BRIEF NOTES ON THE JCT STANDARD BUILDING CONTRACT 2005 (SBC/Q05)

RIBA North West Region Advanced Diploma in Professional Practice Course Chester Residential Course

Michael H Dunn BSc (Hons) LLB LLM FRICS FCIArb Rex Procter & Partners Blenwood Court 451 Cleckheaton Road Low Moor BRADFORD BD12 0NY Tel: (01274) 693622 e-mail: m.dunn@ rpp.co.uk www.rpp.co.uk 2011

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CONTENTS
Page Number
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. JCT Standard Building Contract With Quantities 2005 (SBC/Q 05) The Form of Contract Contractors Obligations Implied Terms Employers Representative Employers Obligations A/CAs Instructions Variations Other Documents and Information Statutory Requirements, Notices, Fees and Charges Levels and Setting Out of the Works Work, Materials and Goods Valuation of Variations Certification and Payment Notice before Payment Notice of Intention to Withhold Right to Suspend Work Interest & Certificates Priced Activity Schedule Off-Site Materials Advanced Payment and Bond Retention Loss and/or Expense Adjustments of Completion Date (Extension of Time) Liquidated Damages Practical Completion Rectification Period Final Certificate Termination General Notice Requirements Reckoning Periods of Days Applicable Law Dispute Resolution Third Party Rights Completion by Sections Contractors Designed Portion (CDP) Supplemental Provisions 3 3 3 7 7 7 8 10 11 13 14 14 15 17 18 19 19 20 20 21 21 22 22 24 25 26 27 27 28 30 30 30 31 31 32 32 35

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1. 1.1

JCT Standard Building Contract With Quantities 2005 (SBCQ/05) This is essentially a review of those SBC/Q05 terms which will commonly feature during the day to day administration of the Contract. The review concentrates on the With Quantities version but it should not be forgotten that there are Without Quantities and Approximate Quantities versions which are similar if not identical for many of the provisions though there are important differences. Unlike its predecessor (i.e. the JCT 98 Contract) the SBC 05 incorporates provisions for sectional completion and a Contractors Designed Portion (CDP). There are no supplements. Third party rights, following the Contracts (Rights of Third Parties) Act 1999, are excluded under clause 1.6 except to the extent they are addressed in Section 7 i.e. Assignment, Third Party Rights and Collateral Warranties The aim of the JCT when drafting the SBC/Q05 was not to make any significant changes in the allocation of risk between the parties to those set out in the JCT 98 contract. Many of the provisions and procedures are similar to those in the JCT 98 contract. However, there are a number of changes in terminology, and omissions from the JCT 98 Contract with the most notable being Nominated Sub Contractors and Suppliers. The overall aim was to simplify and standardise the 05 contracts so far as possible. There is a revision 1 (2007) which primarily deals with the CDM 2007 regulations though there are other amendments and revision 2 (2009). Revision 2 covers a number of amendments to the text, a change to the frequency of interim certificates following practical completion and the introduction of Supplementary Provisions to address Constructing Excellence.

1.2

1.3

1.4

1.5

2. 2.1

The Form of Contract SBC/Q05 is arranged so that it provides Articles of Agreement, followed by the Recitals, the Articles, the Contract Particulars and then the Attestation provisions. These are then followed by the Conditions and finally eight schedules. The Eighth Schedule was introduced under revision 2 and sets out the Supplemental Provisions.

3. 3.1

Contractors Obligations Clause 2.1 should be seen as one of the most important conditions. It defines the extent of the Contractor's obligation which is, quite simply, to carry out and complete the Works by the due date and in accordance with the Contract Documents, the Construction Phase Plan and Statutory Requirements. In short, the Contractors primary responsibility is to build the project correctly and on time. The Works are expressly defined to be those shown upon, described by or referred to in the Contract Documents (refer clause 1.1). Consequently, the Contractor is bound to do all of the work shown, described and/or referred to in the Contract Documents but he must also comply with the Construction Phase Plan, and all Statutory Requirements. Both of these are defined terms (refer to clause 1.1). It follows that the Contractor may add or omit nothing and may not extend or reduce the scope of that obligation except in compliance with an A/CAs instruction properly issued under the Contract; or by agreement with the Employer. Clause 2.3 makes clear that the Contractor must undertake the Works using the specified quality and standards of workmanship and/or materials. Where and to the extent that any quality or standard is a matter for the A/CAs opinion then the A/CA must be reasonable in forming that opinion (clause 2.3.3). As the Contract puts it; such quality and standards shall be to the reasonable satisfaction of the A/CA. See also clauses 1.9.1.1 and 3.20.
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3.2

3.3

3.4

Unfortunately, the Contract does not define precisely what constitutes reasonable satisfaction and disputes could arise over whether the A/CA is insisting on unreasonably high standards of finish. Particularly when practical completion is pending and the A/CA inspects the Works prior to certifying practical completion. Since clause 2.3 provides that the goods and/or materials, so far as procurable, and the workmanship are to be of the respective kinds and standards described in the Contract Bills it follows that the A/CA cannot rely on the reasonable satisfaction provision in clause 2.3.3 to obtain a higher quality of workmanship or materials than that expressly specified in the Contract Bills (clauses 2.3.1 & 2). That is to say, where quality or standards are fully and adequately described in the Contract Bills then the A/CA simply has to decide upon whether or not the Contractor has complied with the standards set out in the Contract Bills. That is a quite different thing from having discretion to set his reasonable satisfaction as a contractual standard, over and above the specification in the Contract Bills. Where the standard or specification is not set out in the Contract Bills or expressly stated to be to the satisfaction of the A/CA then it shall be to a standard appropriate to the Works. Clause 2.3.3 refers. Clause 2.2 deals with the Contractors obligations so far as the Contractors Designed Portion (CDP) is concerned. Where the Works is to include CDP then the Contractor is to complete the design of the CDP in accordance with the Contract Bills and drawings so far as they are applicable, the Employers Requirements and Contractors Proposals. The Contractor is to comply with any instruction of the A/CA for the integration of the design of the CDP with the design of the Works as a whole. However, this is subject to a right of objection where the Contractor believes such an instruction would be injurious to the design of the CDP clause 3.10.3 refers. Further when completing the design of the CDP the Contractor is to comply with the CDM Regulations. See below for further comments on the provisions relating to CDP. The Contractors obligation under clause 2.1 is to carry out and complete the Works in a proper and workmanlike manner in accordance with the Contract Documents. The Contract Documents are defined (clause 1.1) as: i) ii) iii) the Contract Drawings (as listed in the 3 Recital); the Contract Bills (these are the fully priced Bills referred to in the 2 Recital); the Agreement (this is defined as the Articles of Agreement, to which the Conditions are annexed consisting of the Recitals, Articles and Contract Particulars); the Conditions (the clauses set out in Sections 1 to 9 including the attached Schedules); and where applicable the Employers Requirements, Contractors Proposals and the Contract Sum Analysis. These would only apply when there was a CDP.
nd rd

3.5

3.6

3.7

3.8

iv) v)

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3.9

It should be noted that an Information Release Schedule provided by the Employer in accordance with the Fifth Recital is not described as, and so cannot be, a Contract Document. That does not, however, alter the fact that, if an Information Release Schedule is provided the A/CA must, (see reference to clause 2.11) ensure that the information specified is released as and when stipulated in that Schedule. The Priced Activity Schedule (referred to in the 2 Recital) is also not a Contract Document as nd defined at clause 1.1. However, the 2 Recital expressly stipulates when an Activity Schedule is to be supplied and provides that the Schedule is attached to the Contract. If such a Schedule is prepared and attached, clause 4.16.1.1 binds the Parties to use it for the purposes of interim valuations replacing the normal valuation process. So far as the Contract Drawings and Contract Bills are concerned, these are expressly limited to the drawings and bills referred to in the Recitals. Importantly, both drawings and bills are, (according to clause 1.1 and to the Recitals), to be signed by or on behalf of the Parties. If there is no CDP then Recitals 9 to 12 are deleted. These Recitals identify the scope of the CDP (9 Recital); that the Employer has provided Employers Requirements showing and describing the th requirements for the design and construction of the CDP (10 Recital); in response the Contractor th has supplied Contractors Proposals and a Contract Sum Analysis (11 Recital); and that the Employer has examined the Contractors Proposals and CDP Analysis and that he is satisfied that th they meet the Employers Requirements (12 Recital). For identification purposes each document is to be signed by the parties and identified in the Contract Particulars by a unique reference. These documents are defined as the CDP Documents at clause 1.1 along with any other documents referred to at clause 2.9.4.
th nd

3.10

3.11

3.12

3.13

Important consequences flow from defining precisely which drawings and/or bills (or CDP Documents) should be taken as Contract Documents. It is those drawings and bills alone that exactly define the amount of work that is deemed to be included in the Contract Sum clause 4.1. From these documents one can establish the nature and extent of any extra work for which the Contractor may generally be entitled to claim additional payment. That is provided it has been properly instructed. Not uncommonly, Employers (or their professionals) use the preliminaries to the Bills to add to or amend the standard Contract. Clause 1.3 removes any doubt over the status of such additions or amendments. Clause 1.3 makes clear that nothing contained in the Contract Bills (or the CDP Documents when applicable) shall override or modify the application or interpretation of the Agreement or the Conditions. This is an important proviso. For example, where a specification in the preliminaries Bill purports to impose a responsibility on the Contractor for design that would not otherwise exist under SBC 05 (because the relevant CDP provisions had not been completed Recitals 9 to 12 had been deleted), that specification and the liability it imposes is likely to be ineffective by virtue of clause 1.3 John Mowlem & Co Ltd v British Insulated Calenders Pension Trust Ltd (1977). However, that situation should be distinguished from provisions in the Bills which are merely intended to supplement the Conditions. In that case the Bill entry will remain effective. Bills may also validly import obligations or restrictions not covered at all by the Conditions. For example, they may affect access to site, limits on working space or hours or execution of the work in a specific order or sequence etc.

