The A-Z of the JCT Contracts – a glossary of key terms every construction professional should know

The JCT suite of contracts make provision for construction disputes to be determined by adjudication.  This mirrors the legal position under which parties, if they have a “construction contract” are entitled to have any dispute under that contract resolved by adjudication.  Key features of adjudication are:

• It is a swift and cost effective method of dispute resolution. A resolution on the vast majority of cases referred to adjudication will be received 28-42 days of the dispute being referred.
• The party seeking redress can only refer one dispute for determination in each adjudication.
• Section 9 of the JCT Standard Building Contract (the provisions of which appear in other forms in the JCT suite) contain further provisions relating to adjudication. While these terms are often not considered in any detail it does serve as an important reminder to ensure that the terms of the contract are checked to ensure that any referral to adjudication accords with what the parties have contractually agreed.
• Because of the swift nature of adjudication a party dissatisfied with the outcome is entitled to have the subject matter of the dispute decided in court or arbitration. Given the ability to have a second bite of the cherry adjudication decisions are what we call temporarily binding.  However that party will often have to comply with the decision as a condition of bringing those further proceedings.

A listed, usually prepared by a quantity surveyor on behalf of the Employer, setting out the quantity and quality of the work required. Once the bill of quantities has been issued to the Contractor, the Contractor can price each item listed to calculate its tender price.

The JCT Design and Build Contract places full design responsibility upon a contractor.  The other forms in the JCT suite do not automatically do this but have the option of including a contractor design portion.  When considering the inclusion of a CDP the following should be borne in mind:

• Make sure that the scope of CDP element is clearly understood and sufficiently well-defined in the contract. If there is a dispute then understanding the scope and limits on a contractor’s design obligations may be central to resolving it.
• CDP elements are often based on the content of employer requirements. Employers need to ensure that any claim for defective design under a CDP obligation is not met by a defence based on the adequacy of the employer’s requirements (ERs).
• The CDP element will often need to be integrated within a wider design so there will need to be collaboration and co-ordination between the relevant component design elements of a scheme.
• Contractors will need to ensure they carry (and employers will need to be satisfied of) sufficient PII cover to protect against claims arising out of contractor design work.

It may not simply be a case, if an issue arises with a CDP element, that the employer can look to the contractor for redress.  This is particularly so if the CDP issue is connected with an error in the ERs or if the ERs are silent on an issue that bears on the CDP issue.  The risks here can be managed by ensuring the ERs are carefully reviewed for errors and omissions, that the CDP element is carefully defined and the standard JCT terms are revised if the apportionment of risk and responsibility for a CDP element is not sufficient in any particular scheme.

Also known as the ‘rectification period’ in the JCT suite, the defects liability period is a period of time specified within a building contract which begins on the date that practical completion is certified and usually expires six to 12 months later (depending on what period the parties agree). During the defects liability period, if patent defects arise or are discovered, the Contractor is obligated to return to site to rectify the defects – including completing any snagging items.

Parties often conflate extensions of time with loss and expense.  The majority of the JCT suite distinguish between circumstances where a contractor may be entitled to an extension of time (Relevant Events) and circumstances where a contractor might be entitled to more money (Relevant Matters).

There is a significant overlap.  The issuing of instructions to incorporate additional work will constitute both a Relevant Event (assuming the effect is to prolong the contract period) and a Relevant Matter.  However this is not always the case.  The distinction can perhaps best be summarised by the following rule of thumb:  An entitlement to time flows from a delay which is not caused or contributed to by the contractor, whereas an entitlement to money flows from an element of employer culpability.

Expense claims stand or fall on the quality of evidence to enable the entitlement to be assessed.  There will be a degree of assumed knowledge on the part of the person assessing the claim their role in the project, but contractors should err on the side of caution and if in doubt provide more than might strictly be necessary.

From the perspective of the person assessing the entitlement, while it is important to ensure that the contractor proves its claim it is not appropriate to call for information in an oppressive manner or at the sole behest of the employer.

Parties should also remember that the unamended JCT suite will often contain provision for the mechanics for determining loss and expense claims, including as to timing.  Those involved in bringing or determining loss and expense claims should be mindful of and follow any agreed process.

In the unamended form of the JCT, the intention is for the final certificate to be, as the name suggests, final. Once the works have been certified as practically complete, the defects liability period has passed, and the final accounts have been prepared and completed, the final certificate sets out formally, amongst other things, what sum, if anything, is due to or from the contractor – taking into account any variations, liquidated damages, fluctuation provisions, loss and expense claims, retentions etc – and, if expressly specified in the contract, any particular quality of materials or goods, or standard of workmanship, is to the reasonable satisfaction of the Contract Administrator (this second point is often deleted through a schedule of amendments, thereby allowing the Employer to challenge said quality/ workmanship later on).

