Guide - JCT 2005 Design & Built

DB_G_rev 2:S&M 432 JCT Design&Build(Sp)

22/04/2009

14:57

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Design and Build Contract Guide

Revision 2009


2005

DB/G

Revision 2009

Members British Property Federation Limited Construction Confederation Local Government Association National Specialist Contractors Council Limited Royal Institute of British Architects The Royal Institution of Chartered Surveyors Scottish Building Contract Committee Limited All parties must rely exclusively upon their own skill and judgment or upon those of their advisers when using this document and neither Sweet & Maxwell, Thomson Reuters (Legal) Limited nor its associated companies assume any liability to any user or any third party in connection with such use.

Design and Build Contract

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 professional advice.

Published by Thomson Reuters (Legal) Limited (Registered in England & Wales, Company No 1679046) trading as Sweet & Maxwell 100 Avenue Road, London, NW3 3PF First published September 2005 Revision 2009 published May 2009

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except in accordance with the provisions of the Copyright, Designs and Patents Act 1988, without the prior written permission of the publisher. 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

Terrorism Cover Update Issued December 2009 JCT’s Works insurance provisions have been updated in relation to Terrorism Cover and the Contractor’s liability for loss or damage 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 Building Contract 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, Management Building Contract, Prime Cost Building Contract and Intermediate Building Contract. In the case of the Measured Term Contract, similar amendments may also be appropriate.

Clause number and heading

Action

Contract Particulars, 6·10 and Schedule 3 ‘6·10 and Schedule 3

Insert new entry: Terrorism Cover – details of the required cover (State reference numbers and dates or other identifiers of documents setting out the requirements. 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 Joint Contracts Tribunal Limited

the risks comprise: (a)

ionising radiations or contamination by radioactivity from any nuclear fuel or from any nuclear waste from the combustion of nuclear fuel, radioactive toxic explosive or other hazardous properties of any explosive nuclear assembly or nuclear component thereof (other than such risk insofar, but only insofar, as it is included in the Terrorism Cover from time to time required to be taken out and maintained under this Contract);,

(b)

pressure waves caused by aircraft or other aerial devices travelling at sonic or supersonic speeds; and

(c)

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

Terrorism Cover Update, December 2009

Page 1


Action

Clause 6·8, Pool Re Cover

Insert as an additional defined term:

‘Pool Re Cover:

Clause 6·8, Terrorism Cover

such insurance against loss or damage to work executed and Site Materials caused by or resulting from terrorism as is from time to time generally available from insurers who are members of the Pool Reinsurance Company Limited scheme or of any similar successor scheme.’

Amend the existing definition by deletion of the words crossed through and insertion of the words underlined: ‘Terrorism Cover:

New Clause 6·10

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

Insert as clause 6·10 the following new clause:

‘Terrorism Cover – policy extensions and premiums 6·10

Clause 6·10

·1

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

·2

Where Insurance Option A applies and the Contractor is required to take out and maintain Pool Re Cover, the cost of that cover and its renewal shall be deemed to be included in the Contract Sum save that, if at any renewal of the cover there is a variation in the rate on which the premium is based, the Contract Sum shall be adjusted by the net amount of the difference between the premium paid by the Contractor and the premium that would have been paid but for the change in rate.

·3

Where Insurance Option A applies and Terrorism Cover other than Pool Re Cover is specified as 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 of the Terrorism Cover (of any type) there is an increase in the rate on which the premium is based, he may instruct the Contractor not to renew the Terrorism Cover. If he so instructs, the provisions of clauses 6·11·5·1 and 6·11·5·2 shall apply with effect from the renewal date.’

Renumber existing clause 6·10 as clause 6·11 and amend the re-numbered clause by deletion of the 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 a specified date (the 'cessation date'), Terrorism Cover will cease and will no longer be available or 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 notice to the Contractor either: ·1

that, notwithstanding the cessation or reduction in scope or level of Terrorism Cover, the Employer 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 of the insurers' notification but no later than the cessation date) the Contractor’s employment under this Contract shall terminate.



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Action

·3

Where Insurance Option A applies and the Employer gives notice under clause 6·11·2·1 requiring continuation of the Works, he may instruct the Contractor to effect and maintain any alternative 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 to the Contract Sum.

·43

If the Employer gives notice of termination under clause 6·1110·2·2, then upon and from such termination the provisions of clauses 8·12·2 to 8·12·5 (excluding clause 8·12·3·5) shall apply and, notwithstanding any the other provisions of this Contract, no further sum shall become due to the Contractor other than the amounts referred to in clauses 8·12·3·1 to 8·12·3·4 which require 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 by terrorism, the Contractor shall with due diligence restore the damaged work, replace or repair any lost or damaged Site Materials, remove and dispose of any debris and proceed with the carrying out of the Works;

·2

the restoration, replacement or repair of such loss or damage and (when required) the removal and disposal of debris shall be treated as a Variation, without deduction of Retention 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 subcontractor which may have contributed to the physical loss or damage; and

·3

(where Insurance Option C applies) the requirement that the Works continue to be carried out shall not be affected by any loss or damage to the existing structures and/or their contents caused by terrorism but not so as thereby to impose any obligation on the Employer to reinstate the existing structures or affect the rights of either Party under paragraph 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 6·14


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 6·16


Clause 8·12


Schedule 3, paragraph A·4·2


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




Page 3

Guidance Notes to the Terrorism Cover Update JCT has previously highlighted through contract footnotes and guides certain possible issues regarding the extent of Terrorism Cover 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 the Works 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 to the extent that it fell outside Pool Re or other terrorism cover that he ‘bought back’, whether by way of an extension to his CAR or 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 the Reinsurance (Acts of Terrorism) Act 1993 (‘the 1993 Act’), since insurers’ original exclusions of terrorism risk and Pool Re cover were both based on that Act’s definition of terrorism. The gap between exclusion and cover arose after the passing of the Terrorism Act 2000 (‘the 2000 Act’). In the 2000 Act, terrorism was defined as including not only acts connected to organisations with activities directed towards overthrowing or influencing any government by force or violence (the 1993 Act definition) but also acts of individuals (alone or on behalf of any organisation) committed for political, religious, ideological or similar purposes, not only where directed towards the overthrow or influencing of governments but also any intended to put any section of the public in fear. Adoption of the wider definition by insurers enlarged their standard terrorism exclusion beyond the 1993 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 biological damage in commercial cases and also normally requires an extension for nuclear risks. The JCT has therefore agreed that both the Contractor’s liability (where Insurance Option A applies) and, for each Insurance Option, the contractual obligation of the relevant Party to obtain Terrorism Cover should be limited to the risks insured by Pool Re or by such other insurance cover as is 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 clause 6·8 definition of Excepted Risks, which operates through the clause 6·6 exclusion of Contractor’s liability for those risks and also 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 be included in the Contract Sum as tendered (clause 6·10·2), subject to adjustment for changes in renewal costs. Where Terrorism Cover 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 6·10·4 incorporate 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’s consequent option to terminate. However, it also now extends the provision to cover any reduction in the scope or level of cover by insurers and contains an option for the Employer, where the Contractor is responsible for Works Insurance, to require him to switch 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 of a 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 advisers prior 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 be initialled 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 – incorporation The Conditions shall have effect as modified by the amendments in the attached Terrorism Cover Update.” * Allocate the next available Article number.



Page 4

Contents Introduction

Page 1

General Revision 1 Revision 2 Format Risk allocation Content of the Guide

New Supplemental Provisions

3

Articles of Agreement

6

Recitals

6

Articles

6

Contract Particulars

6

Attestation

7

Conditions

9

Section 1 – Definitions and Interpretation

9

Definitions (clause 1·1) Interpretation (clauses 1·2 to 1·10) Section 2 – Carrying out the Works

9

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 Design Submission 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

13

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)

14

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)

© The Joint Contracts Tribunal Limited 2009

DB/G (2009) Page i

Section 5 – Variations

16

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)

16

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)

19

Section 8 – Termination

20

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

21

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

Appendix A – Amendment 1 (DB)

23

Appendix B – Revision 2 changes

27

Appendix C – DB User Checklist

29

Appendix D – Related Publications

35

Page ii DB/G (2009)


Introduction General 1

This edition of the Guide to the 2005 edition of the Design and Build Contract (DB 2005) is being issued contemporaneously 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 where the Contractor is not only to carry out the works, but also to complete the design for them in accordance with those requirements. It retains the provisions designed to meet the needs of both the Private and Local Authority sectors 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; that agent 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 the Construction (Design and Management) Regulations 2007; it also reflected the publication of the JCT SubContractor Collateral Warranty for Employer (SCWa/E) and made certain other minor updates and corrections. A copy 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 the traditional 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 Retention Bond option and a minor modification of the provisions relating to payment applications after practical completion; and (c) to recognise the increasing importance of sustainability.

6

The additional provisions relating to AEC principles are: Acceleration Collaborative working Health and safety Cost savings and value improvements Sustainable development and environmental considerations Performance Indicators and monitoring, and Notification and negotiation of disputes.