3.14

3.15

3.16

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3.17

Without express provision to the contrary (completion of the relevant CDP provisions) the Contractor is not liable for design. But, this should not be taken to mean that the Contractor can remain indifferent to the possibility of errors or insufficiencies in design. There is a general duty to warn of possible defects found in the design: Equitable Debenture Assets Corporation v Moss (1984). Whether that duty goes so far as to require a contractor to seek out such errors or omissions is very doubtful. At most - as part of his implied duty to exercise reasonable skill and care - the Contractor will be expected to warn of design defects which a competent builder should notice. In the context of contracts such as SBC 05 (see clause 2.15 If the Contractor becomes aware), the duty to warn should be seen as limited in both scope and timing. If that were not the case then, contractors would be charged with a duty akin to that of checking the Employers designers work. By default, the Contract Bills are taken to have been prepared according to the rules of the SMM 7, (clause 2.13.1). If they are wholly or partly prepared on some other basis the bills themselves must specifically say so. Moreover, the item or items concerned must also be clearly specified and if there is any departure from the rules which is not so identified the Contractor will be entitled to have the departure, error or omission in quantity or description corrected. That correction would seem to require the issue of an instruction (clause 2.15). It will be treat as though it was a Variation refer to clauses 2.14.1 & 3. The Quantity Surveyor cannot therefore refuse to value such corrections on the premise that no formal instruction had been issued by the A/CA. Likewise, where a description of a provisional sum for defined work given in the Contract Bills is erroneous or insufficient (tested against the requirements of General Rule 10.3 of the SMM 7), that error or omission will also be treat as a Variation (refer clauses 2.14.1 & 3). It goes without saying that, errors in pricing are a different matter. As a general rule the Contractor is stuck with bad, as well as good, rates and prices: Dudley Corporation v Parsons and Morrin Ltd (1959). Other discrepancies in or between the various Contract Documents or any other drawing, document or instruction issued during the course of the Works - except those issued for the purposes of a Variation - are likewise to be resolved by an instruction from the A/CA refer clauses 2.15. Clause 2.15 should not be seen as imposing a duty on the Contractor to go looking for such discrepancies or divergences: London Borough of Merton v Stanley Hugh Leach Ltd (1985). However, if such a discrepancy or divergence is discovered then the Contractor must immediately give written notice of it to the A/CA. Clause 2.17 deals with the discovery of a divergence between Statutory Requirements and any of the Contract Documents and/or a Variation. If any such discrepancy is discovered the Contractor should not resolve it without first seeking the A/CAs instruction. If he does so then he may well prejudice his right to additional payment, loss and /or expense and/or extension of time. As well as his primary obligation under clause 2.1, the Contractor has other important obligations, including: i) ii) iii) iv) v) compliance, forthwith, with A/CAs instructions (clause 3.10); make written confirmation of instructions given otherwise than in writing (clause 3.12); comply with relevant statutes (clause 2.1, 2.17 & 2.18); maintain requisite insurances (e.g. clause 6.4.1); and keeping a competent person-in-charge on site (clause 3.2).

3.18

3.19

3.20

3.21

3.22

3.23

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4. 4.1

Implied Terms Over and above the express terms and conditions contained in any contract documents, terms affecting a contractor and which are commonly implied into every building contract, unless covered by the express terms of the contract, are set out below. The Contractor will: i) ii) iii) carry out the work in a good and workmanlike manner (compare with wording at clause 2.1); supply good and proper materials; and undertakes that the building will be reasonably fit for its intended purpose if known and there is no designer: Hancock v B W Brazier (Annerley) Ltd (1966), Young & Marten v McManus Childs (1969), Test Valley BC v GLC (1979).

4.2

Such terms are usually not of great importance when using a contract such as SBC/Q05, because SBC/Q05 sets out the parties obligations in detail.

5. 5.1

Employers Representative Clause 3.3 allows the Employer to appoint a representative to act for him under the contract. The appointee can exercise all the functions ascribed to the Employer under the Contract. This covers both the Employers powers and duties. In order to appoint a representative under the Contract the Employer must issue a written notice to the Contractor, stating either that he wishes his representative (the individual must be identified) to deal with all of the functions of the Employer under the Contract or whether he wishes there to be any exceptions. Any exceptions must be set out in the notice. For example, an Employer may not want the Employers representative to make certain decisions e.g. have power to terminate the Contractors employment. Footnote [39] suggests that to avoid possible confusion over the distinct and separate roles of A/CA, Quantity Surveyor and Employer's representative, the Employers representative should not also be either the A/CA or Quantity Surveyor. Although not expressly saying as much, the Employers representative will presumably be a project manager in one guise or another.

5.2

5.3

6. 6.1

Employers Obligations From the Contractors point of view, the Employers most important obligation is the making of proper and timely payment for the Works refer Section 4 and Article 2. The quality and quantity of work for which the Contractor is deemed to have priced is that described and quantified in the Contract Bills - clause 4.1. Except where an error covered by clause 2.14 & 16 is concerned or where rectification of the Contract may be appropriate, no arithmetical or other computation error in the Contract Sum can be corrected. Both parties are deemed to have accepted the price and errors - refer clause 4.2.

6.2

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6.3

Since SBC/Q05 is essentially a lump sum type contract that would probably be the position even without an express term to that effect. But the important question remains whether or not such errors must be carried over when valuing variations: Henry Boot Construction Ltd v Alstom Combined Cycles Ltd (1999) refers. The accepted wisdom is that erroneous rates (either too high or too low) in the bills must be used when valuing variations under clause 5.6 & 5.8. If the Works described in the Contract remains unchanged then the Contract Sum will remain unchanged. The Contract Sum cannot be adjusted or altered in any way whatever - either upwards or downwards - except as expressly provided under the Contract (clause 4.2 and 4.3). It is therefore essential for contractors to ensure that any claimed addition to the Contract Sum is brought within the express terms of the Contract.

6.4

7. 7.1

A/CA's Instructions Broadly, any adjustments to the Contract Sum will be as a result of instructions issued by the A/CA. It is important to note that the Contractors obligation to comply with instructions is entirely unrelated to the question of whether or not the associated cost has or has not been agreed. The only real exception will be where a Variation Quotation (Schedule 2) instruction is given refer clause 3.10.2. In all other cases, provided the instruction is expressly empowered under the Contract, the Contractor must comply forthwith (clause 3.10). Forthwith means as soon as is reasonable or without delay: London Borough of Hillingdon v Cutler (1967). If the Contractor fails to comply with an instruction then the Employer may employ and pay others not simply to undertake the instructed works but also any work necessary to give effect to the instruction subject to clause 3.11. This will include any necessary additional professional fees. All costs incurred by the Employer in doing so, subject to any other relevant terms of the Contract, may be deducted from the Contract Sum. So far as the Contractor is concerned, three important general safeguards exist. 7.4.1 The default must last for 7 days following receipt of the written notice before the Employer can exercise that right. 7.4.2 The A/CA can issue only those instructions which the Contract empowers him to issue. Under clause 3.13 (an often under-used provision), the Contractor can insist that the A/CA specify, forthwith and in writing, precisely which provision(s) of the Conditions he considers empower him to issue the instruction concerned. Previously contractors may have been reluctant to use this facility since, once the A/CA gave his response the Contractor had, in effect, to accept it at face value. His only other option was, before compliance, to immediately arbitrate over whether the A/CA was or was not so empowered. Holding off from compliance whilst instigating arbitration proceedings would be a drastic step which few contractors would embark upon. Clause 3.13 makes the question reviewable by adjudication and so, contractors may well now be more willing to question the A/CA basic right to issue the instruction concerned.

7.2

7.3

7.4

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However, before the Contractor opts to take any such step, he should remember the main purpose of this clause. It is to ensure that he is entitled to be paid for instructions carried out. If the A/CA issues an instruction which he is not empowered to issue, the Contractor would not be entitled to be paid for it and he would also be in breach of contract if he carried it out. However, once the A/CA has responded positively to the Contractors question regarding the empowering clause, the Contractor can proceed to carry it out and the clause will be considered, for all the purposes of the Contract to be the empowering clause. 7.4.3 A/CAs instructions must be in writing. If not then they will be of no immediate effect - clause 3.12 refers. If originally given otherwise than in writing (and not confirmed in writing within 7 days by the A/CA) then within 7 days of the instruction the Contractor must confirm it in writing. If the A/CA does not dissent within 7 days of receipt of the Contractors confirmation the instruction then takes effect. If neither A/CA nor Contractor confirms the oral instruction in writing within the prescribed periods, it is open to the A/CA to ratify such an instruction at any time up to the issue of the final certificate. If the A/CA confirms it within 7 days then the Contractor does not need to confirm. 7.5 There are serious risks in a contractor complying with oral instructions immediately they are issued and the practice is certainly not advised. The Contract does not define how instructions must be issued. Provided they are issued (or confirmed) in writing, they may be issued in any form, provided that they can be clearly identified as instructions. That then leaves open the question whether a drawing issued with, say, a compliments slip amounts to an instruction and if so does it also amount to an instruction given otherwise than in writing. Drawings issued may be nothing more than an invitation to the Contractor to carry out the work without payment. Alternatively they may be sent to the Contractor for his comments. The A/CA should always, therefore, be asked at the outset to issue drawings under cover of an instruction if the work shown is to be constructed. If not issued in that way then, on receipt of any such drawing the Contractor should question its status (say, for example, by way of clause 3.12 or .13). Amongst the more important A/CA instructions empowered under the Contract are those relating to: i) ii) varying the Works (clause 3.14 (see also clause 5.1)); opening up works (clause 3.17). If the work is found to be free from defects, the Contractor must be paid for doing so. He is also in that case entitled to extension of time and loss and/or expense (provided he makes the appropriate applications); postponement of any work (clause 3.15). The consequences are extension of time, loss and/or expense and possibly termination of employment by the Contractor if the postponement lasts longer than the period specified in the Contract Particulars; exclusion of persons from site, but not unreasonably or vexatiously (clause 3.21); and removal from site of work found not to be in accordance with the Contract. Curiously, there is no express provision for an instruction to rectify defective work. If necessary, as a result of the defective work, the A/CA may issue instructions and the Contractor must comply at no addition to the Contract Sum. However, there should be consultation with the Contractor first. Refer clause 3.18.