However, the conclusiveness of the final certificate can be suspended pending any decision, award, or judgment in the event that any adjudication, arbitration or other proceedings are commenced before or within 28 days after the date of issue of the final certificate (clause 1.9.2.1 (JCT SBC/XQ 2016), with the final certificate becoming subject to any decision, award, or judgment.

The majority of contract forms in the JCT suite (prior to 2024) are silent on responsibility for site or ground conditions.  The 2024 JCT suite has introduced the discovery of asbestos, contaminated material or unexploded ordnance as both a relevant event and a relevant matter.

If your contract is silent on this issue (as the majority of contracts will be) then the starting point here is that the contractor carries the risk.

However, do always remember that this common law position requires a proper consideration and interpretation of the contract which will include not only your base form of agreement but also any documents incorporated into or forming part of the contract.  Remember to consider the content of those documents that are defined in the JCT suite as Contract Documents.  It may be that one or more of the Contract Documents modifies the allocation of risk in relation to ground conditions and that may in turn impact on the application of the common law position.

If in doubt the parties should consider bespoke amendments to ensure that the allocation of risk for ground conditions is the subject of express agreement.

To the frustration of many, the 2024 editions of the JCT suite was incredibly ‘light-touch’ when addressing the significant changes introduced to the construction industry by the Building Safety Act 2022. Glancing reference to projects involving higher-risk buildings is made in a solitary footnote; as a result, bespoke drafting is needed to address higher-risk buildings, which are defined in the legislation (subject to exclusions) as a building in England that is (1) at least 18 metres in height or has at least seven storeys; and (2) contains at least two residential units.

The construction industry has experienced its fair share of high-profile insolvency events.  It is some 6 years since the collapse of Carillion and toward the end of 2024 we saw the ISG group of companies move to administration.

• Under the JCT suite of contracts, when a contractor is the subject of an event of insolvency there follows an automatic suspension of works obligations and an obligation to make payment. The first step to take is for the definition of event of insolvency to be checked against the circumstances that have arisen.
• The exception to the obligation to make payment is with payments where, at the point of insolvency, the employer was able to serve a notice to pay less. In such circumstances the employer should ensure that pay less notices are served to protect its position.
• An event of insolvency entitles an employer to immediately terminate the contract. There may be good reasons for taking this step but, equally, there may be reasons why an employer may wish to defer terminating.
• There is no automatic obligation on the part of the employer to make payments to subcontractors that the contractor was liable to make. However an employer may wish to make such payments in order to prevent a project from stagnating.  Making such payments may have unintended consequences which should be considered before any agreement to pay is reached.
• Consider whether any bonds or guarantees might be called on. If such protection exists there may be conditions that need to be complied with or time limits to adhere to.

The impact of contractor insolvency can be to destabilise a project with massive ramifications not only for the construction project itself but also any third party agreements which are connected with it (such as the onward grant of any leases of the constructed space).  It is imperative that the totality of such impacts and the pros and cons of alternative courses of action available to the employer are properly considered before an employer plots a route away from the impact of the insolvency event in question.

The Joint Contracts Tribunal (the ‘JCT’) is an organisation based in the UK that develops, publishes, revises, and disseminates ‘suites of standard forms of [construction] contracts and tender documentation and practice notes’. First published in 1931 (but pre-dating the 20th century) the JCT suite contains forms of contract which cater for all sorts of construction projects, with a focus on cost, quality, collaboration, and a heavy reliance on ‘reasonableness’.

A summary of some of the key changes introduced by the 2024 edition of the JCT contracts:

• Sustainability provisions have been introduced into the main form of contract so that a contractor is entitled to propose changes that promote sustainability or that benefit the environment. Contractors are also obliged to provide information regarding the environmental impact of materials that it has selected for incorporation into the project work.
• The Building Safety Act 2022 introduced a new concept of duties imposed in connection with building work and the concept of a dutyholder. The suite of contracts include provisions requiring a contractor to comply with any dutyholder obligations it may have as well as requiring, where appropriate, the employer to ensure that relevant building information (concerning an existing building’s make up and construction) is provided to the contractor.
• The service provisions have been updated so that they expressly provide for service by email.
• The LAD provisions have been revised to reflect the Supreme Court decision in Triple Point so that it is clear the LAD entitlement ceases upon termination of the contract.
• The employer is now under a positive obligation to ask for clarity or further information in cases where an extension of time is sought
• Epidemic clauses (often introduced as bespoke amendments following Covid) have been added which provide clarity over the circumstances in which an outbreak may give rise to more time or more money.
• The impact on subcontracts of the termination of a main contract is clarified. Under previous iterations the termination of the main contract brought subcontracts to an end.  Under the 2024 suite of contracts this is not automatic and is now subject to any step in rights that exist.