7

Revision 2 also makes certain textual refinements. These include wider usage of defined terms, a consolidated notices and communications provision at clause 1·7, which helps to simplify the text generally, and more detailed particulars 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 have been 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 been included as Part 2 of Schedule 2 (Supplemental Provisions), alongside the existing provisions (now Part 1). The standard form of Retention Bond has been included as Part 3 of Schedule 6. The format therefore remains substantially unchanged.


DB/G (2009) Page 1

Risk allocation 10

In JCT’s 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 avoidable risk; most of the related provisions are in substance a statement and reflection of good management practice that is already common in many sectors. Similarly, none of the ancillary changes affects the status quo in terms of risk. Of the deletions mentioned, the substance of clause 1·8 (Electronic communications) is included in clause 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 the minor 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 indicates the principal drafting and other ancillary Revision 2 amendments and deals with the Schedules (including existing Supplemental Provisions) in conjunction with the sections or sub-sections to which they most closely relate. 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 the information and decisions on options that are required to complete the DB 2005 contract form; Appendix D lists the other JCT documents that comprise the DB 2005 suite of documents or that can readily be used in conjunction with the Contract.

Page 2 DB/G (2009)


New Supplemental Provisions

13

AEC or similar principles are already incorporated in the JCT Framework Agreement. The intention of Revision 2 is to incorporate those principles into DB 2005 either where there is no applicable framework or framework provision, or where there is no other contractual coverage of the particular issue. As indicated above, the provisions that give effect to those principles are now set out in Part 2 of Schedule 2, alongside the existing Supplemental 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 be noted that in these cases the headings have now been abbreviated, but they remain substantially in their original form.)

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 governing Contractor’s value engineering suggestions, general sustainable development and environmental provisions, a provision 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 the Seventh 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 Schedule 2. The existing Supplemental Provisions apply only where they are stated to apply, but the new Supplemental Provisions apply unless stated not to apply; they are generally intended to be disapplied only where there is a Framework 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 contract conditions; 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 this case it is not combined with the Variation Quotation procedure, for which there is an existing Supplemental Provision 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 any time 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 with the Statutory Requirements (clause 2·1). This by definition covers Health and Safety legislation. The Contract also makes specific provision with respect to CDM Regulations (clauses 3·16 and 3·17). This Supplemental Provision (at paragraph 8·2·1 in Part 2 of Schedule 2) adds an obligation to comply with non-statutory HSE and HSC approved codes, which is clearly good practice, and, as a useful complement to the existing DB 2005 clauses, 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 they should receive a fair share of the benefit for doing so. When making suggestions, however, care should be taken about 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 the Employer, assisted by the Contractor and relevant specialists as well as his consultant team, is able to derive the greatest benefit from value-engineering exercises. It is to cover that earlier period that the JCT has recently


DB/G (2009) Page 3

produced its two Pre-Construction Services Agreements, PCSA (between Employer and Main Contractor) and PCSA/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, the Contractor will wish to be paid his share of the benefits before Final Statement, while on the other hand it may be difficult 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 covering such a wide field of possible benefits. Adjustments also have to be made for the value/cost of the additional work involved 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 to implement them conditional upon those terms being agreed. As there is no standard approach, there is no entry in 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, as indicated above and by the paragraph 9·3 reference to negotiations, there may then be several other interrelated matters 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 9·2 reference 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 has historically 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 these matters are principally matters for the client and his professional team which generally fall to be made during the pre-construction period; the Contractor’s obligations to comply with the Employer’s Requirements and instructions, 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, the JCT, which has taken and continues to take an active role in establishing common ground on contractual provisions, 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 between Employer and Contractor where there is benchmarking of performance against competitors as part of contractallocation or other incentive arrangements. However, those indicators may also perform a valuable role in individual 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 the Preliminaries, that performance should be regularly and properly monitored and that assessments should be made strictly in accordance with the indicators/targets. Notification and negotiation of disputes

[1]

32

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

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 a dispute to adjudication, so that there cannot in construction contracts (within the meaning of the Act) be any prescribed period of delay in respect of any reference to adjudication.

The Housing Grants, Construction and Regeneration Act 1996

Page 4 DB/G (2009)


34

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


DB/G (2009) Page 5

Articles of Agreement 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 General particulars 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 Seventh Recitals (Framework Agreement and Supplemental Provisions). Entries are provided against the references to them 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 Sections is dealt with by the Contract Particulars for the Fifth Recital and the identifiers of the documents comprising the Employer’s Requirements, the Contractor’s Proposals and the Contract Sum Analysis are for insertion against the 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 the documents that are to comprise the Employer’s Requirements and Contractor’s Proposals respectively and the need for consistency between them. Last minute changes are often inevitable but the constituent documents need to be checked before execution; the fact that identifiers are not always changed to reflect a change in the relevant 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 1 change 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 relevant contractual 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 is used 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 the contract occupies, or intends to occupy, as his or her residence). Part 2 of that Act does not apply to contracts with residential occupiers, so that any Employer who is a residential occupier should take advice on the point, in particular 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 to agree 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 extended entries or groups of entries and the deletion of one existing entry; in the case of Part 2, they consist of a few minor deletions only. Part 1

44

[2]

In Part 1, an entry has been included for the Sixth Recital (Framework Agreement) and the Supplemental Provisions entries are now by reference to the Seventh Recital. The entries for the existing Supplemental Provisions (those in Part 1 of Schedule 2) have been expanded to allow for the selection of each of those provisions separately; previously it was envisaged that all or only the first of those provisions (Site Manager) Fiona Trust v. Privalov [2007] UKHL 40

Page 6 DB/G (2009)


would apply. In contrast to those entries, the default position for each of the new Supplemental Provisions is that it applies unless otherwise stated. Where there is no Framework Agreement or contractual provision that overlaps with any of the Supplemental Provisions, no entry need be made. If there is an overlap either through an 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. In the 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 certain cases, is intended to be within the overall policy, not as separate insurances in their own right, and cover levels are intended to be sub-limits of the general level of cover. (Where there is fungal mould cover, it is understood that 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 required details of Third Party Rights or Collateral Warranties might for convenience be set out in a separate identified document (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 Particulars themselves. That is considered desirable not least because the Design and Build Sub-Contract is predicated upon these (Main) Contract Particulars being made available in substantially completed form for sub-contract tendering 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 are sub-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 the purpose of third party rights or warranty requirements, or if in hard copy cases inclusion of those details is physically difficult, an appropriate entry can still be made in the Tables at (A) and (E) stating that the required particulars 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 and sub-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 retains separate 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 through signature by a single director signing in the presence of an attesting witness. Different attestation provisions are still required under the law of Scotland (for which the Scottish Building Contract Committee Limited issues Scottish contract forms); other attestation clauses may also be needed in the case of certain housing associations, 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 the limitation 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 mode of execution of collateral warranties (clause 7·4) and (for both third party rights and collateral warranties) the limitation 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.


DB/G (2009) Page 7

53

Under the Companies Act 1989, as applied by the Foreign Companies (Execution of Documents) Regulations 1994 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 to sign 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 be given 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.

Page 8 DB/G (2009)


Conditions 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 primarily comprise 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 crossreferences. The Joint Fire Code definition, as a corollary of the point reinforced in clause 6·14, now takes the Base Date as its starting point; it has also been abbreviated. For consistency and brevity, the term ‘Site Materials’, 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 extended clause 1·7 (Notices and other communications), coupled with the deletion of the existing clause 1·8 (Electronic communications), 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 in writing. This simplifies the text of the Conditions and now applies across the range of JCT contracts and subcontracts, apart from the Minor Works Building Contracts and the other, shorter contracts and sub-contracts that contain few express notification procedures.

59

Clause 1·7·4 retains a formal hand delivery/Recorded Signed for or Special Delivery post requirement for key notices, e.g. those relating to defaults/termination and third party rights/collateral warranties. (Reference to hand delivery 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 Parties are 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 prevent the 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 the flow 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 should be noted that Revision 2 has eliminated several traditional references to numbers of copies to be supplied, so that a protocol may be useful in this area also, particularly if any wider direct distribution of hard copy documents is required.

62

There are two other minor changes in the Interpretation sub-section. The first, at clause 1·3, reflects the overriding nature of the building contract, which is recognised in the JCT Framework Agreement and also by many 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 the construction process, starting with the Contractor’s basic obligations with respect to the carrying out and completion 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 carried out in a proper and workmanlike manner and in compliance not only with the Contract Documents but also with the 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 already been established by the Employer’s Requirements or Contractor’s Proposals. In addition, the Contractor is to


DB/G (2009) Page 9

give all necessary notices under the Statutory Requirements, e.g. those under building regulations, those to the local 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 liability to the Employer in relation to the Statutory Requirements, but does not of course affect his position and duty under general law.) Clause 2·1·4 then sets out the Contractor’s duty of compliance with the Employer’s instructions 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 reserve that 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. This covers 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 (The Contractor is entitled to recover any loss and/or expense arising from a permitted deferral; deferral where the 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 out other work on site where the requirement has been sufficiently described in the Contract Documents, and not unreasonably to withhold or delay his consent to such work being carried out even where sufficient information 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 from partial possession being retaken by the Employer under clause 2·30; the latter is treated as practical completion of 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, that should generally be excluded from the site for these purposes; its use (and any necessary insurance arrangements) should be the subject of a separate arrangement.) Supply of Documents, Setting Out etc. (clauses 2·7 to 2·9 and Schedule 1 (Contractor’s Design Submission 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 and when 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 is extremely important that the Contractor should not undertake work to which particular designs relate until he has complied fully with the procedure. If he fails to do so, he risks not being paid for the work in question (see paragraph 6 of Schedule 1).