7.6

7.7

7.8

7.9

iii)

iv) v)

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Provided it is reasonable to do so and provided that regard is had to the Code of Practice in the Contract (Schedule 4), the A/CA may issue instructions for opening up to establish that there are no similar defects. Again, the Contractor is not entitled to be paid for such opening up even if the work is found to be in accordance with the contract although he may be due an extension of time. 7.10 So far as clerk of works directions are concerned; these are of a limited authority. He can give directions only in regard to matters on which the A/CA is expressly empowered to give instructions. Also, if given by the clerk of works they will be deemed to be A/CAs instructions only if confirmed by the A/CA within 2 working days of being given by the clerk of works. Refer clause 3.4. Variations Most commonly, instructions are used to effect variations to the Works and in the case of Variations the Contractor has yet two further specific safeguards against abuse. Firstly, he has a general right of reasonable objection under clause 3.13 and a specific right under clause 3.10.1. Obviously for an instruction to be a valid variation it must bear some relationship to the original Works. Clause 3.14 sets out the A/CAs authority and scope of instructions for Variations. Where a Variation Quotation (Schedule 2) applies he need not - and indeed must not - comply with the instruction/variation until he has quoted for the work concerned and acceptance is confirmed by the A/CA in a Confirmed Acceptance (actual acceptance is by the Employer) or a further A/CA instruction is issued refer clauses 3.10.2, 5.3 and Schedule 2 paragraphs 4 and 5. Variations are defined as any alteration or modification of the design, quality or quantity of the Works, (clause 5.1). See also clause 3.14. Clauses 5.1.1.1, 5.1.1.2 and 5.1.1.3 are not a limitation on that definition. They merely expand on the general position and explain what circumstances might be included under an otherwise general description. Variations also arise, under clause 5.1.2, where the Employer imposes obligations on, or restricts the Contractor specifically with regard to: i) ii) iii) iv) site access or use, and/or limits on working space, and/or limits on working hours, and/or execution or completion of the work in any specific order.

8. 8.1

8.2

8.3

8.4

8.5

8.6

As stated above the Contractor has a right to reasonable objection under this provision 8.7 Although the omission of work by variation is sanctioned by the Contract, (clause 5.1.1.1), it is a breach of contract to omit work from the Contract in order to give it to another contractor to carry out: Carr v Berriman (1953); Vonlynn Holdings v Flaherty (1988); AMEC Building Ltd v Cadmus Investments Co Ltd (1996). Instructions must be issued in regard to the expenditure of provisional sums included in the Contract Bills. See clause 3.16.

8.8

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8.9

The A/CA has no authority to instruct acceleration. However, under Schedule 2 the A/CA can investigate on behalf of the Employer the possibility of achieving an earlier completion date by asking the Contractor to submit an Acceleration Quotation. The Contractor is under no obligation to accelerate. The procedure for obtaining and accepting an Acceleration Quotation is set out at Schedule 2.

9. 9.1

Other Documents and Information Descriptive Schedules: 9.1.1 As well as providing the Contractor with one certified copy of the Contract Documents, and two further copies of the Contract Drawings and unpriced Contract Bills refer to clause 2.8 the A/CA must also, as soon as possible after execution of the Contract, provide any other descriptive schedules or similar documents necessary in the carrying out of the Works. What precisely is meant by descriptive schedules and other similar documents is not explained. Arguably, this might even extend to, colour schedules, floor finishes schedules, ironmongery schedules, door and window schedules, British standards or the like. In that case, this clause could be of considerable importance to contractors and might open the door to claims that are not immediately apparent. Perhaps, despite common practice, contractors can insist on receiving all such documents even before the Works begin; i.e. as soon as possible after the execution of the Contract. Refer to clause 2.9.1. This then might affect the true meaning and scope of clause 2.12.

9.2

The Master Programme: 9.2.1 Clause 2.9.1.2 provides for a master programme. The programme is unlikely to be formally approved by the A/CA, but simply commented upon. If specified as required in the Contract Particulars the critical path or paths are to be shown on the programme along with any other details specified in the Contract Documents. 9.2.2 Unless the Contract is specifically amended to the contrary, (by deleting or amending clause 2.9.1.2), the Contractor will be expected to provide the A/CA with (2) copies of his master programme and to do so as soon as possible after execution of the Contract. 9.2.3 The clause should not be read as requiring the Contractor to produce such a programme but merely as requiring him to provide a copy for the A/CA if and to the extent that he has, in fact, produced one. It is extremely unlikely, verging on the incompetent, that the Contractor will not produce a programme. Therefore, for all practical purposes it can be assumed that he will do so. The Contractor is to provide an up dated version of the programme within 14 days of the A/CA making a decision under clause 2.28.1 (extension of time provision) or a Pre Agreed Adjustment (see clause 2.26.2).

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9.2.4 Commonly the Contract Bills will specify a particular type of programme should be provided and/or that it must contain certain specified information (e.g. Gantt chart, network, etc). Provided no attempt is made to override or modify the Conditions, such a requirement will then become a term of the contract. The programme concerned will not, strictly speaking, be a contract document; it is a document provided under the Contract. Nor, will it impose any additional obligations on the Contractor beyond those that already exist under the Contract refer to clause 2.9.3. Indeed, its status and effect is difficult to define. At best it will primarily be used to assist the A/CA and Contractor to monitor the Contractors actual progress and will be evidentially useful to measure the Contractors original intentions both as to the timing and sequence of the work (and perhaps, also, his associated anticipated cash flow expectations) against his actual progress on site i.e a management tool. The decision in Glenlion Construction Ltd v The Guinness Trust (1987) gives a useful insight into how the Courts view such programmes. Whereas the Contractor is free to decide how he carries out the Works and is entitled to make arrangements to finish earlier than the completion date, neither the Employer nor the A/CA is bound to supply information etc to enable him to achieve that earlier completion. 9.2.5 That said, if a programme is specifically made a contract document at the outset, it must be remembered that it binds both parties: Yorkshire Water Authority v Sir Alfred McAlpine & Son (Northern) (1985). 9.3 Information Release Schedule: 9.3.1 If an Information Release Schedule is provided, the A/CA must, subject only to any subsequent agreement to the contrary, issue the specified information to the Contractor in accordance with that Schedule (clause 2.11). But he need not do so if he is prevented by some act or default of the Contractor or any person for whom the Contractor is responsible i.e. a Contractors Person. 9.3.2 Where such a Schedule is to be provided the recitals should make that clear refer Recital 5. It should be noted that even then it will not be a Contract Document. If no schedule is provided and/or in the case of information not specifically referred to on the schedule, the A/CA must in any event, as and when from time to time may be necessary provide (to the Contractor) such further drawings or details which are reasonably necessary to explain and amplify the Contract Drawings. The A/CA shall issue such instructions to enable the Contractor to carry out and complete the Works in accordance with the Contract - refer clause 2.12.1. 9.4 Provision of other information, details and/or drawings: 9.4.1 Subject to the limits imposed by the Glenlion case referred to above, such further information must be provided by the A/CA at the right time having regard to the contract completion date and must be provided so as to enable the Contractor to complete by that date refer clause 2.12.2. 9.4.2 Information provided must be correct. Revisions must be identified and contractors should not be seen as having an obligation to find discrepancies in the information. It is incumbent on them merely to notify the A/CA should they find them: London Borough of Merton v Stanley Hugh Leach Ltd (1985). 9.4.3 If the Contractor is running late, it seems that the A/CA may time the issue of information to correspond with the Contractors progress but, that may be a dangerous thing to do. It leaves the way open for a contractor to argue that the lateness is, in fact, the result of late issue of information.

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9.4.4 Clause 2.12.2 is commonly read in the widest sense as meaning that the A/CA must provide ongoing design information as and when reasonably necessary whilst the Works are progressing. On a strict reading, that is not, however, what the clause says. The drafting is quite specific. It requires the A/CA to release such further drawings or details as are reasonably necessary, to explain and amplify the Contract Drawings. Reference is also made to issuing such instructions to enable the Contractor to carry out and complete the Works. Beyond that, there is no express reference in this clause to provision of any other information. Hence, on that strict reading this clause is capable of far narrower construction. Read together with clause 2.9 (see above) it may be argued that the Contract clearly envisages that all of the design information should and must be provided to the Contractor as so soon as possible after the execution of this Contract. 9.4.5 That said, where and to the extent that no Information Release Schedule is used, if the Contractor knows or has reasonable grounds to believe that the A/CA is not aware when he requires other information or drawings etc, the Contractor so far as is reasonably practicable is to advise the A/CA accordingly and in sufficient time provided it is reasonably practicable for him to do so. Refer clause 2.12.3. 9.4.6 The Contractor's programme can be an adequate request for information provided it is suitably marked to show when information is required and provided that it is kept up to date (Merton v Leach). Whether or not in the form of a master programme given under clause 2.9, a properly produced and resourced programme can in any case be useful as a tool for estimating extensions of time (particularly if computerised) and it may be the best available evidence of the Contractor's intentions when the contract commenced. 9.4.7 So far as site and other such information already provided in the Contract Bill preliminaries is concerned; the general rule is that the Contractor will be entitled to rely on that information as correct: Bacal Construction (Midland) Ltd v The Northampton Development Corporation (1976). If information is provided and a disclaimer included, it may amount to a misrepresentation: Cremdean Properties v Nash (1977).

10. 10.1

Statutory Requirements, Notices, Fees and Charges Clause 2.1 is of wider application than at first glance may appear. The obligations are not merely to comply with and give all statutory notices required by Acts of Parliament etc. The obligation extends to compliance with all Acts of Parliament etc. and to give all requisite statutory notices under them. The distinction is subtle yet it may well prove significant. See definition of Statutory Requirements at clause 1.1. Clause 2.17.3 gives the Contractor some comfort in that, if the Works, when built according to the Contract and other documents etc, do not comply with the Statutory Requirements then the Contractor will not be liable to the Employer this is subject to the Contractor not being in breach of clause 2.17.1. The Contractor may, of course, remain liable to any other party affected by, and with a right of action in respect of, such non conformance. He, of course, will be liable to any enforcing authority such as a local authority in the case of the building regulations. Clause 3.23 imposes duties on the Employer to ensure that the CDM Co-ordintor and Principal Contractor meet their statutory obligations under the CDM Regulations. See clause 2.21 regarding the payment of fees and charges.

10.2

10.3

10.4

Page 13 of 35

11. 11.1

Levels and Setting Out of the Works It should be noted that the A/CA is responsible not only for providing accurately dimensioned drawings for the purpose of setting out but also for determining any levels required for the execution of the Works. The Contractor is responsible for setting out to the information provided refer clause 2.10.

