Your Guide to JCT Construction Contracts

Construction projects rely on well-crafted contractual agreements that not only protect the interests of all parties involved, but also provide a clear set of expectations to make sure the project is completed successfully. Joint Contracts Tribunal (JCT) construction contracts are one of the most comprehensive contract suites used in the UK construction industry as they feature provisions for a variety of scenarios and circumstances.

Developed by the Joint Contracts Tribunal Limited and supported by both employers and contractors alike, JCT’s standard form contracts have been widely adopted to ensure smooth execution and completion of all kinds of construction projects. The utilisation of these contracts in the construction sector helps maintain high standards, increase predictability of cost, time, quality and thereby create a fair environment from which all parties can benefit

What is a JCT contract?

A JCT (Joint Contracts Tribunal) contract is an agreement commonly used in the construction industry that establishes the rights, duties, and liabilities of two parties involved in a construction project. The JCT provides a framework for negotiation between all parties involved; it sets out how the project should be run and facilitates cooperation between them.

Furthermore, these contracts define the various aspects of a project such as pricing and duration. As such, the JCT contract is incredibly valuable to those involved in large-scale projects within this sector, allowing projects to move forward with confidence.

Different types of JCT contracts

There are a number of different types of JCT contracts with dozens of different variations of standard contracts and other agreements. These documents are organised into contract families, which include:

• Standard building contracts
• Minor works building contracts
• Major project construction contracts
• Design and build contracts
• Construction management contracts
• Repair and maintenance contracts

The documents have been publishing by JCT since the 1930s, the current editions were issued in 2016. With updates being produced for the contracts once every ten years.

Benefits of producing a JCT contract.

There are a number of benefits for producing JCT contracts, these can go further than simply roles and responsibilities, including:

• Standardisation and protection over common issues. JCT contracts have come about over years, and as such, take into account most issues that can reasonably be expected to occur during a construction project. Most builders and contractors will be familiar with these issues so, rather than drafting a new and bespoke contract, these issues come built into the contract template. This offers assurance to both sides of a baseline of risk management.
• Recognisable and equitable allocation of risk. Due to the standard formatting of JCT contracts, both parties will typically be familiar with the risks of a project and how they are distributed across each side. The JCT ensures these risks are split equally across both parties, so the terms are not more favourable to one side than the other.
• Dispute resolution. Suppose in the unfortunate scenario a dispute does arise in the course of building works. In that case, a JCT contract also contains provisions on how to deal with such disputes. These provisions will often nominate an arbitrator or adjudicator who can make decisions as to the accountability of the parties. A JCT contrac therefore allows the parties to avoid more costly and drawn-out court proceedings. People within the construction industry use JCT contracts primarily to have a standard document to rely upon when a dispute arises.
• Dangers surrounding the industry are addressed. JCT contracts are also used as a means of protecting employers against poor contractors. The employer can be comfortable in the knowledge that most eventualities are covered by the contract, e.g. penalties for late completion of work or conditions. Furthermore, a JCT contract is designed in a way that the provisions of the agreement are comprehensive and cover most of the dangers which surround the construction industry.

Moving from the 2011 JCT forms to the 2016 JCT forms

Despite the common delay in adoption of updated JCT forms, the 2016 edition is now ready for use by those involved in the construction industry. The publication of the 2011 forms ceased at the end of 2018 and those who have stayed with using these outdated forms must now make the switch to the new versions.

It may be clear for some that it’s time to move on, but for others making this change may require adjusting to a different set of terms and conditions. Moving from one set to a second can be a challenging process, as well as extremely necessary – so do not let this task slip through the cracks.

Key changes in the 2016 JCT contracts

The three main drivers for creating the 2016 forms were to:

1. Simplify payment processes;
2. Incorporate the certain elements relevant to public sector procurement; and
3. To include reference to the Construction Design Management 2015 Regulations.

The 2016 updates are classed as reforms to the 2011 JCT forms rather than large scale re-drafts, so whilst they do not include changes to the overall allocation of risks and obligations, there are a large number of changes that contractors need to be aware of.

Payment provisions

Payment provisions have been revised to ensure all levels of the contractual chain — from the main contractor to sub-contractors and sub-sub-contractors are paid within the same 30-day period. To facilitate this, a common interim valuation date has been introduced throughout the contract chain. Moreover, payment periods have been co-ordinated up and down the line in main contracts and sub-contracts, leaving adequate time for processing applications and payments. This is just one way in which we strive to maintain fair distribution of payments and adhere to our payment terms.