69

Clause 2·9 makes the Employer responsible for defining site boundaries: the consequences of a divergence in that 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 divergences discovered in Contract Documents, Contractor’s Design Documents and instructions, either in or between themselves or in relation to the Statutory Requirements, and the cost of remedial action. The Employer is required 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 the document in question. If there are inadequacies in the Employer’s Requirements (or in designs contained in them) which are not dealt with in the Contractor’s Proposals or a divergence between those requirements and the definition of site boundaries, the Employer is responsible for the cost of the necessary Change; the Contractor is responsible for errors, discrepancies and divergences in the Contractor’s Proposals, in his Contract Sum Analysis and in the Contractor’s Design Documents. Under clause 2·15·2·2, the Contractor may also be required to allow for amendment to the Contractor’s Proposals necessitated by Development Control decisions.

Page 10 DB/G (2009)


72

The exceptions arise in relation to divergences from the Statutory Requirements. The first, under clause 2·15, is that the Contractor is responsible for checking that the Employer’s Requirements and any instructions conform to the 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 the Employer’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 change necessitates an alteration to the Works, or

•

if an amendment to the Contractor’s Proposals is necessitated by the terms of any Development Control permission 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 to comply 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 professional designer employed by the Employer. There is, under clause 2·17·3, an optional provision for an overall cap on liability for loss of use, loss of profits and other consequential loss arising from any inadequacy in the Contractor’s design work: this does not limit or affect liability for direct loss, including the cost of remedial work or, 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 the Contractor and are his liability unless they are stated by way of a Provisional Sum in the Employer’s Requirements, 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. Such cases are rare; if there is any question as to whether a requirement may involve use or infringement of third party patent or other intellectual property rights, the matter should be raised with the Employer before entry into the 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 payment to the Contractor and the concomitant restriction on removal from site. This in practice is a matter which in a majority of cases involves sub-contractors, so that the flow-down of these conditions required by clause 3·4·2 is generally 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 is a Pre-agreed Adjustment within clause 2·23·2, i.e. agreement on an extension of time under Supplemental Provision 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 apparent that it is likely to be delayed, and also that it arises in relation to any cause of delay or likely delay. The obligation is not restricted merely to Relevant Events (i.e. those listed in clause 2·26) that entitle the Contractor to an extension 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) and thereafter 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 from clause 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 clause 2·25·1, 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 should reach 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


DB/G (2009) Page 11

he can exercise the latter power only where there has already been an extension of the original Completion Date, either through an earlier decision or by a Pre-agreed Adjustment, and cannot do so in such a way as to affect 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 be earlier 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 also the 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 been specifically notified under clause 2·24·1 and has power to do what he considers fair and reasonable, either by fixing 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 the Works, sometimes in a short space of time and without a full knowledge of the facts and effects of the various possible causes of delay, inevitably risk giving rise to precisely the expensive and wasteful disputes that AEC principles 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 Completion Statement 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 time as 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 practical completion by the relevant Completion Date (clause 2·28). In the event of such failure, liquidated damages will become payable or deductible on notice from the Employer in accordance with clause 2·29·2 provided both that a 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 repayment within 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 should note 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 to insurance, 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 2·31 to 2·34, i.e. deemed practical completion of the relevant parts, commencement of the Rectification Period in respect of them, followed by a separate 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, where use and occupation will not impede the Contractor in managing the site and his completion of the Works as a whole, 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 suspected defects and faults arising during the progress of the Works: this sub-section gives him power to specify and require remedial action in respect of defects and faults arising in the Rectification Period. This power is exercisable 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 than 14 days after the expiry of the Rectification Period. It should be noted that, when given, the schedule of defects should 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.

Page 12 DB/G (2009)


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 Interim Payment 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 a pre-condition to issuance of the Practical Completion Statement or a Section Completion Statement and the subsection then sets out the terms and conditions relating to the Employer’s licence to use Contractor’s Design Documents 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 upon the 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 CDM Regulations. 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 requires reasonable 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 also required 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 is intended 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 Site meetings 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 the Works or their design, though it is not to be unreasonably delayed or withheld (clause 3·3). The giving of consent by 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 to require that work be carried only by a sub-contractor named in the Employer’s Requirements but does not give him 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 the Contractor to be responsible for completing that work, the Contractor’s choice of sub-contractor is subject to his approval, 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 may select his sub-contractor but even where the Employer’s pre-named specialist is acceptable to the Contractor, it is desirable that there should also be the measure of agreement between the Parties as to possible alternatives of 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 be entered 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 JCT continues 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 termination of the sub-contractor’s employment upon termination of the Contractor’s employment and sub-contract provisions that are compatible with the main contract with respect to vesting and control of Site Materials, access to workshops, CDM Regulations, interest on late payments and execution of sub-contractors’ collateral warranties. 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


DB/G (2009) Page 13

Employer gives oral instructions or if there is in the Contractor’s view doubt as to the Employer’s power to issue the 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. The first of those applies where the instructions relate to a Variation within clause 5·1·2 (i.e. one that relates to site access, imposes any limitation on working space or hours or affects the order of working) and operates if the Contractor 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 and for 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. Provision for instructions to resolve discrepancies and divergences and those relating to defects have already been made in 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 and postponement, the duty to give instructions on Provisional Sums, the powers in relation to opening up and testing, 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 clause 3·12 for opening up and testing to establish whether there is more extensive non-compliance, is required by clause 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 duties under the regulations. They highlight certain of those duties, e.g. the Principal Contractor’s obligations with regard 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 the Employer.

106

Further details of the 2007 Regulations and consequent Revision 1 amendments are contained in Appendix A to this Guide. As previously mentioned, general Health and Safety considerations are now further amplified by Supplemental 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 a Retention Bond has been added as clause 4·17 and loss and expense relating to Antiquities added as a Relevant Matter at clause 4·21·3. The form of the Retention Bond is set out in Schedule 6, along with those relating to Advance Payment and Listed Items. Employer’s approval of the proposed surety for each bond required 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 the various adjustments that are provided for and clause 4·3 provides for the amount of each adjustment, when ascertained, to be reflected in the next Interim Payment. This is intended to apply both to monthly payments and to 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 an advance payment and bond, clause 4·7 provides for Interim Payments to be calculated in accordance with whichever method of Gross Valuation applies – Alternative A, set out in clause 4·13, which relates to stage payments or Alternative B (clause 4·14) which relates to monthly payments and clause 4·8 sets out the deductions 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 also reflected in the DB Sub-Contract.)

Page 14 DB/G (2009)


111

Clause 4·10 provides that the final date for an Interim Payment is 14 days from receipt of the application and then makes express provision for the issue of payment notices and withholding notices that mirrors sections 110 and 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 the Employer 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 Making Good), the Statement then becomes conclusive as to the final balance. Subject to the provisions of clause 1·8, it also 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 straightforward basis for calculating amounts that have fallen due under the Contract. Each makes a simple division for the purposes 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 then nets off any applicable deductions provided for in the Conditions that have been ascertained or fixed, excluding any 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 the Contractor’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 an appropriate 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 those cases 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 should result in the release of one half of the Retention in the interim payment made on or immediately following practical 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 incurs either as a result of any deferment of possession under clause 2·5 or (subject to express exclusions in the Conditions) because the regular progress of the Works or any part of them has been or is likely to be materially affected 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 also include instructions for postponement, expenditure of provisional sums, opening up or testing (except where required 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; unavoidable Development 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 any other 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 progress has become (or should have become) apparent and on request to supply such further information as is reasonably required.


DB/G (2009) Page 15

Section 5 – Variations 123

The section is divided into two sub-sections, the first a General sub-section which includes at clause 5·1 the definition 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 obligations or 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 second category.)

125

Clause 5·2, in addition to Changes, covers work which is to be treated as a Change and work under instructions as to the expenditure of Provisional Sums. In each case the value may be pre-agreed by the Employer and the Contractor, for which purpose they may use the estimates procedure under Supplemental Provision 4. If they do not agree the value, then, unless they agree on some other method of valuing the work, it is a matter for a Valuation, i.e. a valuation by or on behalf of the Employer in accordance with the Valuation Rules. This applies equally 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 consistent with the Contract Sum Analysis (and of any omissions to be in accordance with that analysis), with appropriate allowance for adjustments in the amount of design work and site costs involved. (There are minor modifications to 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 AllInclusive 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 Personal Injury 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 the overall insurance scheme, clauses 6·2 and 6·3 exclude liability for loss or damage to the Works, executed work and Site Materials and, where Option C applies, liability for damage by any of the Specified Perils to the Employer’s existing structures/contents prior to practical completion. (It will be noted that clause 6·3·2 deals with Sectional completion.) Those exclusions are followed in the next sub-section by the Contractor’s clause 6·4 obligation to effect insurance against liability under clauses 6·1 and 6·2 (i.e. Public Liability cover) with the level of cover (other than in respect of employer’s liability insurance) specified in the Contract Particulars.