12. 12.1

Work, Materials and Goods Without express terms absolving the Contractor from providing even unprocurable materials and goods of the standard and quality specified, the obligation to meet the specification would, in effect, be absolute. Clause 2.3 does have such a saving provision. However, the phrase so far as procurable should not be confused with the often used term or other approved. In the case of materials and goods not procurable, provided the materials or goods have become unavailable on the open market since the time of tender, and provided the Contractor first seeks an A/CAs instruction to that effect, he may substitute materials or goods in place of those specified. However, where the phrase or other approved materials etc. is used, the position under private contracts will be that the A/CA cannot be required to approve such alternatives. Contractors cannot simply provide an alternative unless the A/CA chooses to give his consent: Leedsford Ltd v Bradford Corporation (1956). The A/CA need not give reasons for not doing so. With the introduction of EC Council Directives, use of the phrase equal and approved in the case of public works contracts (as defined under the Directive) is now prohibited. Where an authority is unable to specify by means of a sufficiently precise description then the trade name or the like must be accompanied by the words or equivalent. So far as defects in the specified workmanship or materials are concerned the Contractor is responsible for finding and correcting such defects throughout the course of construction. The A/CA has no obligation to the Contractor to find his defects for him: Oldschool v Gleeson (1976). He does, however, have a duty to his client or Employer to carry out inspection duties to establish that the work is being executed by the Contractor in accordance with the Contract Documents. The extent of that duty will depend upon the contract of engagement between A/CA and client. The clerk of works has little power under the Contract. He does, however, have a duty to inspect work on behalf of the Employer under the direction of the A/CA. See clause 3.4. Despite custom and practice having developed within the industry, neither the A/CA nor the clerk of works have any positive obligation under the Contract to issue snagging lists. Such lists are not referred to in the Contract except, that is, under clause 2.38 (schedule of defects) when, and in that case, they must be issued according to the strict timetable laid down. Clause 3.20 imposes an obligation on the A/CA to draw any dissatisfaction that he may have with the work, materials or goods used to the Contractor's attention within a reasonable time from its execution. However, this clause is linked to any work which is expressly stated as having to be to the reasonable satisfaction of the A/CA Clerks of works are known to mark goods they consider defective. Such goods are the property of the Contractor if they are rejected and he may wish to use them on another, less exacting, project. Defacing such goods may entitle the Contractor to make a charge.

12.2

12.3

12.4

12.5

12.6

12.7

12.8

12.9

Page 14 of 35

13. 13.1

Valuation of Variations The methods for valuation set down in Section 5 apply to: i) ii) iii) iv) all Variations; all work treated as if it was a variation; all work carried out against a provisional sum; and all work done for which approximate quantities were billed.

Refer clause 5.2. 13.2 Under SBC/Q05 there are three procedures available for the valuation of variations, provisional sums and/or approximate quantities. They are: 13.2.1 By agreement between Employer and Contractor: i) The Quantity Surveyor must apply the rules of the Contract strictly in accordance with clause 5, but he has no authority to decide liability: John Laing v County & District Properties (1982). The Employer, on the other hand, is free to agree with the Contractor either the price to be paid for Variations or, more fundamentally, any alternative rules / methods for valuation of Variations. Provided such agreements are properly made they will then override the Contractual rules for valuation and any agreement on price will be binding, in lieu of any price or rate otherwise applicable by reference to clause 5. Whether from the Contractors or the Employers point of view, such agreements must be carefully made if all financial implications of the variation are to be taken into account. That is not always as easy as it first appears and not unusually agreements are later wholly denied or, more often, the parties later find themselves arguing about precisely what was or was not included in their agreement. Therefore, it is sensible for such agreements to be recorded or confirmed in writing.

ii)

iii)

13.2.2 i)

By reference to an accepted Variation Quotation (Schedule 2): Provided the Contractor agrees, the A/CA may, at the time of issuing his variation instruction, ask the Contractor to first give a Variation Quotation before complying with the variation instruction. Any instruction given by the A/CA under clause 5.3 (Variation Quotation) must be accompanied by sufficient information to enable a quotation to be given. If the Contractor considers the information provided insufficient or deficient then within 7 days from receiving the instruction, he must ask the A/CA to provide the required information. Footnote [63] at Schedule 2 explains that sufficient means: information similar to that provided for the initial tender purposes, including where appropriate a) b) c) drawings; and/or specifications; and/or addendum bills of quantities
Page 15 of 35

ii)

iii)

Clauses 2.13 & 14 apply to such addendum bills just as they do to the Contract Bills. Thus, unless specifically stated otherwise, any bills provided for a Variation 2 Quotation will be deemed to be measured in accordance with SMM7 unless agreed otherwise. iv) The Contractor is to submit his quotation within 21 days (see paragraph 3 Schedule 2) to the Quantity Surveyor or A/CA. The quotation must be submitted in compliance with any particular requirements of the instruction and must in all instances state, with full particulars and calculations (see paragraph 1 Schedule 2): a) the full price for the Variation including the cost of all necessarily associated work and preliminaries; any associated loss and/or expense; a fair and reasonable amount for the costs of preparing the quotation; and any adjustment of time required for Completion (this can include reducing the Contractual Completion Date)

b) c) d)

v)

If specifically asked to do so the Contractor must also give indicative information concerning: e) f) additional resources that will be required; and any proposed particular methods for carrying out the Variation concerned.

vi)

Following receipt by the Quantity Surveyor or A/CA, the Employer then has 7 days (i.e. before close of business on the 7th. day), within which to decide whether or not he accepts. If it is accepted the A/CA issues a Confirmed Acceptance instruction. On a strict reading of the Contract, it seems that the Employer cannot accept a part or parts of the quotation. He must accept it all or not at all. Hence, even if the price is acceptable but the loss and/or expense or extension of time is not, then the whole quotation falls. However, practically in such a situation it is likely that negotiations will take place.

vii)

According to Schedule 2 paragraph 3, the Contractors offer must stay open for the whole 7 days after receipt by the Quantity Surveyor or A/CA. This is an express term of the Contract. That then raises the question of whether the Contractor may withdraw his quotation before it is accepted should he find an error or omission in his price. The general position is that offers (or tenders) may be withdrawn at any time before acceptance except where there is a binding and legally enforceable agreement to hold the offer open for a given time. It seems that a Variation Quotation constitutes such a binding agreement. Hence, strictly speaking withdrawal of the quotation before expiry of the 7 day acceptance period would amount to a breach of that agreement. In theory, at least, such early withdrawal would entitle the Employer to damages.

Page 16 of 35

viii)

Assuming the quotation is correct, up to 35 days may elapse (i.e. 7 days + 21 days + 7 days) during which the Contractor cannot and must not carry out the variation. Even if the Employer directly notifies the Contractor of his acceptance of the quotation, the Contractor still must not carry out the work concerned (Schedule 2 paragraph 1.3) unless and until the A/CA properly issues a Confirmed Acceptance. The Confirmed Acceptance must be in the form prescribed by Schedule 2 paragraph 4 and must be sent by the A/CA. Schedule 2 paragraph 4 sets out the form and content of any Confirmed Acceptance. Where a Variation Quotation is concerned it is now apparently possible not only to reduce any previous extension of time but also, where appropriate, to reduce the Contractual Completion Date entered in the Contract Particulars. This is a fundamental departure from the extension of time philosophy under clauses 2.26 to 29 generally, and clause 2.28.6.3 in particular. Clause 2.28.6.3 provides that; no decision of the A/CA under clause 2.28.4 or clause 2.28.5.2 shall fix a Completion Date for the Works or any Section earlier than the relevant Date for Completion. However, the Contractors quotation is accepted by the Employer. The parties are at liberty to agree such changes to their Contract as they wish.

ix)

If not accepted by the Employer within 7 days of being given to the Quantity Surveyor or A/CA, the Contractors quotation will lapse. It cannot then be resurrected and the A/CA must immediately instruct either that, the variation be ignored altogether or that it be carried out and that the work then is valued in the normal way i.e. under clauses 5.6 to 10. Refer Schedule 2 paragraph 5.

(Note: Schedule 2 though not a Variation as defined within the Contract Schedule 2 makes provision for obtaining an Acceleration Quotation from the Contractor.) 13.2.3 i) The Usual Contractual Mechanism If the Variation Quotation procedure is not adopted then the price for the Variation must be determined using the Valuation Rules clauses 5.6 to 5.10. The basis of the Valuation Rules is broadly, that similar work carried out under similar conditions is to be valued at the rates in the Contract Bills. Where there are dissimilar elements, an appropriate adjustment must be made to the rates. If it is not possible to base the rates on Contract Bill rates, then fair rates and prices must be used. Allowance in respect of preliminaries, if appropriate, must be made in any valuation. If a valuation cannot be achieved by measurement, then dayworks should be used.

ii)

14. 14.1

Certification and Payment From commencement and until practical completion, the A/CA must issue certificates at the periods stated in the Contract Particulars (clause 4.9.2) and must issue them in the manner provided in clause 4. After practical completion the certificates are to be issued every two months and on the expiry of the Rectification Period or the issue of the Certificate of Making Good. They must: i) ii) iii) state the amount, if any, due to the Contractor, and specify to what that amount relates, and specify the basis on which that amount is calculated.
Page 17 of 35

14.2

For the purposes of certifying, the A/CA may require the Quantity Surveyor to prepare a valuation. If he does then the Quantity Surveyor must undertake the valuation refer clause 4.11. The Quantity Surveyor must in any event make an interim valuation if and when the Contractor makes an application for payment, provided the application is made in the manner and at the time specified in clause 4.12. In the past, no specific contractual provision existed governing such applications albeit that, contractors customarily submitted them in one form or other. JCT 98 introduced this provision which has been carried on in SBC/Q05. Clause 4.12 expressly provides for how they are to be dealt with if and when the Contractor chooses to make such an application. If he does so then, it must be made no later than 7 days before the Certificate it refers to is due. It must be valued in accordance with the contract valuation rules. If the Quantity Surveyor disagrees with the amount claimed in the Contractors application he must specify where and why he disagrees. The Contractor can and should insist on receiving a detailed explanation of the disagreements. That explanation should be equal in the level of detail to that in the application made by the Contractor. Whether the Quantity Surveyor values the Works himself or by reference to an application from the Contractor under clause 4.12, the A/CA is not bound to accept that valuation: R B Burden v Swansea (1957). He is responsible for certifying and should satisfy himself to a reasonable extent that the valuation accurately represents work properly carried out. This may be achieved by asking the Quantity Surveyor to break down the valuation into recognisable sections. It used to be thought that an interim certificate was as good as cash. It is not quite like that and if an employer has good grounds for disputing a certificate he may refuse to pay and successfully resist an application for summary judgment. The grounds must be strong: Pillings v Kent Investments (1985); R M Douglas v Bass Leisure (1991). But see the essential notices below. In compliance with the requirements of the Housing Grants, Construction and Regeneration Act 1996, all JCT contracts make provision for the necessary notices to be given by the Employer in respect of payment. The Act came into force on the 1 May 1998. The Act will be subject to change when the Local Democracy Economic, Development and Construction Act 2009 comes into force this date is still to be determined.

