What is a JCT contract? Do I need one for my build?

This article will look at the commonly used JCT forms of building contract and reasons to amend the JCT forms, as well as various factors you need to consider in choosing the most suitable JCT form for different types of construction project.

What is a JCT contract?

The Joint Contracts Tribunal (JCT) publishes a suite of standard form contracts which are commonly used in construction projects in the UK. At the time of writing, the JCT 2016 editions are the latest versions, with the next versions expected to be the 2024 editions. 

Established in 1931, the JCT is comprised of a number of contributing organisations, including the British Property Federation, the Contractors Legal Group, RIBA and the RICS.

Why should I use a JCT contract?

JCT contracts are well known in the UK construction industry and are institutionally acceptable to investors and financiers provided certain amendments are made.

The RIBA Construction Contracts and Law Report 2022 found that 59% of respondent organisations used JCT forms of contract most often, compared with RIBA building contracts at 15% and NEC contracts at 13%, and that the JCT forms were widely considered “industry standard”.

Using a standard form allows contractors to quickly understand the risk profile of a contract when preparing their tender. This helps contractors keep to a short turnaround time when tendering for works and to keep tendering costs as low as possible.

What does a JCT contract contain?

JCT contracts tend to be lengthy documents which is unsurprising bearing in mind the complexity of their subject matter and the potential scenarios which can occur on a live project. 

They generally comprise:

• The introductory Agreement identifying the employer and the contractor
  
  
• Recitals covering a brief description of the works and the associated contract documents and Articles which include the contract sum (if it is a lump sum contract)
  
  
• Contact Particulars which include information such as the:
  Date of Possession
  Date for Completion
  Levels of required insurances
  
  
• Contract Conditions, for the main forms of building contract these are split into nine sections governing matters such as:
  the contractor’s obligations in carrying out the works,
  determining when practical completion has been achieved and what happens on late completion,
  who is responsible for escalating costs and project delays,
  change control,
  payment arrangements – in the UK, this is a heavily regulated area,
  insurance – this is a key requirement, with insurances shoring up the contractual risk allocation,
  arrangements for collateral warranties - again fundamental in meeting some key requirements of the stakeholders typically involved in a construction project,
  termination provisions, including drafting dealing with insolvency of one of the parties, and
  dispute resolution – again an area which is subject to statutory regulation.
  
  
• Schedules
  
  
• Contract documents – the parties append the technical documents.

Why amend a JCT contract?

It is very common for employers to amend the JCT forms of contract to cover their requirements for the project.

Typical employer amendments include:

• Single point responsibility
  If the employer is looking for ‘single point responsibility’ from the contractor, the JCT Design and Build Contract 2016 needs to be amended to make the contractor responsible for all the design, including any design in the Employer’s Requirements, as this is not the case in the unamended JCT Design and Build Contract 2016.  This is also commonly insisted upon by a funder.
  
  
• Assignment
  Making the contract unilaterally assignable by the employer, as the unamended JCT requires the contractor’s consent for the employer to assign in most circumstances.
  
  
• Copyright conditional on payment of fees
  Where included in the design forms of contract, the JCT makes its copyright licence conditional upon there being no monies owed to the contractor.   This is often amended by an employer to avoid the risk of a copyright licence being withdrawn in the event of a payment dispute. 
  
  
• Bespoke Collateral Warranties
  Including bespoke forms of collateral warranty, as the JCT forms of collateral warranty are not generally acceptable to purchasers, tenants and funders. This is because of the limitations of liability in the JCT’s collateral warranties, including net contribution clauses.
  
  
• Relevant Events and Relevant Matters
  Changing the risk allocation of delays by the removal of some of the contractor’s contractual grounds for seeking an extension of time (called Relevant Events), as the default allocation of risk under the contract may be inappropriate.
  
  The employer may also be looking for greater cost certainty by removing the contractor’s right to claim loss and expense for certain Relevant Matters.
  
  
• Retention
  
  The JCT contracts provide that the employer holds the retention monies in a fiduciary capacity and requires the employer, upon request, to put the retention monies into a separate retention account.  This drafting is commonly amended so that the employer can treat the retention as its own funds until it is due to be paid to the contractor.
  
  

What are the JCT contract types

JCT Standard Building Contract 2016

Key Features:

• Used for large, complex projects where the design responsibility remains with the employer (and its professional team)
  
• The employer appoints an architect/contract administrator and quantity surveyor to administer the contract
• Can be used where there is design input from the contractor in relation to discrete parts of the works – the Contractor’s Designed Portion
  
  

JCT Design and Build Contract 2016

Key Features:

• Used for large, complex projects where the contractor carries out the works and also completes the design
• The employer employs an employer’s agent to administer the contract
• Employer’s Requirements are prepared by the employer and provided to the contractor – without amendments the employer will be responsible for the design in the Employer’s Requirements
  
  

JCT Intermediate Building Contract 2016

Key Features:

• Used for midsized projects without undue complexity
• The employer appoints an architect/contract administrator and quantity surveyor to administer the contract
• The design is prepared by or on behalf of the employer, save where there is a contractor’s designed portion
• It is not suitable as a design and build contract
  
  

JCT Minor Works Contract 2016

Key Features:

• Used for small projects of a simple nature with or without a design element
• The employer appoints an architect/contract administrator to administer the contract
• The design is prepared by or on behalf of the employer, save where there is a contractor’s designed portion
  
  

Which JCT contract should I choose?

There are a number of JCT contracts available. Deciding on which one to choose requires a decision to be made on the preferred procurement route.

There are different procurement routes, including:

• Traditional
  
  Key Features:
  
  
• Contractor is usually appointed by competitive tender
• Full documentation is needed at tender stage
• The employer has control over the design, quality and standards
• The employer appoints an independent contract administrator, usually the architect or another member of the professional team
  
  
• Design and Build
  
  Key Features:
  
  
• The Employer’s Requirements can vary in detail but are matched by the Contractor’s Proposals
• The employer has less control over design development once the contract is entered into
• There is no independent contract administrator – the employer appoints an agent to act on its behalf
• Lower risk in terms of cost and time for the employer
• Uncertainty over design and quality particularly when the Employer’s Requirements are not sufficiently detailed
  
  
• Construction Management / Management Contracting
  
  Key Features:
  
  
• For construction management:
• The work is divided into several ‘packages’. The employer will engage trade contractors to carry out each package. The employer will employ a construction manager to manage the various packages of work.
• This form of procurement is used on projects where there is a shortage of time with a need to let early packages of work whilst design of the works progresses and/or the employer wants greater control over the project and the choice of trade contractors.
  
  
• For management contracting:
• The employer employs a management contractor. The work is divided into several ‘packages’, each of which will be a separate contract between the works contractor and the management contractor.  Generally, where the management contractor is not in breach of its obligations, its liability for default by a works contractor is limited to amounts actually recovered from the works contractor.
  
  
• The management contractor is paid a fee plus site set-up and preliminaries costs. The management contractor is engaged early on to advise on programming, buildability and packaging of work.

The choices are set to increase further in 2024, with promise of a new target cost contract being published as part of the 2024 suite of contracts, giving the user more choice based upon alternative pricing requirements.

For further information and assistance please contact Patricia Nathan-Amissah by telephone on +44 (0)20 7203 5411 or by email.