Navigating the new JCT Design and Build 2024

On 17 April 2024, the JCT Design and Build 2024 (JCT DB 2024) was published.

This is the first contract published in the new JCT 2024 suite, with further contracts set to be published on a rolling basis over the coming year.

There are some notable changes, but overall the JCT has taken a balanced approach on the extent of the changes, building on the previous JCT Design and Build 2016 (JCT DB 2016).

An understanding of the key changes is essential for those looking to adopt the new form.

Building Safety Act 2022

As the industry continues to get to grips with the new Building Safety Act 2022 (“BSA”), the JCT is the first standard form to specifically include provisions to address the new legislation.

The JCT DB 2024 includes changes to reflect the new dutyholder requirements that have been included in Part 2A of the Building Regulations 2010. The dutyholder regime places obligations on clients, designers, principal designers, contractors and principal contractors and applies to all work that is subject to the Building Regulations.

In the JCT DB 2024, parties can specify in the contract who will take on the dutyholder roles of Principal Designer and Principal Contractor under the Building Regulations, with the default being that the Contractor will take on these roles, which is understandable for a design and build contract and consistent with the approach for the equivalent dutyholder roles under CDM.

There are also provisions dealing with the obligation to comply with dutyholder obligations under Part 2A of the Building Regulations 2010 and to require sub-contracts to provide that the parties to the sub-contract will comply with the dutyholder obligations.

The design duty and liabilities under clause 2.17 have also been modified in relation to its interaction with Statutory Requirements, the Defective Premises Act 1972 (DPA) and a new carve out of fitness for purpose obligations. This goes a long way to dealing with the effect of the BSA and related legislation, however, notwithstanding these modifications, it is possibly open to debate as to whether the provisions fully take into account the statutory duties.

Regardless of contractual liabilities, the Contractor has statutory duties under the DPA and the wider building safety legislation that it cannot contract out of.

The JCT Design and Build Guide also provides a sample overall liability cap which again in part recognises the interaction with the DPA. However, it doesn’t capture other aspects of the BSA or new regulations, which cannot be limited and so would need some modification.

The JCT DB 2024 does not include any provisions for projects subject to the new building control regime for higher-risk buildings that will be overseen by the Building Safety Regulator. This will apply to buildings of at least 18 metres in height or that have at least seven storeys containing at least two residential units. It also applies to care homes and most hospitals meeting the height requirement.

Parties will need to consider whether amendments to the contract are required to take account of this new regime, for example, whether practical completion is subject to obtaining Gateway 3 approval from the Building Safety Regulator.

It is a relatively light touch set of amendments for the BSA and it is inevitable that further amendments will be made by Employers to expressly deal with some of the duties under the BSA, which would otherwise sit with the Employer, such as the preparation and submission of building control applications and certificates in the context of the gateway 2 and 3 procedures for higher-risk buildings.

Timetable for extensions of time

The JCT has sought to streamline the timetable and procedures for dealing with extensions of time under clauses 2.23 to 2.25.

Upon receipt from the Contractor of the notice of delay and the particulars of its expected effects and, where applicable, any material changes under clause 2.24, new clause 2.24.4 provides that if the Employer requires “such further information as is reasonably necessary” to enable it to reach a decision in relation to an extension of time the Employer must request it within 14 days of receipt of the notice and particulars.

Under the JCT DB 2016, the Contractor was required to provide further information “as the Employer may at any time reasonably require”. This revision could act as a guillotine on the Employer’s right to request further particulars and so, with such a relatively short timescale, employer’s agents will need to be on their toes before potentially getting timed out.

Under clause 2.25.2 the timeframe for the Employer to notify the Contractor on whether an interim extension of time has been given has been reduced from 12 weeks to eight weeks. The equivalent period under the sub-contract has also been shortened from 16 to 10 weeks.

New Relevant Events and Relevant Matters

New Relevant Events have been added to clause 2.26 entitling the Contractor to claim an extension of time for delay. The first relates to changes to clause 3.15 where asbestos, contaminated material, and unexploded ordnance (artillery/weapons) are discovered.

The Relevant Event at clause 2.26.4 dealing with antiquities has been updated to deal with these events. Under clause 3.15.3, upon discovery the Contractor shall use its best endeavours not to disturb and cease work where continuing would endanger health and safety, life, property or prevent or impede the disposal of the material or item. The Employer can issue an instruction which may include the investigation, disposal or removal of the item by a third party (clause 3.15.4).

Compliance with clause 3.15.3 or with the Employer’s instructions under 3.15.4 is a Relevant Event under clause 2.26.4 except where the material was identified in the Contract Documents or brought onto site by the Contractor or the Contractor’s Persons.

A new Relevant Event has been introduced at clause 2.26.7 dealing expressly with epidemics.

An extension of time may be awarded where the epidemic affects the execution of the Works by limiting the availability and use of labour or preventing or delaying the Contractor in securing goods, materials or services necessary for the proper carrying out of the Works. In addition, the event included in the previous JCT DB 2016, relating to the exercise of statutory powers has been expanded. This includes the publication of any guidance by the Construction Leadership Council affecting the execution of the Works.

The list of Relevant Matters in clause 4.21 entitling the Contractor to claim loss and expense has also been extended. Clause 4.21.3 has been updated to specify the discovery of asbestos, contaminated material and unexploded ordnance as a Relevant Matter. In addition, two optional Relevant Matters have been introduced, one for epidemics (clause 4.21.6) and the exercise of statutory powers (clause 4.21.7). These will only apply if they are stated to apply in the Contract Particulars.

The JCT has, therefore, taken a view on what it sees as an appropriate risk profile on the issues highlighted above, though it is likely that Employers will not always agree in whole or part with these new amendments.