14.3

14.4

14.5

14.6

14.7

14.8

15. 15.1

Notice Before Payment Not later than 5 days after the certificate has been issued, the Employer must give a written notice to the Contractor stating, (in respect of the amount stated as due in the certificate), how much he intends to pay (clause 4.13.3). He must also specify to what that payment relates and the basis on which it is calculated. It is difficult to see the logic of this provision in SBC/Q05 since, provision already exists for the Contractor to be sent a copy of the certificate immediately it is issued to the Employer (clause 1.8). Moreover, that certificate must also state, the amount due, to what that amount relates and the basis upon which it has been calculated, (clause 4.9.1). The best that can be said is that, this first 5 day notice may in certain unique circumstances differ from the certificate since the amount shown as due on the certificate is calculated by deducting the value of the previous certificate rather than the amount actually previously paid. In those circumstances there may be some justification for it. Alternatively an employer may disagree with how the amount stated as due in the certificate has been calculated by the A/CA or Quantity Surveyor.

15.2

Page 18 of 35

15.3

The reason for the inclusion of what seems to be a superfluous requirement is simply that it is in compliance with the Housing Grants, Construction and Regeneration Act 1996. The Act is neither concerned specifically with JCT contracts nor even with contracts where a certificate is issued. It is concerned with all construction contracts where a payment is to be made. If there is no provision for certification (as in many sub-contracts), it is important that the receiving party knows as soon as possible how much money is proposed to be paid. It would seem that given clause 4.13.5 there is no sanction for an employer should he fail to issue such a notice.

15.4

16. 16.1

Notice of Intention to Withhold If the Employer intends withholding all or any part of the due amount (which seemingly, but may not always, is the amount stated on the certificate as due), this second notice must be given, by the Employer to the Contractor (e.g. liquidated damages). This second notice must be given not later than 5 clear days before the final date for payment; the final date for payment is 14 days from the issue of the certificate refer clauses 4.13.1 & 4. It must specify each of the grounds for withholding, the sums concerned and the amount withheld in respect of each ground. Clause 4.13.5 provides that if the Employer does not give the 4.13.3 and/or the 4.13.4 notices, he has no option but to pay the amount shown on the certificate and will have no option but to try to claim back later any amount he would otherwise have been able to deduct.

16.2

17. 17.1

Right to Suspend Work This right is included in response to the Housing Grants, Construction and Regeneration Act 1996. The JCT contracts, including SBC/Q05, include this provision. The right is set out at clause 4.14. It is said to be without affect on any other rights and remedies which the Contractor may possess. This means that if the Contractor exercises this right it does not preclude him from exercising other rights either under the Contract or at common law. If the Employer fails to pay the Contractor in full the amount due by the final date for payment, the Contractor may issue a notice to the Employer stating his intention to suspend. It must also state the grounds for such suspension. The notice must be given in writing and it must be a seven-day notice. In other words, it must allow the Employer seven days within which to pay the money properly due. Obviously, the Employer is not obliged to pay any amount for which he has issued a valid notice stating that he intends to withhold payment. It should be noted that in order to comply with the clause (but not the Act), the Contractor must send a copy of the notice to the A/CA refer clause 4.14. The notice is to be sent by special delivery or by recorded delivery to ensure that it is received and that there is evidence to that effect (see clause 1.7). The suspension may continue until the payment has been made in full payment includes any VAT due. Strictly speaking, the need to copy the A/CA with the notice is not a requirement of the Act. However, if the Contractor omits to send it he will be in breach of the Contract and may well prejudice his position in suspending. He should therefore follow the procedure strictly. The Contractor is entitled to an extension of time and appropriate loss and/or expense as a result of any proper suspension.

17.2

17.3

17.4

17.5

17.6

Page 19 of 35

18. 18.1

Interest & Certificates The general position, so far as interest is concerned, is fairly complicated. Suffice to say, that it is not enough for the party to be late in receiving payment in order to be entitled to interest. In order for interest to be payable, certain requirements must be met. There must be either an express or implied term of the Contract to that effect, or the interest must be payable either as part of damages or awarded by an arbitrator or the Court. For many years JCT contracts did not have provision for interest on late payment. However following the Latham Report the JCT contracts were amended to provide that if the Employer fails to pay the amount due to the Contractor by the final date for payment either in the case of an Interim Certificate or in the case of the Final Certificate, he must pay interest to the Contractor at the rate of five per cent above the base rate of the Bank of England current at the date when the payment became overdue. See clauses 4.13.6 & 4.15.6 and clause 1.1 for the definition of Interest Rate. In addition we now have the Late Payment of Commercial Debts (Interest) Act 1998. It is specifically stated that payment of this simple interest is not to be taken as a waiver of the Contractors rights to proper payment nor of his right to suspend his obligations or terminate his employment in appropriate circumstances. These provisions are probably inserted for the avoidance of doubt. The interest provision is intended to prevent an unscrupulous employer from using a contractor as a bank. Obviously, the failure to pay the amount due under a contract refers to the amount shown on any certificate after all proper deductions have been made and after, if appropriate, the giving of necessary notices. Interim certificates are not conclusive see clause 1.10. That is to say, the fact that the A/CA certifies a sum against any item(s) of work will not of itself be conclusive that work is properly executed and is in accordance with the Contract. In addition, they are, of course, cumulative, in that each one shows the total amount due to the Contractor and then deducts amounts already certified. It follows that subsequent interim certificates can be adjusted downwards and may even result in a negative amount due. The Final Certificate has limited, but important, conclusive effect refer clause 1.9. Unless arbitrated /adjudicated within 28 days after its issue the amount stated will be deemed to be the correct statement of the adjusted Contract Sum, except where there is: i) ii) fraud or accidental inclusion or exclusion of any work, materials, goods or figure in any computation, or any arithmetical error in any computation.

18.2

18.3

18.4

18.5

iii) 18.6

The Final Certificate is also conclusive as to the amount of loss and/or expense due under clause 4 but, in that case there apparently is only one exception; fraud. So far as loss and/or expense is concerned there seemingly is no scope for reviewing errors or omissions. It is also conclusive evidence that all extensions of time have been given under the contract.

19. 19.1

Priced Activity Schedule If this is to apply under SBC/Q05 then it should be stated at Recital 2. The Activity Schedule should be attached to the executed Contract. Each activity must be priced so that the total of the prices equals the Contract Sum, less provisional sums, prime cost sums, Contractor's profits on these and the value of any work for which approximate quantities are included in the Contract Bills. See footnote [3] to Recital 2.
Page 20 of 35

19.2

The Contractor has the option as to whether or not he provides a Priced Activity Schedule. If he does, it is used to assist in the valuation of interim certificates refer clause 4.16.1.1. The prices in the activity schedule are to be proportioned so as to calculate the amount included within the Interim Certificate. It seems unusual, at first sight, to use a Priced Activity Schedule as well as Contract Bills. But, it should be noted that even when a Priced Activity Schedule is used, Contract Bills are still used to value Variations. Beyond the most general outline, SBC/Q05 gives little or no clear definition of what information must be contained and described in the Priced Activity Schedule.

19.3

19.4

20. 20.1

Off-Site Materials If the Employer wishes to pay for materials off-site, a list of the materials should be attached to the Contract Bills refer clause 4.17. The items on the list are to be divided into two parts: in the first part are uniquely identified items and in the second part not uniquely identified items. Uniquely identified items are those materials which are easy to recognise, such as heating boilers, or sanitary fittings and the like. Items not uniquely identified cover such things as bricks, sand, tiles, timber and anything which it would be difficult to recognise as being for a particular project. If materials are listed then the A/CA must include all such listed materials in the valuation in any interim certificate and he must do so before their delivery to site. This is subject to the fulfilment by the Contractor of certain specific criteria. They are as follows: i) The Contractor must have provided the A/CA with a reasonable proof that he owns the items so that after he has been paid the value of items included in interim certificates the ownership of the items will pass to the Employer. The Contractor must provide the Employer with a bond, if so required by an entry in the Contract Particulars. See Part 2 of Schedule 6. The items must be in accordance with the Contract Documents. At the premises where they have been manufactured or stored they must both be set on one side and clearly marked so as to identify the Employer whose order they are and that they are destined for the Works. The Contractor must have provided reasonable proof that the items are insured in respect of specified perils.

20.2

ii)

iii) iv)

v)

21.

Advanced Payment and Bond (Note that this does not apply to LA refer Contract Particulars clause 4.8) If the Employer wishes, he may make an advance payment to the Contractor; for example to allow him to order or purchase materials. A bond will normally be required and the Contractor is obliged to repay the amount in instalments. This is achieved by the A/CA deducting the instalments from interim certificates refer clauses 4.8 & 4.10 and Part 1 Schedule 6. For there to be provision for advance payment there must be an appropriate entry to that effect in the Contract Particulars. It is important to note that, a separate entry is required if the advanced payment is to be bonded. A sample bond is provided at Part 1 Schedule 6 and clause 4.8 deals with the procedure.