132

If the Employer’s Requirements state that insurance under clause 6·5·1 is required, the Contractor is obliged to take out insurance in the joint names of the Employer and the Contractor in respect of claims against the Employer as a result of damage to property due to subsidence, weakening or removal of support, vibration or the like arising out of the carrying out of the Works. Cover is to be the amount stated in the Contract Particulars and is subject to the list of exclusions set out in that clause. This type of insurance is sometimes referred to as “nonnegligent loss insurance”, reflecting the Employer’s strict liability in respect of damage to other properties, irrespective of whether or not there has been negligence or breach of duty on the part of either the Employer or the Contractor. Under this Contract, the cost of such insurance, if stated as required, is taken to be included in the Contract Sum.

133

The sole Revision 2 amendment in these sub-sections is the insertion at the end of clause 6·1, for the sake of consistency, of the reference to Statutory Undertakers.

Page 16 DB/G (2009)


Works insurance (clauses 6·7 to 6·10 and Schedule 3) 134

135

For the purposes of Works insurance, it is envisaged that the Parties will effect a Joint Names Policy in the terms of Insurance Option A, B or C, as appropriate, a choice effected by the relevant entry in the Contract Particulars for clause 6·7: •

Insurance Option A applies to new buildings and requires the Contractor to take out a Joint Names Policy for All Risks Insurance for the full reinstatement value of the Works, including Site Materials, plus professional fees;

•

Insurance Option B applies to new buildings and requires the Employer to take out a Joint Names Policy for All Risks Insurance for the full reinstatement value of the Works, including Site Materials, plus professional fees;

•

Insurance Option C applies where existing structures are involved and requires the Employer to take out a Joint Names Policy for the full reinstatement cost in respect of damage to the existing structures and their contents by Specified Perils, and, in respect of the Works, a Joint Names Policy for All Risks Insurance on the same basis as under Option B. (In the case of existing structures and contents, the Employer himself will in fact normally have, and will himself wish to retain, All Risks cover.)

To ensure that suitable arrangements are made, the Parties and their advisers are strongly advised to consult each other and to seek professional insurance market advice prior to entering into the contract. Relevant Definitions

136

The term ‘Joint Names Policy’, and other relevant insurance terms, are defined in clause 6·8. The policy (or policies) are required to include the Employer and the Contractor as composite insured and to provide that the insurer has no right of recourse against either of them, irrespective of which Party claims under the policy or may otherwise have been liable for the loss or damage. By clause 6·9, the Joint Names Policy for the Works is also required either to recognise each sub-contractor as an insured or to include a waiver of rights of subrogation against him in respect of loss or damage caused by the Specified Perils.

137

‘All Risks Insurance’ as a defined term has a meaning somewhat narrower than the phrase “all risks” might otherwise imply. Briefly, the policy is to cover physical loss or damage to work executed or Site Materials (but not the Contractor’s plant and equipment), and it will usually exclude loss or damage caused by wear and tear/deterioration, defects in design or workmanship, war or Excepted Risks and also inventory losses that are not traceable to an identified event. However, as mentioned in the first footnote to the clause 6·8 definition (which has been expanded in Revision 2), it is not entirely straightforward and requires the “buy back” of Terrorism Cover, which is discussed in greater detail below.

138

Difficulty can also arise in relation to joint names insurance of existing structures in cases that involve residential owner-occupiers or leaseholders whose insurance is effected by their landlord. In such cases, the practical solution may be to use Option A (or possibly Option B) in respect of the Works and Site Materials, with the Employer continuing separately to cover his own particular risk in respect of loss or damage to the existing structures and contents and with the Contractor covering his risk in respect of such loss and damage under his Public Liability policy, referred to above in the context of clause 6·4. In either case, however, prior to entering into the contract, the Employer must inform his existing structure and contents insurers of the intention to carry out the work, and appropriate professional advice should be sought, not least because of the consequential amendments that may be needed in clause 6·2 and elsewhere. Terrorism and Terrorism Cover

139

A point of concern for both the Employer and the Contractor is the general exclusion from All Risks policies for the Works (and, where relevant, from Existing Structures policies) of cover for damage by terrorism. In each case, DB 2005, in line with JCT contracts generally, assumes that the Party effecting the policy will “buy back” that terrorism cover. However, risks reinsured by Pool Re, the Government-linked reinsurer of terrorism risks, remain limited to acts of terrorism within the Reinsurance (Acts of Terrorism) Act 1993, i.e. “any act of any person acting on behalf of or in connection with any organisation with activities directed towards the overthrowing or influencing of any government de jure or de facto by force or violence”, not the wider definition under the Terrorism Act 2000 which insurers generally use for the purposes of their exclusion from the policy.

140

If there is any likely difficulty in buying back terrorism cover, or if insurers propose a limitation on the cover to be bought back that reflects the Pool Re limitation referred to in the previous paragraph, the Parties and their insurance advisers should prior to entry into the contract consult and agree what they wish to do in that regard.

141

Where Insurance Option A applies, paragraph A·5 in Schedule 3 provides Local Authority Employers with the option of themselves assuming the terrorism risk if during the progress of the Works there is a premium increase for the Contractor’s terrorism cover. In the event of non-availability of cover under the Works policy during that


DB/G (2009) Page 17

period, whichever Insurance Option applies, or under the existing structures policy where Insurance Option C applies, clause 6·10 provides the Employer (Private or Local Authority) with the option of assuming the risk or terminating. 142

The JCT continues to keep the matter under review. Reinstatement and other costs

143

The three Works Insurance Options are designed solely to meet the cost of restoring lost and damaged work and materials, but in calculating reinstatement cost there are several factors to be borne in mind; other potential costs and losses may also need to be considered.

144

The costs of reinstatement generally include those of removing debris. They are often covered automatically by insurers’ policy terms but appear on occasion to require to be dealt with by a separate item under the All Risks policy: the Parties and their advisers should ensure that there is an appropriate level of cover for them.

145

If the Employer is exempt from VAT registration or if supplies made by him in the course of the business are wholly or partially exempt, the Employer should include in his calculation of the reinstatement cost not only the normal VAT-exclusive cost of reinstatement (adjusted for interim increases in those costs) and the percentage to cover professional fees, but also the amount of the VAT chargeable on the work of reinstatement, to the extent that he would not be able to recover it.

146

Other costs that are not generally covered automatically by the Works insurance and may require an extension of cover or separate cover include increases in costs of working as a result of the damage or reinstatement work, together with increases in the cost of the unbuilt portion through inflation.

147

In addition there are financial or consequential losses of the Employer’s Delay in Completion/Advance Loss of Profits (ALOP)-type for which Employers may require their own separate cover. Professional Indemnity insurance (clauses 6·11 and 6·12)

148

The Employer may require the Contractor to effect and thereafter, provided it is available at commercially reasonable rates, maintain PI insurance of the type(s), with limit(s) of indemnity and for a period not less than that stated in the Contract Particulars.

149

The provisions are in substantially the same terms as those in the JCT Collateral Warranties. Under Revision 2, the Contract Particulars now make separate provision for cover against pollution and contamination, asbestos and fungal mould claims, all within the general cover; there are only minor changes in the sub-section itself.

150

A realistic approach needs to be taken both to the type(s) of cover required and to the cover level(s) required. Unless otherwise specifically agreed, the terms and period agreed for the purposes of clause 6·11 will apply in relation to the Third Party Rights and each Collateral Warranty that the Contractor is required to give. Joint Fire Code (clauses 6·13 to 6·16)

151

The Joint Fire Code is generally required by insurers to apply and the Parties should comply both with its requirements and the other provisions of clauses 6·14 and 6·15. Under clause 6·15 the Contractor is to ensure that any remedial measures required by the insurers to achieve compliance are carried out and, if he fails to do so, the Employer may employ others for the purpose, with an appropriate deduction being made from the Contract Sum. Minor amendments have been made here and in the clause 1·1 definition to underline the obligation to comply with any amendments which may from time to time be made to the code. In respect of amendments made after the Base Date there is an option as to which Party bears the cost. Financial Services and Markets Act 2000

152

The regulatory requirements imposed by the Insurance Mediation Directive were implemented through the Financial Services and Markets Act 2000. With effect from 15 January 2005, a person who is carrying on by way of business and in the United Kingdom any insurance mediation activity for remuneration is required either to have obtained authorisation from the Financial Services Authority (FSA) or to be exempt as the appointed representative of an authorised firm. The JCT understands that each of its member bodies has issued guidance to their members; users of JCT contracts should ensure that they are familiar with the requirements and take professional advice where necessary.

Page 18 DB/G (2009)


Section 7 – Assignment, Third Party Rights and Collateral Warranties (and Schedule 5 – Third Party Rights) 153

This section comprises the restrictions on, and the Employer’s limited optional right of, assignment, together with the enabling provisions for Third Party Rights/Collateral Warranties. The Third Party Rights which the Contractor may be called upon to give are set out in Schedule 5; the relevant forms of JCT Collateral Warranty are available as separate published documents.