Liquidated damages

There is a new sub-clause 2.29.5 to reflect the approach taken by the Supreme Court in Triple Point Technology Inc (Respondent) v PTT Public Company Ltd (Appellant) (2021).

The decision restores the orthodox position that liquidated damages clauses apply up to the termination of a contract, but not thereafter.

Sub-clause 2.29.5 provides that where the Contractor’s employment was terminated prior to the date of practical completion, liquidated damages can be levied from the contractual completion date to the date of termination. For the period after termination, the Employer cannot levy liquidated damages. However, this is “without prejudice to and not in substitution of any other rights and remedies of the Employer”. Therefore, post termination the Employer can claim any damages for delay arising as a result of the termination as general damages. For further details of the Triple Point decision - Guidance from the Supreme Court on liquidated damages (shoosmiths.com).

Termination

The meaning of insolvency in Section 8 has been updated to reflect the new insolvency procedures introduced by the Corporate Insolvency and Governance Act 2020. Clause 8.1.4 refers to a Part A1 moratorium and clause 8.1.4.4 includes a Part 26A restructuring plan. These two new clauses are grounds for termination under 8.5 (Contractor insolvency) and 8.10 (Employer insolvency).

Clauses 8.7 (Consequences of termination by Employer), Clause 8.8 (where the Employer decides not to complete the works), Clause 8.12 (termination by the Contractor/either party) all deal with the consequences of termination. These clauses have all been revised, in part, to provide for the payment and payment related notice requirements of the Construction Act. ‘Termination Payment’ is defined separately in each clause setting out how the amount due on termination should be calculated and the mechanism for calculating the due date for the Termination Payment.

Where the Employer terminates the contract under clauses 8.4 to 8.6 and completes the Works, clause 8.7.4 introduces a new notification requirement for the Employer to forthwith notify the Contractor of the date of completion of the Works and making good of defects.

Completion will be deemed for the purposes of clause 8.7 to have taken place on that date and the due date for the Termination Payment shall be two months after that date, although that connection of the due date to the Employer’s notification arguably infringes the Construction Act. Under the JCT DB 2016, a final account should be prepared three months after completion of the Works and the making good of defects in them and so the 2024 position tightens up that timescale.

Clause 8.8 deals with the consequences of termination where the Employer decides not to complete the Works. The wording of clause 8.8.1, has been changed to remove the previous reliance on the Employer notifying its decision and provides that if within six months from the termination date the Employer does not give the Contractor notice that it intends not to complete the Works then, if it does not commence to make arrangements for carrying out and completion of the Works within the six month period, “the Employer shall on and after the expiry of that six month period be treated as having decided not to have the Works completed”. This crystallises the due date for the consequent Termination Payment.

Clause 8.11, which relates to the circumstances where either party may elect to terminate if the Works are suspended for a period specified in the contract particulars - typically 2 months - has also been expanded to include pandemic and changes of law after the Base Date.

The prospect of additional grounds for non-fault termination may make Employers’ nervous and increase the focus on what the appropriate period of suspension might be.

There is also a new Termination Payment mechanism under clause 8.13 providing a timetable for when the Employer’s Termination Payment notice, setting out the amount of the Termination Payment, must be issued - failing which the Contractor may issue an equivalent notice - for calculating the final date for the Termination Payment, and when the Pay Less Notice must be served by the paying party.

It may be unexpected by many that in a termination scenario the defaulting party can issue a payless notice, which would then no doubt trigger the dispute procedures under section 9 of the contract.

Fluctuation Options now fully hosted online

The JCT has removed the Fluctuation Options from the JCT contract documents and instead has made all three Fluctuation Options available online: Fluctuations Options A, B & C (jctltd.co.uk).

Note that JCT DB 2016 contained Fluctuation Option A (Contribution, levy and tax fluctuations) in Schedule 7 with Fluctuation Options B (Labour and materials cost and tax fluctuations) and C (Formula adjustment) available online. The parties must state against the entry for clauses 4.2, 4.12 and 4.13 in the Contract Particulars if they want a Fluctuation Option to apply. Unless another option is selected, JCT Fluctuation Option A applies. Note that fluctuation provisions are often deleted with the contractor taking on the risk of fluctuations.

Other amendments

• Cap on the Contractor’s liability: The Design and Build Contract Guide 2024 (Guide) includes some guidance regarding the use of an overall cap on the Contractor’s liability and a model clause. In the Guide, the JCT ‘acknowledges that increasingly limitation of liability is being used as a tool to address the apportionment of risk’.

• Supplemental provisions:

• Provisions that were optional in the JCT DB 2016 are now embedded in the main agreement relating to collaborative working, sustainable development and environmental considerations, and notification and negotiation of disputes.

• The Contract Particulars have been updated to allow parties to specify their own Adjudicator nominating body (clause 9.3.1) or Arbitrator appointer body (clause 9.5.1) as an alternative to selecting from the list set out in the contract. Clause 9.1 contains what was previously Supplemental Provision 10 in the JCT DB 2016 for parties to meet for “direct, good faith negotiations to resolve the matter”. Subject to the parties right to refer a dispute to adjudication, this provision deals with the avoidance or early resolution of disputes or differences by requiring each party to promptly notify the other of a matter that is likely to give rise to a dispute or difference. It also requires senior executives to meet “as soon as practicable, for direct, good faith negotiations to resolve the matter”.

• Modernising and streamlining: Gender neutral language has been adopted throughout the contract, provisions for notices to be served by email and recognition by the JCT of the growth in the use of electronic signatures. ‘Statutory Undertaker’ has been rephrased as ‘Statutory Provider’ and the definition has been revised. The Guide explains this is “to reflect the privatisation that has taken place in the utilities sector”.