Payment provisions in any commercial construction contract must abide by the Housing Grants, Construction and Regeneration Act 1996 (otherwise known as the Construction Act). If not, the contractual payment terms will be overriden by the legislative regime. The JCT 2016 has brought together all payment requirements laid out in the Construction Act, allowing for certainty when it comes to payments and safeguarding both developers and contractors from violating said act. As such, those adopting this version of the JCT should make sure everyone knows their obligations when it comes to payments.

CDM Regulations

The long-awaited CDM Regulations 2016 were introduced in April of this year, and with them came an important shift in roles in the construction industry. The new legislation saw the CDM co-ordinator role revised to that of principal designer – a move which aims to increase everybody’s safety and health at work.

As a result, the JCT forms have been updated too, to align with the CDM Regulations 2015 and reflect this change. It is essential that those involved in construction projects are aware of these changes and take steps to implement them into their procedures.

Performance bonds and parent company guarantees

Performance bonds and parent company guarantees are not common knowledge in the building and construction industry. The 2016 Joint Contracts Tribunal (JCT) Forms have acknowledged this by providing for them if developers require, although there is no form available for those instances and no sanctions if the contractor does not comply. Performance bonds serve to protect project owners from financial loss in case of a contractor’s failure to carry out its obligations under a contract.

Similarly, parent company guarantees help protect developers from default or insolvency on the part of their contractor. Both types of instruments provide an extra layer of security for larger projects where there may be shared interests between different parties involved.

Collateral warranties and third party rights

Collateral warranties and third party rights are an important consideration in the scope of construction contracts. In 2011, the Joint Contracts Tribunals (JCT) provided necessary guidance for contractors to provide collateral warranties and/or third party rights to beneficiaries, with minimal involvement from sub-contractors.

However, when the 2016 JCT forms were introduced, it included provisions requiring sub-contractors to provide third party rights to beneficiaries – a shift from previous standards. While this was a major development intended to protect shareholders in project structures with multiple layers of contractors and sub-contractors, there has been little evidence that this provision has actually been widely used to date.

Insurance

Insurance is an important part of any construction project, and the Joint Contracts Tribunal (JCT) contracts have provisions for the insurance of alterations and extensions. The most significant change related to Option C, which covers existing structures, is the allowance for alternative solutions yet to be defined by stakeholders.

While the amendments to these provisions are not considered substantial, they will still play an integral role in ensuring that suitable levels of risk protection are provided. Insurance is an important protection against any potential damage that may occur during a tenant’s works to the part they rent. Without insurance, the tenant would be taking on significant liability risk with respect to other parts of the building. Therefore, it is essential that this liability is considered in drafting contracts under the JCT 2016 forms.

This change acknowledges developers who are often tenants and not owners, so their responsibility does not extend to insuring entire buildings. The provision allows contractors to rely on their annual cover for potential damages associated with existing structures during their works, provided the contractor’s insurer is consulted and agrees. This example illustrates how beneficial such a provision can be for tenants undertaking works in part of a building

Getting advice early

When entering into any building contract, it is essential to seek legal advice to ensure all risks and implications are properly understood. Without JCT Contracts or similar documentation setting out the mutual rights and obligations of both parties, misunderstandings and misplaced trust can lead to costly problems further down the line.

This could even result in potential litigation unless all contracts concerning the construction works have been thoroughy drafted by a professional at the beginning of the project. Taking the time to ensure clear contractual obligations are established from the outset helps to protect both parties against any potential misunderstandings and sets a solid foundation for successful construction works.

Read more: How to finance a construction project

JCT Contracts Explained

Conclusion

JCT (Joint Contracts Tribunal) construction contracts are widely used in the construction industry in the United Kingdom as a standard form of contract between parties involved in a construction project. JCT building contracts, which are a specific type of JCT construction contracts, are tailored for building works and cover various aspects of the construction process, including design, construction, payment terms, and dispute resolution.

These contracts are recognised for their comprehensiveness, providing clear contractual terms and conditions that govern the relationships, responsibilities, and obligations of the parties involved, including the employer, contractor, and subcontractors. JCT building contracts are commonly used in construction projects of varying sizes and complexities, providing a structured framework that helps to manage risks, ensure compliance with legal and regulatory requirements, and promote fair and transparent dealings in the construction industry.