154

The assignment provisions are set out in clauses 7·1 and 7·2. After the ancillary provisions of clauses 7·3 and 7·4, they are followed by five clauses (7A to 7E) which perform essentially the same functions as the enabling clauses formerly included with the JCT Collateral Warranty forms. These provisions relate: •

in the case of clauses 7A and 7B, to the grant by the Contractor of third party rights for Purchasers/Tenants and a Funder respectively;

•

in the case of clauses 7C and 7D, to the alternative of collateral warranties by the Contractor;

•

in the case of clause 7E, to Sub-Contractors’ obligations to grant collateral warranties in favour of Purchasers/Tenants, a Funder or the Employer.

155

In relation to each form of grant the required details are those set out or referred to in Part 2 of the Contract Particulars. The terms of any third party rights from the Contractor are substantially identical to those in the corresponding Collateral Warranty; to facilitate that correspondence in terms of the particulars, the clause numbering of the relevant Collateral Warranties is the same as that of the paragraphs in the relevant Part of Schedule 5. Under Revision 2, in addition to minor consequential changes in each case, the period for exercise of step-in rights is extended from 7 to 14 days.

156

Clause 7·4 provides for the mode of execution of collateral warranties. Part 2 of the Contract Particulars

157

As indicated in the Contract Particulars section of this Guide, Part 2 of the particulars requires careful completion. In terms of completing it, the point to be emphasised for the Parties and beneficiaries is that obtaining the rights and/or warranties is in legal terms dependent upon certainty, i.e. upon the necessary particulars being given.

158

The first requirement is the identification of the Purchaser/Tenant beneficiaries and the Funder. Section 1 of the Contracts (Rights of Third Parties) Act 1999 provides that a third party may enforce a term of a contract if the contract expressly so provides but (by section 1(3)) that the third party must be expressly identified in the contract by name, or as a member of a class or as answering a particular description. As a matter of general law, the requirement for certainty applies equally for collateral warranties.

159

The class or description can of course be quite simple and general, e.g. “all first purchasers” and/or “all original/first lessees” of the building or of particular units or parts of the Works. Section 1(3) of the Act goes on to provide that the third party need not be in existence when the contract is entered into. Where known, the Funder will no doubt be named, but there should be no problem describing an as-yet unascertained Funder as, for example, the lead bank providing finance for the project or as the special purpose vehicle to be incorporated or established under a specified agreement.

160

Unless already selected, the same principle may need to be applied to identify relevant sub-contractors for the purposes of the Table at (E), where reference may have to be made to those selected for identified work packages.

161

There is then the question as to whether rights to be granted by the Contractor are third party rights under the 1999 Act or to be granted by collateral warranty. Unless collateral warranties are stipulated by entries in the third column in the Table at (A), rights under the Act will apply.

162

In completing the Sub-Contractor particulars at (E) in Part 2, regard should be had to the default positions in paragraphs (i) to (iii) and the footnotes following the Table. In completing the third column, the Employer and the Contractor should recognise that not all Sub-Contractors carry or are able to obtain PI insurance cover, either on a per event basis or at all: some will at best carry only Product Liability insurance and any specified cover levels should be realistic, as should the selection of Sub-Contractors from whom collateral warranties may be required. As previously indicated different forms of warranty may be needed for sub-contracted consultants; where a consultant’s appointment is intended to be novated to the Contractor by the Employer, however, the matter may be better dealt with as part of the original arrangement.


DB/G (2009) Page 19

Section 8 – Termination 163

The section contains provisions for termination of the Contractor’s employment under the Contract.

164

It comprises five sub-sections: General (defining insolvency and setting out certain ancillary provisions that apply to the section generally); Termination by Employer; Termination by Contractor; Termination by either Party (in cases of extended no-fault suspension); and Consequences of Termination (in cases of termination by the Contractor or extended no-fault suspension).

165

The basis of the section is that each Party may terminate the Contractor’s employment either for a specified default or insolvency on the part of the other or where substantially the whole of the Works is suspended for the period stated in the Contract Particulars through a range of events outside the control of either Party. The default entry in the Contract Particulars is a period of 2 months. In addition the Employer may terminate for corruption.

166

It is only the Contractor’s employment under the Contract that is terminated, not the Contract itself, which remains in force to deal with the consequences of termination. These differ, dependent on the grounds for termination.

167

In the case of default by either Party, there is a requirement for a warning notice of the default to be given prior to termination, giving an opportunity for the default to be remedied. If it is not remedied within 14 days of that notice, there is, under Revision 2, a 21 day period for giving notice of termination. The extension of the period to 21 days mirrors the extension to the period for a Funder’s election to exercise step-in rights. Where, after a notice of default, a notice of termination is not given within the 21 day period but the default is repeated, the Party not in default again becomes entitled to give notice of termination within a reasonable time.

168

Where either Party is insolvent or the Contractor commits a corrupt act, the other Party may terminate without a warning notice but, where termination is due to prolonged no-fault suspension of the Works, a warning notice is required. General (clauses 8·1 to 8·3)

169

The clause 8·1 definition of insolvency introduced by DB 2005 was framed with the assistance of the Association of Business Recovery Professionals (R3) and was intended to provide greater consistency. However, in a substantial proportion of insolvency cases, the insolvency will also be preceded and/or accompanied by contractual default.

170

Clause 8·2 makes provision with respect to notices, commencing with the long-standing requirement that notice of termination is not to be given unreasonably or vexatiously. Notice of termination takes effect on receipt; clause 8·2·3, albeit now by reference to clause 1·7·4, is aimed at ensuring that there is no scope for argument on the question of receipt.

171

Clause 8·3·1 then provides that the provisions of the section are without prejudice to the rights of the Employer or, as relevant, the Contractor; there may for example be occasions where there is repudiatory breach by a Party that is not within the specified grounds for termination but upon which the innocent Party wishes to treat the Contract as being at an end. Termination by the Employer (clauses 8·4 to 8·8)

172

Clause 8·4 sets out the Employer’s right to terminate for default, clause 8·5 his right to terminate for insolvency and clause 8·6 the right to terminate for corruption; it will be noted that the grounds of termination for default are specific and that both the warning notice and any notice of termination also therefore need to be specific.

173

In relation to the consequences of insolvency and termination on those grounds or for Contractor’s default, clauses 8·5·3 and 8·7·3 respectively provide that, pending the final account under clause 8·7·4 or 8·8, the provisions of the Contract which require any further payment cease to apply. (There is a similar provision in clause 8·12·1 and also in clause 6·10·3.) That provision appears entirely valid in respect of sums that have not then become due under the Contract and also in the case of sums that have become due where a valid withholding notice is given under section 111(1) of the HGCR Act and clause 4·10·4 within the appropriate period. In the case of sums that are due but unpaid where no withholding notice has been given and the last date for giving such notice has passed, it appears on the basis of the House of Lords decision in Melville Dundas Ltd v. George Wimpey UK Ltd [2007] UKHL 18 that the sum may be validly withheld if termination is on the grounds of insolvency and the insolvency has occurred after the period for giving a withholding notice has expired, but not if the insolvency occurred before that expiry and not if the termination was on grounds other than insolvency. If there is any doubt as to the position in relation to any actual or prospective termination, professional advice should be taken; a withholding notice should of course be given where that is still practicable.

Page 20 DB/G (2009)


174

The provisions of clause 8·7 as to the Employer’s rights, Contractor’s obligations and the basis of the final account (clause 8·7·4) are reasonably straightforward, the final account being based on cost to complete and direct loss or damage caused to the Employer. That is however predicated upon completion of the Works by a completion contractor. If the Employer decides not to complete the Works or fails within 6 months of the termination to make arrangements to that end, clause 8·8 provides for the final account to be prepared on the alternative basis of the value of work properly executed less direct loss or damage. Termination by the Contractor (clauses 8·9 and 8·10)

175

Over and above breach of the prohibition on assignment and breach of CDM Regulations (which are also grounds under clause 8·4), clause 8·9 gives the Contractor the right to terminate if the Employer fails to pay amounts properly due and for continuous extended suspension caused by any impediment, prevention or default on the part of the Employer or others for whom the Employer is contractually responsible. (Here also the default period for the suspension is 2 months, plus 14 days for a warning notice.) Clause 8·10 relates to Employer insolvency. The consequences of termination are not dissimilar to those of termination under clause 8·11 and those are dealt with together in the final sub-section (clause 8·12).

176

Where he has given Third Party Rights or a Collateral Warranty to a Funder, the Contractor’s right to terminate will, as indicated above, be subject to either paragraph 6 in Part 2 of Schedule 5 or clause 6 of Collateral Warranty CWa/F, providing for notice to the Funder to enable the Funder to decide whether to exercise its ‘stepin’ rights. Termination by either Party (clause 8·11)

177

The bilateral right of termination under clause 8·11 is not entirely dissimilar to termination by the Contractor for continuous extended suspension under clause 8·9; it has the same default period and, entitlement to direct loss and damage apart, the consequences are the same. It is based on events beyond the reasonable control of either party – force majeure, negligence or default of Statutory Undertakers, Specified Perils damage, civil commotion and UK Government action. (In relation to Specified Perils damage, clause 8·11·2 contains the appropriate exclusion for Contractor’s negligence.) Consequences of Termination under clauses 8·9 to 8·11, etc. (clause 8·12)

178

This sub-section covers the consequences of termination under clauses 8·9 to 8·11 and also where termination arises under clause 6·10·2·2 (withdrawal of Terrorism Cover) or paragraph C·4·4 of Schedule 3 (material loss of or damage to existing structures). As under clause 8·8, the final account is based on value of work properly executed and other amounts due to the Contractor under the Conditions. In addition the Contractor is entitled to direct loss and damage arising from the termination where he has terminated for Employer’s default or insolvency or where Specified Perils damage giving rise to an extended suspension and then to termination under clause 8·11 has been caused by negligence or default on the part of the Employer or those for whom the latter is responsible.