21.1

21.2

Page 21 of 35

21.3

The idea is that the Employer may make a payment to the Contractor at a specified time, usually intended to be at the beginning of the Contract Works, and that, the Contractor repays that advance payment by instalments at specified times throughout the Contract period. The repayments will be achieved by the deducting from amounts included within interim certificates. Unless specific amendment is made to clause 4.8 there apparently is no provision for the terms of the Bond to be revised. Consequently, the bond should be in the standard form. Any change to the standard terms must be expressly agreed between the Employer and the Contractor. If the bond is called in the Employer must make his demand in the specified form and the Contract contains a sample notice of demand which must be used if it becomes necessary to require payment from the surety. Retention SBC/Q05 confers trust status on retention money - refer clause 4.18.1. That is the meaning of fiduciary the Employer holds the Contractors money by agreement but without an obligation to invest. In such circumstances, the law is perfectly clear following a succession of cases starting with Rayack Construction Ltd v Lampeter Meat Co Ltd (1979). The Employer is obliged to keep the retention money in a separate bank account and entitled to retain any interest. That is the situation even if the clause stipulating setting the money aside has been deleted from the Contract. Refer clause 4.18.3. Where a LA is involved there is no express requirement to place the retention into a separate bank account. The requirement to place retention money in a separate account does not depend on individual requests and a request can be made at any time (J F Finnegan Ltd v Ford Sellar Morris Development Ltd (No 2) (1991)), but there is no trust fund until money is set aside: MacJordan Construction Limited v Brookmount Erostin Limited (In Administrative Receivership) (1991). The court may grant a mandatory injunction requiring the money to be set aside, but that is subject to all the circumstances. If the Contractor is excessively late in applying to the court or if the Employer can show that there is an entitlement under the contract to deduct from the retention a liquidated sum which is greater than the amount of the retention, an injunction is unlikely to be granted: GPT Realisations Limited v Panatown Limited (1992). Clause 4.13.2 allows the Employer to make deductions against the Retention monies. Bodill & Sons (Contractors) Ltd v Harmail Singh Mattu [2007] held that the account should be clearly identified as a trust account. There is provision for the Contractor to provide a bond in lieu of retention if the parties so agree. Refer to Schedule 6, Part 3.

21.4

21.5

21.6

22. 22.1

22.2

22.3

22.4

23. 23.1

Loss and/or Expense Claims tend to arise from: i) ii) iii) iv) v) vi) late information; conflicting contract provisions; interference by the Employer; revisions to drawings; A/CAs instructions; other people on the Works (direct works); and lack of understanding of contract by both parties.

Page 22 of 35

23.2

There are three basic types of claim: i) ii) iii) Contractual: which fall within the contract provisions and to be addressed by the A/CA; Common law: (or ex-contractual), which fall outside the provisions of the contract and should be settled by the Employer; and Ex-gratia: which have no legal basis and are sometimes called `hardship claims' which should be settled by the Employer.

23.3

In London Borough of Merton v Stanley Hugh Leach Ltd (1985), Vinelott J said: The Contractor must act reasonably: his application must be framed with sufficient particularity to enable the A/CA to do what he is required to do. He must make his application within a reasonable time: it must not be made so late that, for instance, the A/CA can no longer form a competent opinion on the matters on which he is required to form an opinion or satisfy himself that the Contractor has suffered the loss or expense claimed. But in considering whether the Contractor has acted reasonably and with reasonable expedition it must be borne in mind that the A/CA is not a stranger to the work and may in some cases have a very detailed knowledge of the progress of the work and of the Contractor's planning. And later: The Contractor must clearly co-operate with the A/CA or the Quantity Surveyor giving such particulars of the loss or expenses claimed as the A/CA or Quantity Surveyor may require to enable him to ascertain the extent of that loss or expense; clearly the Contractor cannot complain that the A/CA has failed to ascertain or to instruct the Quantity Surveyor to ascertain the amount of direct loss or expense attributable to one of the specified heads if he has failed adequately to answer a request for information which the A/CA requires if he or the Quantity Surveyor is to carry out that task. And again: If (the Contractor) makes a claim but fails to do so with sufficient particularity to enable the A/CA to perform his duty or if he fails to answer a reasonable request for further information he may lose any right to recover loss or expense under (clause 11 (6) or clause 24(1)) and may not be in a position to complain that the A/CA was in breach of his duty. At the time the judge was referring to the JCT 63 standard form of Contract but the principles would seem equally to apply to SBCQ/05.

23.4

The contract machinery for dealing with loss and/or expense claims is to be found at clauses 4.23 to 26 of SBC/Q05. Under the provisions of clauses 4.23 to 26 the Contractor must make applications for reimbursement of loss and/or expense as soon as it has become reasonably apparent that regular progress is likely to be disrupted by one of the Relevant Matters listed at clause 4.24 or due to deferred possession of the site by the Employer. The Contractor must provide supporting information reasonably necessary to enable the A/CA to form an opinion in principle as to whether an entitlement exists and then to allow the QS to ascertain the value (if the A/CA has instructed him to do so). Should the A/CA instruct the Quantity Surveyor to undertake an ascertainment then clear instruction should be given as to what is to be ascertained and over what period(s). The Contractor can claim loss and/or expense if the regular progress of the works has been delayed by one of the Relevant Matters (clause 4.24) or possession of the site has been deferred (clause 2.5). There are 5 Relevant Matters with the fifth being a general sweep up provision for all acts impediments etc. for which the Employer is liable. Any amounts ascertained are to be added to the Contract Sum.
Page 23 of 35

23.5

23.6

23.7

The right to seek to recover loss and/or expense under the Contract is with out prejudice to any other rights the Contactor may have. This means that the Contractor could decline to recover under the Contract but sue for damages at common law. This has disadvantages as Variations are not breaches of contract and therefore loss and/or expense associated with these may not be recoverable at common law though it would be recoverable under the express provisions of clauses 4.23 and 4. See also clause 1.9.1.4 and the effect of the Final Certificate.

24. 24.1

Adjustments of Completion Date (Extension of Time) Every contract has an implied term that an employer will not hinder the Contractor in carrying out the Works. Hindrance can take the form of positive prevention or such things as requesting extra work or late information. Hindrance may remove a Contractor's obligation to finish on the contract date for completion: Percy Bilton v GLC (1982). The Contractors obligation would then be to complete within a reasonable time i.e. time will be at large. Where time is at large, an employer cannot deduct liquidated damages, because there is no specific date from which the damages can be calculated: Miller v LCC (1934). The A/CA does not have any implied power to fix a new date for completion. The power must be clearly set out in the contract: Peak Construction v McKinney Foundations (1970). SBC/Q05 deals with it in at clauses 2.26 to 29. In brief, the procedure is that the Contractor must notify the A/CA of all delays, however caused, as soon as the Contractor is aware or ought to have been aware of the delay. If the Contractor is in breach of this obligation, the A/CA is entitled to consider the breach when making an extension of time (London Borough of Merton v Stanley Hugh Leach Ltd (1985)). It appears that notice under the Contract is not a condition precedent to the making of an extension of time and the A/CA must ensure that all extensions of time (particularly for those delays which are the responsibility of the Employer) are given. This is reflected within the A/CA authority to look at all delaying Relevant Events during the post practical completion review rather than just those for which the Contractor has given notice. The Contractor must identify to the A/CA all causes of delay and those the Contractor believes are Relevant Events and an estimate of the delay to the completion date caused by each event. Once the A/CA has sufficient information, he must reach a decision within 12 weeks or endeavour (strive/attempt) to reach a decision by the Completion Date if it is less than 12 weeks away. After the date for completion has passed the A/CA has to review extensions of time and he is obliged to do so no later than 12 weeks after practical completion. The A/CA may: i) ii) iii) confirm the completion date already fixed; or fix a new later completion date; or in certain circumstances fix a completion date earlier than that previously fixed.

24.6

24.7

24.8

In doing so, the A/CA can take any Contractors notices into account, but if there have been no notices, he is entitled to use his own knowledge of the project. The object is to prevent time becoming at large. For each extension of time the A/CA must identify the time allocated to each Relevant Event or Relevant Omission refer clause 2.28.3. 24.9 The Contractor has an obligation to use his best endeavours to prevent delay. That does not mean that he must put more resources onto the project or spend more money. If it did mean that, there would be little need for an extension of time clause. It probably means no more than that the Contractor must continue to work regularly and diligently.

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24.10

There is provision within Schedule 2 for obtaining an Acceleration Quotation from the Contractor. The Contractor is not under an obligation to accelerate. The procedure for obtaining and accepting an Acceleration Quotation is similar to that for a Variation Quotation (see above under Valuation of Variations) though the content of the Quotation is different see paragraph 2.1.1 of Schedule 2. See also clauses 2.26.2 and 4.3.2.

25. 25.1

Liquidated Damages The rules for deciding whether a sum is to be considered liquidated damages or a penalty were formulated by Lord Dunedin in Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd (1915). These are set out below. i) Though the parties to a contract who use the words penalty or liquidated damages may prima facie be supposed to mean what they say, yet the expression used is not conclusive. The court must find out whether the payment stipulated is in truth a penalty or liquidated damages. XXX The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre-estimate of damage.

ii)

The question whether a sum stipulated is a penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged at the time of making the contract, not as at the time of the breach. 25.2 Unless the sum is a genuine pre-estimate under all circumstances, it will not be upheld. Where complexities may arise, they should be severed from the primary liquidated damages provision. Lord Dunedin set out tests which could prove helpful or even conclusive: i) It will be held to be a penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss which could conceivably be proved to have followed from the breach. It will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid. There is a presumption (but no more) that it is a penalty when a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damages.

25.3

ii)

iii)

25.4

The application of this principle is clearly to be seen in Ariston SRL v Charley Records Ltd (1990), where a sum of money claimable if certain manufacturing parts were not returned within 10 working days was held to be a penalty, because the same sum was payable whether the whole or just a few of the parts were late. It is suggested that the principle is the key to some other decisions in relation to building contracts where there have been no proper provisions for dividing a single sum, expressed as liquidated damages, to allow for the completion and taking into possession of part of a building. (iv) It is no obstacle to the sum stipulated being a genuine pre-estimate of damage that the consequences of the breach are such as to make precise pre-estimation almost an impossibility. On the contrary, that is just the situation when it is probable that pre-estimated damage was the true bargain between the parties.

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25.5

The two important considerations are the extent to which an accurate pre- estimate of loss can be carried out and the existence of different events, each of which are said to give rise to liquidated damages. But the decision of the Privy Council of the House of Lords in Philips Hong Kong Ltd v Attorney General of Hong Kong (1993) is significant. The Law Lords held that hypothetical situations cannot be used to defeat a liquidated damages clause. The courts will take a pragmatic approach. Clause 2.32 deals with liquidated damages. The A/CA must issue a Non-Completion Certificate if the Contractor fails to complete the Works by the completion date refer clause 2.31. This certificate must be issued before an employer can deduct liquidated damages. In addition if the Employer wants to recover or deduct damages, he must send a written notice to the Contractor so informing him no later than 5 days before the final date for payment of the amount due under the Final Certificate that the Employer may deduct liquidated damages. Also before making the deduction, a withholding notice must be issued in the usual way by the Employer against the relevant certificate. Alternatively, an employer could recover the liquidated damages as a debt.

