Relevant Matters and design liability issues, there are generally less amendments made to the JCT DB 2024 than might have been expected. There is no steer in respect of the significant building regime changes in England, but it is helpful that some key legal and market developments have been addressed.

References:

Triple Point Technology, Inc v PTT Public Company Ltd [2021] UKSC 29 

Van Oord UK Limited v Dragados UK Limited [2021] CSIH 50