Section 9 – Settlement of Disputes 179

The Contract contains provisions in relation to four external means of settling disputes: •

the Parties may agree to attempt to resolve disputes through mediation, using a third party to assist the negotiation process;

•

the Parties have a contractual as well as a statutory right to refer disputes to adjudication (Article 7 and clause 9·2); DB 2005 provides for adjudication to be conducted in accordance with the Scheme for Construction Contracts, subject only to the clause 9·2 provisions regarding the nomination of adjudicators and for cases of opening up and testing;

•

the Parties may agree to refer disputes to arbitration, either through the appropriate entry in the Contract Particulars, or by subsequent agreement; the arbitration agreement in DB 2005 is subject to the three exceptions mentioned in Article 8 and provides that an arbitration under it is to be conducted in accordance with the JCT 2005 edition of the Construction Industry Model Arbitration Rules (CIMAR);

•

the Parties may litigate except insofar as they have specifically agreed to refer disputes to arbitration.

Mediation (clause 9·1) and ADR 180

The JCT supports the use of mediation and ADR in appropriate cases, but considers that it would not be appropriate to endorse specific techniques or bodies. The variety of techniques and bodies that have developed over recent years would appear to suggest that such choices are frequently better made by the Parties when the dispute has actually arisen and its nature is clear: in cases where mediation is likely to assist, possible exposure


DB/G (2009) Page 21

to litigation costs under the Civil Procedure Rules may be sufficient incentive for the Parties to agree such matters. Adjudication (clause 9·2) 181

In the case of adjudication, the adjudicator may be named and the nominating body identified in the Contract Particulars. Where the Employer is a residential occupier (as defined by section 106 of the Act) there is no statutory requirement for the contract to contain an adjudication provision, and the Employer’s advisers should consider with their client whether the adjudication provision is desirable or whether it should be deleted. Arbitration (clauses 9·3 to 9·8) and litigation (Article 9)

182

A range of factors, which are outside the scope of this Guide, will determine the choice between arbitration and litigation. Litigation is the default position and will apply unless the Parties specifically make arbitration operative.

183

Where arbitration is agreed under the Contract and CIMAR Rules apply, Rule 2.3 in effect provides that an arbitrator cannot be named by the appointor identified in the Contract Particulars until at least 14 days after the arbitration notice is served and it is only after that period, if no agreement is reached as to who is to act as arbitrator, that either Party has the right to apply to the appointor, requesting him to name the arbitrator. The award of the arbitrator is final and binding on the Parties except in respect of any question of law arising in the course of the reference or arising out of an award, which (by clause 9·7) the Parties agree may be referred to the courts.

Page 22 DB/G (2009)


Appendix A – Amendment 1 (DB) CDM Regulations Clause number and heading

Action

Article 5 heading

Delete ‘Planning Supervisor’ and insert ‘CDM Co-ordinator’

Article 5

Delete ‘Planning Supervisor’ and insert ‘CDM Co-ordinator’ (twice); Delete ‘6(5)’ and insert ‘14(1)’

Article 6

Delete ‘6(5)’ and insert ‘14(2)’

Footnote [6]


Delete existing text and insert:

‘Insert the name of the CDM Co-ordinator only where the Contractor is not to fulfil that role, and that of the Principal Contractor only if that is to be a person other than the Contractor. If the project is not notifiable under the CDM Regulations 2007 (i.e. a project which is not likely to involve more than 30 days, or 500 person days, of construction work or which is being carried out for a homeowner as a purely domestic project), delete Articles 5 and 6 in their entirety.’

Insert new entry: ‘CDM Planning Period[

]

shall mean the period of ______________________ * days/weeks * ending on the Date of Possession/ * beginning/ending on _________________________ 20 _____’

Insert new footnote text for

[ ]

:

‘Under the CDM Regulations 2007 every client is expressly required to allocate sufficient time (the CDM Planning Period) prior to the commencement of construction to enable contractors and others to carry out necessary CDM planning and preparation. There may be cases where that planning and preparation needs to be completed earlier than the Date of Possession and adaptation of the entries may be needed where there are Sections.’

Clause 1·1

Clause 2·1

‘CDM Regulations’: Delete ‘1994’ and insert ‘2007’; Delete the definitions of ‘Health and Safety Plan’ and ‘Planning Supervisor’; Insert the following new definitions: ‘CDM Co-ordinator:

the Contractor or other person named in Article 5 or any successor appointed by the Employer.

CDM Planning Period:

the minimum amount of time referred to in regulation 10(2)(c) of the CDM Regulations, as specified in the Contract Particulars (against the reference to clause 1·1).

Construction Phase Plan:

the plan prepared by the Principal Contractor, where the project is notifiable under the CDM Regulations and in order to comply with regulation 23, including any updates and revisions.’

Delete ‘Health and Safety’ and insert ‘Construction Phase’; After ‘Plan and’ delete ‘the’ and insert ‘other’


DB/G (2009) Page 23


Action

Clause 2·7·2

After ‘of the Contract Documents’ insert ‘, together with any pre-construction information required for the purposes of regulation 10 of the CDM Regulations’

Clause 2·27

Delete ‘3·18·4’ and insert ‘3·18·5’

Clause 3·4·2

Insert new sub-clause as 3·4·2·3: ‘that each party undertakes to the other in relation to the Works and the site duly to comply with the CDM Regulations;’; Renumber existing sub-clauses ·3,·4 and ·5 as ·4,·5 and ·6 respectively

Clause 3·9·4

Delete ‘Where the Contractor is and while he remains the Planning Supervisor, he’ and insert ‘The Contractor’; Delete ‘regulation 14’ and insert ‘regulation 20 (if he is the CDM Co-ordinator) or regulation 22’; Delete ‘If he has such objection’ and insert ‘If the Contractor has any reasonable objection’

Clause 3·14

Delete ‘Health and Safety’ and insert ‘Construction Phase’

Clause 3·18

Delete existing text and insert: ‘Each Party acknowledges that he is aware of and undertakes to the other that in relation to the Works and site he will duly comply with the CDM Regulations. Without limitation, where the project that comprises or includes the Works is notifiable: ·1

where the Contractor is not the CDM Co-ordinator, the Employer shall ensure both that the CDM Co-ordinator carries out all his duties and, where the Contractor is not the Principal Contractor, that the Principal Contractor carries out all his duties under those regulations;

·2

where the Contractor is and while he remains the CDM Co-ordinator, he shall comply with all the duties of a CDM Co-ordinator and shall without charge prepare, and deliver to the Employer, the health and safety file;

·3

where the Contractor is and while he remains the Principal Contractor, he shall ensure that: ·1

the Construction Phase Plan is prepared and received by the Employer before construction work under this Contract is commenced, and that any subsequent amendment to it by the Contractor is notified to the Employer and the CDM Coordinator; and

·2

welfare facilities complying with Schedule 2 of the CDM Regulations are provided from the commencement of construction work until the end of the construction phase [ ] ;

·4

where the Contractor is not the Principal Contractor, he shall promptly inform the Principal Contractor of the identity of each sub-contractor that he appoints and each subsubcontractor appointment notified to him;

·5

where the Contractor is not or ceases to be the CDM Co-ordinator, promptly upon the written request of the CDM Co-ordinator, the Contractor shall provide, and shall ensure that any sub-contractor, through the Contractor, provides, to the CDM Co-ordinator (or, if the Contractor is not the Principal Contractor, to the Principal Contractor) such information as the CDM Co-ordinator reasonably requires for the preparation of the health and safety file.’

Insert new footnote text for [ ]:

‘There is a duty on contractors to ensure compliance with Schedule 2 of the CDM Regulations so far as is reasonably practicable, whether or not the project is notifiable and whether or not the contractor is the Principal Contractor.’

Clause 3·19

Page 24 DB/G (2009)

Delete ‘Planning Supervisor’ and insert ‘CDM Co-ordinator’


Assignment, Third Party Rights and Collateral Warranties Clause number and heading

Action


Delete ‘(where Sections do not apply)’ and insert ‘(If neither entry is deleted, clause 7·2 will apply.)’ Delete existing bracketed text under Sections and insert: ‘(If clause 7·2 applies, amend the entry if rights under that clause are to apply to certain Sections only.)’