25.6

26. 26.1

Practical Completion The consequences of practical completion are that: i) ii) iii) iv) v) the Rectification Period starts; the Contractor's liability for clause 6.7A insurance ends; the Liability for liquidated damages ends; the Employer's right to deduct full retention ends; and interim certificates are issued on a 2 monthly cycle.

26.2

Practical completion is not defined in the Conditions, but it has been defined in a number of court decisions (for example: Jarvis v Westminster (1969), Neville (Sunblest) v William Press (1981)). The decision in the Hong Kong case Mariner International Hotels Ltd & Another v Atlas Ltd & Another (2006) reviewed the English authorities and confirmed the rather strict criteria. Taking all the cases together, a working definition is probably that the A/CA should certify practical completion (issue a Practical Completion Certificate) when the work is complete except for minor (trivial) items of work and defects. There are added requirement that the Contractor has provided the necessary information for the Health and Safety file (CDM). Therefore, two possible criteria must be satisfied before the A/CA can certify practical completion under clause 2.30: i) ii) Practical completion in the physical sense; and Provision of necessary information for the health and safety file.

It should be noted that where the CDP provisions apply the Contactor has to supply the as built drawings in accordance with clause 2.40. 26.3 Practical completion is dealt with in clause 2.30.

Page 26 of 35

27. 27.1

Rectification Period Clause 2.38 states that defects which become apparent during (or are apparent at the beginning of) the Rectification Period are to be listed by the A/CA at the end of the period and sent as a schedule to the Contractor to be made good. The words `defects, shrinkages and other faults' are to be interpreted ejusdem generis so that `other faults' means other faults of the same type as defects and shrinkages. The Contractor has a valuable right by virtue of this clause. He may return to correct defects at a lower cost than if some other firm was engaged. If the Employer does not want the Contractor to make good defects etc, then the A/CA may issue an instruction accordingly and an `appropriate deduction' to the Contract sum must be made. An appropriate deduction will generally be what it would have cost the Contractor to make good the defect himself: William Tomkinson v Parochial Church Council of St Michael (1990). There are instances when the A/CA may forget to issue the schedule on time. Although this is a failure to operate the contract provisions correctly, it is not fatal to the Employer's right to receive the building constructed in accordance with the contract: Pearce & High v Baxter (1999). A defect is a breach of contract and the Employer has the right to be put into the same position, so far as money can, as if the breach had not occurred. In such a case, the A/CA should write to the Contractor, listing the defects and asking if the Contractor is prepared to rectify them at his own cost. The alternative being for the Employer to engage others to rectify, but because the schedule is late he may only charge the cost to the Contractor which it would have cost the Contractor to make good. Depending upon whether the contract is executed under hand or as a deed, the Contractor is liable for defects for either 6 or 12 years from the date of the breach. A latent defect is one which is hidden during the contract period and the Rectification Period and becomes detectable thereafter.

27.2

28. 28.1

Final Certificate Notice before payment 28.1.1 The provisions in SBC/Q05 regarding the notice before payment of the amount due under the Final Certificate are similar to those required before payment of interim certificates. Refer to clause 4.15 which set outs when the Final Certificate should be issued and the corresponding notices. 28.1.2 In summary, a notice must be given in writing no later than five days after the issue date of the Final Certificate. It must specify the amount of payment proposed to be made in respect of the balance due under it and the basis of calculating that amount must be stated. Refer to clause 4.15.3.

28.2

Notice of intention to withhold 28.2.1 Again, the procedure for a withholding notice closely follows that required in connection with interim certificates. If the Employer intends to withhold any amount from the final payment, he must specify the amount in a written notice. That written notice must be given no later than five clear days before the final date for payment which, so far as the payment of the Final Certificate is concerned, is 28 days from the date the Final Certificate is issued. Refer to clause 4.15.4. 28.2.2 The grounds for each proposed deduction must be stated and the amounts attributed to each ground must also be stated. Failure to issue this notice would mean that the Employer has no option but to pay the amount stated as due in the Final Certificate unless a 5 day payment notice had been issued. See clause 4.15.5.

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28.3

It is important that the A/CA takes the appropriate steps leading up to the issue of the Final Certificate. A failure to do so could invalidate the conclusiveness of the Final Certificate. See Cantrell v Wright & Fuller Ltd (2003). See clause 1.9.

29. 29.1

Termination Clause 8.4 allows the Employer to terminate the Contractor's employment for matters such as abandonment or substantial suspension of the Works; a failure to proceed regularly and diligently; neglecting written instructions to remove work if as a result the Works are substantially affected; the Contractors failure to operate the sub-letting or assignment provisions properly; or his failure to comply with the CDM Regulations. Pre-requisites to termination for such events are: i) ii) the A/CA must first give notice specifying the default(s); the Contractor must have continued the specified default(s) for 14 days from receipt of the notice; the Employer may on the expiry of the 14 days or within 21 days from the date of expiry of the 14 days give a notice terminating the Contractors employment. if the Employer does not give notice following the expiry of the 14 days but later the Contractor repeats the default then the Employer within a reasonable time of the repeated default may give notice terminating the Contractors employment.

iii)

iv)

29.3

If the Contractor is insolvent within the terms of clause 8.5 (see clause 8.1) then the Employer may at anytime give a notice terminating the Contractors employment. Note the effect of the Contractor being insolvent as set out in clause 8.5 e.g. payments cease. These occur even though the Contractors employment has not been terminated. Until the Employer decides what to do, the Employer need not make any further payments. Nor need the Contractor do any more work, unless, of course, the parties agree otherwise, pending the Employer making up his mind. Following termination in the manner outlined above, the Employer is entitled to use the Contractor's equipment and engage others to complete the Works note not equipment owned by others e.g. sub-contractors. The Contractor is not entitled to any further payment or release of retention until the Works are completed by others including defects and the accounting process completed - refer clause 8.7.3. The Employer is entitled to recover loss and damage sustained by the termination refer 8.7.4.1. Put briefly, the Employer's position, financially, should be no worse than would have been the case if the termination had not taken place and the original contractor had properly performed his contractual duties. The Employer can opt not to complete the work. Clause 8.9 provides for termination by the Contractor due to certain specified Employer defaults and/or certain specified suspension events. Specified Employer defaults include, failure to make payment as and when required to do so, the Employer interfering with the issue of a certificate, and the Employers failure to comply with the CDM Regulations. Specified suspension events include, suspension of work for a period noted in the Contract Particulars as a result of a number of A/CA generated situations (including failure to meet the requirements of the Information Release Schedule and issue of instructions) or any act, etc of the A/CA, QS, Employer or Employers Person.

29.4

29.5

29.6

29.7

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29.8

The first time the Employer defaults or the specified event arises, the Employer has similar safeguards to those of the Contractor in that the Contractors right to terminate depends on; i) ii) the Contractor first giving written notice specifying the default(s) or event; the Employer continuing the specified default(s) or event for a further 14 days from receipt of the notice; the Contractor may on the expiry of the 14 days or within 21 days from the date of expiry of the 14 days give a notice terminating the Contractors employment.

iii)

29.9

These safeguards do not apply where the default or event is later repeated. In that case, subject only to the test of reasonableness, the termination can be effected by immediate notice. The Contractor can give notice of termination following the insolvency of the Employer refer clause 8.10. The consequences of the Contractor invoked termination would be costly for an employer. They include an entitlement to loss and damage caused by the termination. The Contractor may claim loss of the profit he would have made if he had been allowed to carry out and complete the Works provided of course he could demonstrate that a profit would have been made. Clause 8.11 deals with termination by either party on account of suspension of the work for events such as force majeure, civil commotion, terrorist activity, etc. The consequences are not designed to be particularly onerous on either party. Termination should only be invoked with the greatest care. The procedure for termination should be strictly followed to the letter and the notices must be given in the precise manner and strictly according to the timing laid down in the Contract. Although SBC/Q05 now makes specific express provision (at clause 1.7) relating to the giving or service of notices or other documents generally, the determination provisions include their own particular requirements refer clause 8.2 which does cross refer back to clause 1.7.4. They are that any appropriate notice(s) or further notice(s) must be: i) ii) iii) iv) in writing; and delivered by hand, or by special delivery, or by recorded delivery.

29.10

29.11

29.12

29.13

29.14

Note also clause 8.2 makes clear that notices under clause 8 are not to be given unreasonably or vexatiously and they take effect when received. If these procedures are followed then unless proved otherwise, the notice will be deemed to have been received on the second Business Day after the date of posting. Business Days do not include Saturdays, Sundays and Public Holidays (clause 1.1).

Page 29 of 35

30. 30.1

General Notice Requirements Generally, unless stipulated elsewhere to the contrary, notices may be given by any effective means and may be sent to the address stated in the Contract Particulars. If no effective means of service is agreed by the parties, the notice must be given by pre-paid properly addressed post. If there is no agreed address then it must be sent to the last known principal business address or, if dealing with a company, to the company's registered or principal office. Refer to clause 1.7.

31. 31.1

Reckoning Periods of Days Clause 1.5 relates to periods specified in days. The period begins immediately after the date stated in the contract. So, for example, if the days are to be counted as from the date of receipt, the counting starts with the day following the date of receipt. Public holidays are excluded and those are defined (clause 1.1) as Christmas Day, Good Friday and any Bank Holiday under the Banking and Financial Dealings Act 1971. Notably, where the period is calculated according to clause 1.5, Saturdays and Sundays are not expressly excluded from the reckoning. However, very careful note should be taken of the fact that any express provisions of the contract regarding notices must be strictly followed. Where, for example under the termination provisions, the period for postal service by recorded delivery is nd deemed to be the 2 Business Day which expressly excludes Saturdays and Sundays. One must, therefore, have particular regard to the specific notice provisions and not simply rely blindly on the general application of clause 1.5. With regard to certificates periods usually run from the date of issue and not receipt.

