This guide will outline the forms of JCT contract, the most common standard form construction contract used in the UK, accounting for about 70% of UK projects.
The Joint Contracts Tribunal
The Joint Contracts Tribunal (JCT), is made up of seven members who represent a wide range of interests in the building and construction industries. It produces standard forms of contract, guidance notes and other standard documentation for use in the industry. The intention of the JCT is that the contracts generated by them represent a balanced allocation of risk between the parties.
The JCT suite of contracts
The most recent version is the 2011 suite. This takes account of changes to the Housing Grants, Construction and Regeneration Act 1996, which affects payment and dispute resolution. However, previous editions of JCT are still in use.
The main contracts in the JCT suite are listed below (see 'Main JCT contracts'). This guide will focus on the following forms:
- Standard Building Contract (SBC);
- Design & Build (DB).
Format and structure
The standard format of a JCT contract is:
- Articles of Agreement;
- Contract Particulars: these contain project-specific information;
- Conditions of Contract; and
The schedules cover some of the more commonly used 'add-ons' to a construction contract, such as insurance options, a design submission procedure and fluctuations.
There are nine main sections to the JCT suite of contracts. They cover:
The JCT contract payment provisions are flexible. They may permit up front payments from employers to contractors, usually accompanied by payment security such as a bond, and/or invoicing once work has been certified as completed. Certification is usually by an independent third party (such as an architect, an employer's agent or a contract administrator). Interim payments are usually made as the works progress.
JCT envisages retention of an agreed percentage of the contract sum until practical completion, and then a reduced percentage until a period after final completion. This is usually intended to act as an incentive to the contractor to deal with defects which come to light after the project has been completed.
JCT provides a fixed date for completion and envisages up front agreement of liquidated damages as an estimate of the employer's losses if the contractor does not complete the works by that contractually agreed date. The contractor will be entitled to ask for an extension of time for completion if an event occurs which is at the employer's risk and delays the contractor.
The JCT was one of the first standard forms to embrace 'third party rights' as an option for use instead of collateral warranties (although collateral warranties are still the most common option).
Design & Build Contract
The D&B contract is a popular form in the JCT suite and tends to be used for large, complex construction projects such as sports stadia, shopping centres and office blocks. It is used by the public and private sector.
The key feature of the D&B contract is that the contractor will design the works based on requirements given to it by the employer (i.e. what the employer wants in terms of construction). The contractor will produce the contractor's proposals (setting out how the contractor will achieve the employer's requirements). It will then carry out the works (as described in contractor’s proposals) for a lump sum.
Standard Building Contract
Sometimes described as 'traditional contracting,' the contractor will tend not to be involved in any aspect of the design under an SBC. The works will be described by reference to drawings and bills of quantities prepared by or on behalf of the employer and given to the contractor. 'Bills of quantities' are effectively lists of the items which will be needed for construction (including a description of the item and the quantity required) and on which payment is based.
There are three forms of SBC and the appropriate type is likely to depend on whether the Employer wants a lump sum contract price or a measurement contract price:
- lump sum: the SBC/Q and SBC/XQ are lump sum contracts. This means that the contract price will change only if the works are varied or delayed (due to the Employer's risk/fault). The two types of SBC are:
- SBC/Q – the employer provides the contractor with bills of quantities to define the quantity and quality of the work;
- SBC/XQ – the employer provides the contractor with specification or work schedules to define adequately the scope and quality of the work but with no bills of quantity. Likely to be appropriate where the degree of complexity is not such as to require bills of quantities;
- measurement: the SBC/AQ is a measurement contract:
- this type of contract would be suitable where the quantity of the work is uncertain – for example in a civil engineering contract scheme where large amounts of earthworks might be needed, but with the exact quantity being unknown, or where there is insufficient time to prepare the detailed drawings necessary for accurate bills of quantities to be produced;
- the employer provides the contractor with approximate bills of quantities, which are to be subject to re-measurement;
- this means that like a lump sum contract, the contract price will change if the works are varied or delayed (due to the employer's risk/fault). However, the contract price will also change to reflect the actual work carried out:
- the works are 'measured' and the rates given in the approximate bills of quantities are applied to the measured quantities.
Major Project Construction (MP)
MPs are designed for use on the largest design and build projects all built by one contractor. They are shorter than DB contracts and more flexible.
They are appropriate where parties are:
- experienced in undertaking large scale construction work;
- familiar with risk management;
- have appropriate in house contractual procedures.
Main JCT contracts
The main contracts in the JCT suite are:
- Standard Building Contract;
- Design & Build;
- Intermediate Contract;
- Intermediate Contract with Design;
- Minor Works;
- Minor Works with Design;
- Major Projects (MP);
- Framework, non-binding and binding;
- various sub-contracts;
- guidance books, practice notes and forms.