Part 2 (E), middle column heading

Delete ‘State whether clause 7E and/or clause 7F applies’ and insert ‘Type(s) of warranty required’ and after ‘[31]’ insert ‘(SCWa/P&T, SCWa/F, SCWa/E) limited to’

Part 2 (E) Notes, item (i)

Delete ‘where clause 7E is stated to apply[31],’; After ‘(A) above’ delete ‘and’ and insert comma; After ‘(C) above’ insert ‘and the Employer’; After ‘clause 7E’ delete ‘[33]’; After ‘identified sub-contractor’ insert ‘[31]’

Part 2 (E) Notes, item (ii)

Delete item number and text; Renumber existing items (iii), (iv) and (v) as (ii), (iii) and (iv) respectively

Part 2 (E) Notes, item (v)

After ‘Collateral Warranty’ delete ‘–’ and insert ‘SCWa/E and’

Footnote [31]

Delete existing text and insert:

‘Where a sub-contractor is required to grant only a particular type or types of the Collateral Warranties referred to in clause 7E (i.e. the Sub-Contractor Collateral Warranty for a Purchaser or Tenant (SCWa/P&T), for a Funder (SCWa/F) and for the Employer (SCWa/E)), state the particular type(s). All three Collateral Warranties are documents prepared by JCT.’

Footnote [32]

Delete ‘and sub-contractors who maintain Product Guarantee cover only’

Footnote [33]

Delete footnote number and text

Clause 7E heading

Delete ‘– Purchasers and Tenants/Funder’

Clause 7E

After ‘to a Purchaser, Tenant or Funder’ insert ‘or to the Employer’; After ‘SCWa/P&T’ delete ‘or’ and insert comma; After ‘SCWa/F’ insert ‘or SCWa/E’

Clause 7F

Delete clause heading, number and text

Guidance Notes to Amendment 1 CDM Regulations General The Construction (Design and Management) Regulations 2007 replace the 1994 Regulations with effect from 6 April 2007. They also incorporate the provisions of the Construction (Health, Safety and Welfare) Regulations 1996 not incorporated in the Work at Height Regulations 2005, i.e. health and safety duties on site, welfare facilities and inspection report particulars. The latter provisions are contained in Part 4 and Schedules 2 and 3 respectively. As a result, the 2007 Regulations impose on clients, designers, contractors (including sub-contractors at all levels), and on others controlling the way in which any construction work is carried out (e.g. construction or project managers and contract administrators), a wider and more coherent set of health, safety and welfare duties. As part of the greater emphasis placed on the need to plan and on communication and co-ordination, the functions of the Planning Supervisor are replaced by those of a CDM co-ordinator, and a ‘construction phase plan’ replaces the Health and Safety Plan; the Health and Safety file provisions remain. Amendment 1 incorporates the changed terms. The 2007 Regulations also eliminate the distinction in the 1994 Regulations between the notification requirements and applicability


DB/G (2009) Page 25

provisions for particular regulations. While the Regulations maintain the basic 1994 criteria as to notifiability, i.e. 30 days or 500 person days of construction work, there are now only two types of project – notifiable and non-notifiable. The ‘five or more workers’ requirements of the 1994 Regulations have been omitted. Domestic clients, i.e. those not acting in the course or furtherance of a business, are exempt from duties under the 2007 Regulations in relation to purely domestic projects, which in turn are treated as non-notifiable. Part 2 – General duties Part 2 of the 2007 Regulations (regulations 4 to 13) sets out the duties that apply to all projects, whether or not notifiable, commencing with duties that apply to clients, designers and contractors alike. These include the requirement of competence and the duty to check appointees, a general duty to co-operate and seek co-operation with others concerned (now expressly extended to adjoining construction sites) and duties for all, so far as reasonably practicable, both to coordinate their activities with others and to ensure the application of general principles of prevention (specified in the Management of Health and Safety at Work Regulations 1998). Part 2 then sets out specific duties for clients, designers and contractors respectively. In the case of clients, these include a duty to ensure that suitable arrangements are in place for the management of health, safety and welfare aspects of the project, including the allocation of sufficient time for construction phase planning and preparation for health and safety purposes. This is coupled with obligations to supply information on the site and its proposed use and to specify the minimum period to be allowed to contractors for planning and preparation before construction starts (referred to in the Amendment as the ‘CDM Planning Period’). Main contractors are under similar obligations with respect to their sub-contractors and so on down the chain; provisions are being inserted in the JCT sub-contracts and sub-subcontract. Part 2 also sets out in detail contractors’ information and training obligations with respect to their workers and an obligation, so far as is practicable, to make Schedule 2 welfare provision. The commencement of work by any contractor is conditional (inter alia) upon reasonable steps having been taken to prevent unauthorised site access. Part 3 – Notifiable Project duties Part 3 (regulations 14 to 24) relates to notifiable projects. The client is required to appoint the CDM co-ordinator as soon as is practicable after initial design work or other preparation has begun – further design work is conditional on that appointment, as is construction, which (in addition to access restrictions) is also conditional on the appointment of the principal contractor, production of the construction phase plan and notification to the Health and Safety Executive. The duties of the CDM co-ordinator and principal contractor are slightly more widely drawn than in the 1994 Regulations and the principal contractor’s responsibilities now include ensuring the provision of Schedule 2 welfare facilities. Part 3 imposes certain additional duties on each participant both with respect to these appointees and generally. These in general follow naturally from the Part 2 obligations and the functions and duties of the two appointees but there is now a duty on all contractors promptly to supply to the principal contractor any information relevant to health and safety, as well as that identified for inclusion in the Health and Safety file.

Assignment, Third Party Rights and Collateral Warranties The Contract Particulars associated with clause 7·2 have been revised to make clear that clause 7·2 applies unless otherwise stated. They have also been revised so that where clause 7·2 applies it will apply to each Section of the Works unless the relevant entry is amended. Clause 7E now additionally provides for a warranty for Employer (previously clause 7F) and incorporates specific reference to the recently published Sub-Contractor Collateral Warranty for Employer (SCWa/E). Consequential changes have been made to Part 2(E) of the Contract Particulars and clause 7F deleted.

Page 26 DB/G (2009)


Appendix B – Revision 2 changes The following provisions in Revision 2 2009 contain textual changes. The provisions with substantive textual changes have been identified with *. For an explanation of those changes, please refer to the main body of the Guide. Revision 2 2009 numbering

Revision 2 2009 numbering

Recitals Sixth* Seventh*

2·20 2·21 2·22 2·23·2* 2·24·1, 2·24·3 2·25·2, 2·25·4, 2·25·5 introduction, 2·25·6·4 2·26·2* 2·27 introduction 2·28 2·29·1·2, 2·29·1 hanging paragraph, 2·29·2·2, 2·29·4 2·30 2·31 2·36 2·37 2·38·2 3·3·1, 3·3·2 3·4* 3·5 3·6 3·7* 3·8 3·9·1, 3·9·4 3·15 3·16·1, 3·16·4, 3·16·5 3·17 Section 4* (except 4·1, 4·4) 5·1·1·3 5·2 5·5* 6·1* 6·4·3 6·5·1·5, 6·5·3 6·6 6·10·1, 6·10·2 introduction, 6·10·4·2* 6·11·1*, 6·11·2* 6·12 6·14* 6·16* 7·1 7·3* 7·4 8·2·3* 8·3·2 8·4·1·3, 8·4·1·5, 8·4·2* 8·5·2 8·7·2·2 8·8·1 introduction 8·9·1·3, 8·9·3* 8·10·2 8·11·1 hanging paragraph 8·12·2·2, 8·12·3 introduction, 8·12·3·2, 8·12·5 9·1* 9·4·1 9·5

Articles Article 3 Article 8* Contract Particulars (entries) Part 1: Sixth Recital* Seventh Recital and Part 1 of Schedule 2* Seventh Recital and Part 2 of Schedule 2* Article 8 Clause 1·7* Clause 4·7 Alternative B* Clause 4·15·4 Clause 4·15·5 Clause 4·17* Clause 4·18·1* Clause 4·19 and Schedule 7 Clause 5·5* Clause 6·11* Clause 7·2 Clause 9·2·1 Part 2* Conditions (clauses) 1·1: Acceleration Quotation* Confirmed Acceptance* Employer’s Final Statement Employer’s Persons Final Statement Fluctuations Options A, B and C Joint Fire Code* Relevant Matter Retention Retention Percentage 1·3* 1·7* 1·8* 1·9 1·10 2·1·4 2·2·1 2·5·1 2·6·2 2·10 2·12·1 2·13 hanging paragraph 2·14 2·15·1 hanging paragraph 2·16·2 2·17·3


DB/G (2009) Page 27

Revision 2 2009 numbering Schedules Schedule 1 Schedule 2* Schedule 3: Option A Option B Option C Schedule 5: Part 1

Part 2

Schedule 6 Schedule 7: Option A Option B Option C

Page 28 DB/G (2009)

paragraph 1* paragraph 7 paragraph A·2 paragraphs A·4·1, A·4·4*, A·4·6 paragraph B·2·2 paragraph B·3·1 paragraph C·1 paragraphs C·4·1*, C·4·2*, C·4·3*, C·4·4 introduction* paragraph 2 paragraph 4 paragraph 6 paragraph 7* paragraph 2 paragraph 5 paragraphs 6·1·1, 6·2, 6·3*, 6·4 paragraph 8 paragraph 9* paragraph 10 paragraph 11* Part 3* paragraph A·3·1 paragraph A·4 paragraphs A·9·1, A·9·2·2 paragraph B·4·1 paragraph B·5 paragraphs B·10·1, B·10·2·2 paragraphs C·5·1, C·5·2 paragraph C·6·2·2


Appendix C – DB User Checklist

This is a checklist of the key information that will help you to complete the Articles of Agreement.