31.2

31.3

32. 32.1

Applicable Law The applicable law of the contract is stated to be the law of England. That is in accordance with clause 1.12. If one consults the advance payment bond or the off-site materials bond, which are both bound in at the back of the Contract (Schedule 6), it will be seen that, in the case of the bonds, the applicable law is said to be law of England and Wales. Presumably the reference simply to England (clause 1.12) is an oversight and it is not clear whether there will be any repercussions from this discrepancy. The parties may change the law of the contract by making the appropriate amendment to the clause for example to make the applicable law, the law of Scotland or Northern Ireland. The law is stated to apply whatever the nationality or residence or domicile of the Employer and the Contractor or any sub-contractor or supplier, wherever the works may be situated. Therefore, the law could be the law of England, even if the works were carried out in Scotland and the Employer was French, the Contractor Greek and all the sub-contractors German.

32.2

Page 30 of 35

33 33.1

Dispute Resolution Adjudication: This provision has been introduced to allow either the Contractor or Employer to refer any dispute, which has arisen under the contract provisions, to adjudication of a third party. The intention is that it is fast track (usually 28 days from the notice to refer to the decision) and relatively cheap in that both parties bear their own costs although the loser will usually pay the adjudicators fees. The adjudicators decision will be enforced by the courts even if the losing party has referred the matter to arbitration, provided the arbitrator has not published his award. The only realistic way to avoid the adjudicators decision is to apply to the court on the basis that the adjudicator has exceeded his jurisdiction or that he has failed to comply with the rules of natural justice. The rules of the Statutory Scheme will apply subject to minor amendments. Refer to clause 9.2. Arbitration: This is carried out in accordance with the CIMAR rules. Refer to clauses 9.3 to 9.8. It should be noted that arbitration is no longer the default provision under SBC/Q05. Litigation: This is now the default procedure. See Articles 8 and 9, and the Contract Particulars. Mediation: clause 9.1 highlights that the parties can refer a dispute to mediation. There is no mandatory requirement within the clause. It would seem to be a simple restatement of what the parties could agree in any event. See Supplemental Provisions Schedule 8 paragraph 6. This provision if chosen looks to senior executives from each party to try and resolve matters by negotiating in good faith. The executives are to be identified in the Contract Particulars though this provision would not prevent either party from referring a matter to adjudication at any time. Note that a dispute or difference will include the failure to issue a certificate on time or at all refer to clause 1.11.

33.2

33.3 33.4

33.5

33.6

34. 34.1

Third Party Rights SBC/Q05 at Section 7 includes for dealing with third party rights by specifically identifying the party to benefit in the Contract Particulars (Part 2). The third parties can benefit either by the provisions under clause 7A and Schedule 5 or through the use of collateral warranties. The JCT has produced standard warranties. Such third parties are future tenants, purchasers or a funder. It is important that Part 2 of the Contract Particulars is correctly completed. It is possible to use either the standard provisions or standard warranties or to refer to rights that are set out in alternative documents. Schedule 5 sets of the third party rights that would be given to a third party by the Contractor. The wording in these provisions is similar if not identical to the wording used within the JCT standard warranties. At Part A of the Contract Particulars you would identify the name or class of person who is to receive a benefit (the benefits are given by the Contractor); the interest in the works which the third party is to obtain has to be identified: and also whether the rights are to be obtained by Third Party Rights (clause 7A) or collateral warranties (clause 7C). It is also possible to obtain warranties from sub contractors in favour of the Employer future purchasers or tenants. See clause 7E.

34.2

34.3

34.4

34.5

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34.6

At Contract Particulars Part 2(B) details are to be inserted covering matters such as insurance limits, type of liability and net contribution provisions. These are common whether you use the third party rights (Schedule 5) or collateral warranties.

35 35.1

Completion by Sections If the Works are to be completed by Sections then these are to be shown or identified in the Contract Bills and/or on the Contract Drawings refer to Recital 6. If there are no Sections then Recital 6 is to be deleted. SBC/Q05 does not have a supplement; the option is built into the Contract. The Contract Particulars allow for the insertion of the relevant details; clause 2.4 Date of Possession allows for either a single date (if there are no Sections) or for the insertion of a date for each Section. The same applies to the following provisions: Clause 1.1 Date for Completion of the Works Clause 2.5 Deferred Possession Clause 2.32.2 Liquidated damages Clause 2.37 Section Sums Clause 2.38 Rectification Periods

35.2

35.3

The wording within the Conditions is drafted to cater for the situation when there are Sections or when there are no Sections. For example refer to clause 2.4 where it addresses possession of the site or in the case of sections the relevant part. This approach in drafting is followed through out the Conditions. When there are Sections care has to be taken to ensure the appropriate certificates are issued for each section e.g. Non Completion Certificates (clause 2.31) or Practical Completion Certificates (clause 2.30). Extensions of time under clause 2.26 to 29 are to be given for each Section. When completing the Contract Particulars for Sections which are sequential it is essential that the start and completion dates for the follow on Sections relate back to the previous Section. E.g. Section 2 commences 7 days following the completion of Section 1 and is of 3 months duration. This is necessary due to the extension of time provisions not expressly allowing adjustment to the completion date of a later Section following delays to an earlier Section. However, see the decision in Liberty Mercian Ltd v Dean & Dyball Construction Ltd (2008) CILL 2648.

35.4

35.5

36. 37.1

Contractors Designed Portion (CDP) There is no CDP supplement. The relevant clauses are embodied within the Contract and it simply a question of selecting by including Recitals 9 to 12. The work comprising the CDP is identified at Recital 9. The Employer prepares his requirements (Employers Requirements) and the Contractor submits his proposal (Contractors Proposals) and an analysis of the costs of the CDP work (CDP Analysis). In the Contract Particulars the Employers Requirements, Contractors Proposals and CDP Analysis are identified by a unique reference.

36.2

Page 32 of 35

36.3

The relevant provisions regarding the CDP are: 36.3.1 clause 2.2: This sets out the Contractors obligation to: complete the design of the CDP work including the selection of materials etc not identified in the Employers Requirements or Contractors Proposals; ensure that the CDP complies with the CDM Regulations; and comply with the direction(s) of the A/CA for the integration of the CDP design with the design of the Works as a whole.

36.3.2

clause 2.9.5

This provision sets out the submission procedure for the Contractors Design Documents to the A/CA as and when necessary in accordance with Schedule 1. This procedure can be amplified elsewhere in the Contract Documents. In general terms, within 14 days the A/CA is to return a copy of the submitted documents marked with an A, B or C. An A means the Contractor can proceed; B means the Contractor can proceed provided he takes on board the A/CAs comments and submits revised drawings adjusted accounting for the A/CAs comments; and a C means that the submitted documents are not in accordance with the Contract Documents and the Contractor cannot proceed with the works on the basis of the submitted drawings. The Contractor has to resubmit.

36.3.3

clause 2.13.

Subject to clause 2.17 the Contractor is not responsible for any design included within the Employers Requirements. This is an important provision from a Contractors perspective as it had previously been decided that the Contractor would be responsible for the complete design. See Cooperative Insurance Society v Henry Boot Scotland Ltd (2003). Any inadequacy in the design in the Employers Requirements is to be treated as a Variation unless it is resolved within the Contractors Proposals. Any error in description or quantity in the Contractors Proposals is to be corrected with no addition to the Contract Sum. Discrepancies within the CDP Documents (excluding the Employers Requirements) are resolved by the Contractor sending his proposals to the A/CA showing the removal of the discrepancy. The A/CA issues an instruction and to the extent that they remove the discrepancy there is no addition to the Contract Sum. Where there is a discrepancy within the Employers Requirements then the Contractors Proposals prevail. If the Contractors Proposals do not deal with the discrepancy then the Contractor shall inform the A/CA of his proposal to deal with discrepancy and the A/CA shall either accept the proposal or decide how it shall be dealt with. The removal of the discrepancy is to be treated as a Variation. This clause deals with divergence between the CDP Documents and the Statutory Requirements. Provided there has been no change in the Statutory Requirements since the Base Date then the Contractor shall comply with the Statutory Requirements at no cost to the Employer. However, if there is a change in the Statutory Requirements following the Base Date then it shall be treat as a Variation.

36.3.4

clause 2.14.2

36.3.5

clause 2.14.4

36.3.6

clause 2.16

36.3.7

clause 2.17

Page 33 of 35

36.3.8

clause 2.19

This provision sets out the standard by which the Contractors design liability will be measured. This provision makes clear that the standard is that of a consultant who had been independently appointed to undertake the design reasonable skill and care. The standard is not fit for the purpose which would normally be the standard at common law for a contractor undertaking design and build. However, where the Works involve dwellings then the Defective Premises Act 1972 applies i.e. fit for habitation. Clause 2.19.3 allows a limitation to be placed on the Contractors liability so far as consequential losses are concerned following defective design. The amount is stated in the Contract Particulars. This would cover the cost of renting alternative premises, loss of profit or business, etc.

36.3.9

clause 2.20

This clause makes clear that the Contractor is not entitled to an extension of time, to recover loss and/or expense or terminate his employment under the contract due to a suspension of the Works if caused by: a shortcoming within the Contractors Proposals, or any documents provided under clause 2.9.4; a failure to comply with the CDM Regulations; or a failure to provide in time any calculations or documents under clause 2.9.5.

36.3.10 clause 2.40

The Contractor is to provide as built drawings and other relevant documents relating to the CDP element as specified in the Contract Documents. This provision gives the Employer a non exclusive license to use the Contractors design for the specified purposes relating to the Works. However, this is subject to one important proviso that the Contractor has been paid all monies due under the Contract. These provisions require the Contractor to have in place PI insurance covering the design of the CDP element. The limit of the insurance is to be stated in the Contract Particulars. If no amount is stated then it is deemed that no insurance is required.

36.3.11 clause 2.41

36.3.12 clauses 6.11 & 6.12

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37. 37.1

Supplemental Provisions The Supplemental Provisions were introduced under Revision 2. Recital 8 states that the Supplemental Provisions identified in the Contract Particulars are to apply. There are six provisions. It should be noted that the default position is that the provisions will apply so if they are not to apply the Contract Particulars must be completed accordingly. The provisions are independent so it is possible for none to apply, for them all to apply or for any number in between to apply. The six provisions are: i) ii) iii) iv) v) vi) Collaborative Working Health and Safety Cost savings and value improvements Sustainable development and environmental consideration Performance indicators and monitoring Notification and negotiation of disputes

Suggested Reading
th

Speaight A & Stone G Architects Legal Handbook The Law for Architects 9 Edition (2009) Architectural Press Chapters 16, 17, 19, 25 & 26. Cantrell and Another v Wright & Fuller Limited [2003] EWHC 1545 (TCC) parts 4 and 5 of the judgement.

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