Parties’ details

□ Employer’s name and address □ Contractor’s name and address

Works (First Recital)

□ nature □ location

Construction Industry Scheme (Fourth Recital and clause 4·5)

□ Is the Employer a ‘contractor’?

Sections (Fifth Recital)

□ applicable? □ description

Framework Agreement (Sixth Recital)

□ Is the Contract supplemented by a Framework Agreement? □ details (date, title, parties)

Supplemental Provisions (Seventh Recital and Schedule 2) Site Manager (Schedule 2, paragraph 1)

□ applicable?

Named Sub-Contractors (Schedule 2, paragraph 2)

□ applicable?

Bills of Quantities (Schedule 2, paragraph 3)

□ applicable?

Valuation of Changes – Contractor’s estimates (Schedule 2, paragraph 4)

□ applicable?

Loss and expense – Contractor’s estimates (Schedule 2, paragraph 5)

□ applicable?

Acceleration Quotation (Schedule 2, paragraph 6)

□ applicable?

Collaborative working (Schedule 2, paragraph 7)

□ applicable?


DB/G (2009) Page 29

Health and safety (Schedule 2, paragraph 8)

□ applicable?

Cost savings and value improvements (Schedule 2, paragraph 9)

□ applicable?

Sustainable development and environmental considerations (Schedule 2, paragraph 10)

□ applicable?

Performance Indicators and monitoring (Schedule 2, paragraph 11)

□ applicable?

Notification and negotiation of disputes (Schedule 2, paragraph 12)

□ applicable? □ name of the Employer’s nominee □ name of the Contractor’s nominee

Contract Sum (Article 2)

□ amount

Employer’s Agent (Article 3)

□ name and address

Employer’s Requirements (Article 4)

□ identification

Contractor’s Proposals (Article 4)

□ identification

Contract Sum Analysis (Article 4)

□ identification

CDM Regulations (Article 5)

□ applicable?

CDM Co-ordinator (Article 5)


Principal Contractor (Article 6)


CDM Planning Period (clause 1·1)

□ period (days/weeks) □ commencement/end date

Adjudication (Article 7)

□ applicable? □ Adjudicator’s name

Page 30 DB/G (2009)


□ Adjudicator nominating body? Arbitration (Article 8)

□ applicable? □ appointor of Arbitrator?

Base Date (clause 1·1)

□ date

Date for Completion (clause 1·1)

□ Works: date □ Sections: date for each Section

Address for service of notices (clause 1·7)

□ Employer □ Contractor

Date of Possession (clause 2·3)

□ Site: date □ Sections: date for each Section

Deferment of possession (clause 2·4)

□ applicable? □ Site: period □ Sections: period for each Section

Limit of Contractor’s liability for loss or use etc. (clause 2·17·3)

□ amount

Liquidated damages (clause 2·29·2)

□ Works: rate and period □ Sections: rate and period for each Section

Section Sums (clause 2·34)

□ amount for each Section (These must add up to the Contract Sum.)

Rectification Period (clause 2·35)

□ Works: period □ Sections: period for each Section

Advance payment (clause 4·6)

□ applicable? (Not applicable for Local Authority employer) □ amount or percentage


DB/G (2009) Page 31

□ payment date □ reimbursement: amount(s) and time(s) □ Advance Payment Bond: applicable? Method of payment (clause 4·7)

□ Stage Payments (Alternative A) or Periodic Payments (Alternative B) Alternative A: Stage Payments (clauses 4·9·1 and 4·13)

□ description of each stage □ cumulative value for the stage (Cumulative value of final stage must be equal to the Contract Sum.)

Alternative B: Periodic Payments (clauses 4·9·2 and 4·14)

□ first date for the Application for Interim Payment

Bond for Listed Items uniquely identified (clause 4·15·4)

□ applicable? □ amount

Bond for Listed Items not uniquely identified (clause 4·15·5)


Contractor’s Retention Bond (clause 4·17)

□ applicable? (Not applicable for Local Authority employer) □ amount □ expiry date

Retention Percentage (clause 4·18·1)

□ percentage

Fluctuations Options A, B and C (clause 4·19·1 and Schedule 7)

□ applicable option: A, B or C?

Option A

□ percentage addition (paragraph A·12)

Option B

□ percentage addition (paragraph B·13)

Option C

□ Base Month (rule 3) □ Non-Adjustable Element (percentage) (rule 3) (For Local Authority employer only) □ Method of formula adjustment (Section 2 of the Formula Rules: Part I or Part II?) (rules 10 and 30(i))

Daywork (clause 5·5)

□ identification of document for Percentage Additions and All-Inclusive Rates

Page 32 DB/G (2009)


Insurance: Contractor’s liability – injury to persons or property (clause 6·4·1·2)

□ amount

Insurance: Employer’s liability (clause 6·5·1)


Works Insurance Options A, B and C (clause 6·7 and Schedule 3)

□ applicable option: A, B or C?

Option A

□ percentage to cover professional fees □ renewal date of annual policy

Option B

□ percentage to cover professional fees

Option C

□ percentage to cover professional fees

Professional Indemnity insurance (clause 6·11)

□ type, amount, expiry

PI insurance sub-limit: Cover for pollution and contamination claims (clause 6·11)


PI insurance sub-limit: Cover for asbestos claims (clause 6·11)


PI insurance: Cover for fungal mould claims (clause 6·11)

□ applicable?

Joint Fire Code (clauses 6·13 and 6·16)

□ applicable? □ Has the insurer specified the Works are a ‘Large Project’? □ Who is to bear the cost for amendments?

Assignment of rights (clause 7·2)

□ applicable? □ applicable to each Section?

Period of suspension (clause 8·9·2)

□ period


DB/G (2009) Page 33

Period of suspension (clauses 8·11·1·1 to 8·11·1·6)

□ period

P&T Rights (clauses 7A, 7C and 7E)

□ applicable? □ identification of Purchasers/Tenants □ the part of the Works to be purchased or let □ Third Party Rights (clause 7A) or Collateral Warranty (clause 7C)? Contractor’s liability for costs (paragraph/clause 1·1·2 of Schedule 5, Part 1 or CWa/P&T)

□ applicable? □ amount and type

Funder Rights (clauses 7B, 7D and 7E)

□ applicable? □ identity of Funder □ Third Party Rights (7B) or Collateral Warranty (7D)?

Collateral warranties from Sub-Contractors (clauses 3·3 and 3·4)

□ applicable? □ identification of sub-contractors □ type(s) of warranty (SCWa/P&T, SCWa/F, SCWa/E) required □ levels of Professional Indemnity insurance required for each sub-contractor

Attestation

□ Execution under hand □ Execution as a Deed □ Other forms of Attestation

Page 34 DB/G (2009)


Appendix D – Related Publications The 2005 editions of the following documents have been issued by the JCT for use with DB 2005, where required:

•

Design and Build Sub-Contract Agreement comprising: •

Agreement (DBSub/A) and

•

Conditions (DBSub/C)

•

Design and Build Sub-Contract Guide (DBSub/G)

•

Short Form of Sub-Contract (ShortSub)

•

Sub-subcontract (SubSub)

•

Partnering Charter (Non-binding)

•

Framework Agreement (FA 07) and Framework Agreement Guide (FA/G 07)

•

Pre-Construction Services Agreement (General Contractor) (PCSA) Pre-Construction Services Agreement (Specialist) (PCSA/SP)

•

Consultancy Agreement (Public Sector) (CA)

•

Collateral Warranties •

Contractor Collateral Warranty for a Purchaser or Tenant (CWa/P&T)

•

Contractor Collateral Warranty for a Funder (CWa/F)

•

Sub-Contractor Collateral Warranty for a Purchaser or Tenant (SCWa/P&T)

•

Sub-Contractor Collateral Warranty for a Funder (SCWa/F)

•

Sub-Contractor Collateral Warranty for Employer (SCWa/E)

•

Adjudication Agreement (Adj) and Adjudication Agreement (Named Adjudicator) (Adj/N)

•

JCT 2005 edition of the Construction Industry Model Arbitration Rules (CIMAR)


DB/G (2009) Page 35

DB_G_rev 2:S&M 432 JCT Design&Build(Sp)

22/04/2009

14:57

Page 1


Revision 2009


2005

DB/G

Revision 2009

Members British Property Federation Limited Construction Confederation Local Government Association National Specialist Contractors Council Limited Royal Institute of British Architects The Royal Institution of Chartered Surveyors Scottish Building Contract Committee Limited

All parties must rely exclusively upon their own skill and judgment or upon those of their advisers when using this document and neither Sweet & Maxwell, Thomson Reuters (Legal) Limited nor its associated companies assume any liability to any user or any third party in connection with such use.

Design and Build Contract

Guide - JCT 2005 Design & Built

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