While the above is just a whistlestop summary of some of the changes introduced into the 2024 suite of contracts it is important to stress that not all of the changes above have been incorporated into every 2024 edition.  Some of the 2024 suite (e.g. the Minor Works Agreement) will have modified versions of some of these changes so it is important to familiarise yourself with the changes introduced to the form of contract you are utilising.

Liquidated damages are a pre-determined level of damages, agreed between the parties, to which the Employer is entitled to in the event of specific breaches occurring (the most common being failure to complete the building works within a specified time). When deciding on the level of liquidated damages, it is important to note that the level of liquidated damages is supposed to be a genuine pre-estimate of the losses that the Employer is likely to suffer in the event of the breach (eg. delay). Excessive or punitive levels can be interpreted by a Court as a penalty (rather than legitimate liquidated damages), which are often not enforceable.

The JCT suite of contracts will contain provisions aimed at swift and effective dispute resolutions, whether that is in the form of notification to and discussion by named individuals when an issue arises to the use of construction adjudication as a cost effective route to resolution.

Mediation is referred to in passing.  The disputes section of the JCT SBC (for example) provides that parties shall give serious consideration to mediation.  The benefits of mediation should not be overlooked as a cost effective route to resolving a dispute.  Key features of mediation include:

• It is confidential and can be swift.
• Discussion is facilitated by an independent third party, trained in resolving disputes.
• The mediator does not impose a decision or determination on the parties, though that does not mean they will not stress test a party’s case.
• Unlike adjudication the parties can resolve any number of disputes in one mediation. The parties can also resolve disputes on terms that a court or adjudicator or arbitrator cannot (e.g. purely commercial or practical solutions).
• Mediation is considered voluntary but parties should be mindful not to be seen to unreasonably refuse the prospect of resolving a dispute by mediation in favour or arbitration or litigation. Such a refusal may have serious costs consequences even if a party ends up succeeding in litigation or arbitration having unreasonably refused an offer to mediate.

Anyone involved in dispute resolution will confirm the benefits of mediation both as a route to resolving disputes and to maintaining relations between the parties in dispute which is particularly important in the context of construction projects where a dispute arises midway through a project.

Notices are a keyway in the JCT suite that the parties can preserve and exercise their rights – and it is imperative that the parties understand how to issue and react when receiving notices.

Notices must be in writing, and the parties are generally at liberty to agree between themselves how notices are to be given. The 2024 editions of the JCT suite now allows for express service of notices by email.

Perhaps the most important notices in the JCT suite are in relation to payment, and follow the statutory requirements of The Housing Grants, Construction and Regeneration Act 1996 (as amended) (the ‘Act’). Payment Notices, Pay Less Notices, and Final Payment Notices must all state the sum that the paying party considers to be or have been due, and the basis on which the sum has been calculated.

Other important notices include those relating to termination, and notices conferring third party rights.

In most of the JCT suite of contracts it is open to an employer to vary the scope of work by adding to the existing scope, varying it or reducing it.  The latter is commonly referred to as an omission.

Omitting works from a project does not automatically result in a cost saving to an employer.  This depends on the timing of the omission as well as the wording of the contract itself.  If a contract is a fixed price contract for example then the omission of work from it may not equate to a reduction in the fixed price.

An omission is a contract variation and a relevant matter.  While it is for the contractor to evidence there may be circumstances where an omission does nevertheless give rise to loss and expense.

Omissions may be considered desirable by both the employer and the contractor, particularly if the contractor is struggling with the completion of a project.  In such circumstances the parties should consider varying their contract to record an omission rather than dealing by the issuing of instructions so as to avoid the risk of a loss and expense claim for example.

Depending on how a contract has been priced and the extent of omissions, a decision to omit work may amount to a breach of contract by the employer.  This can be illustrated by two examples:

First, imagine an extreme example where an employer omits 99% of the work.  In that scenario the actions of the employer have materially changed the nature of the contract and may be considered unreasonable.  Similarly, an omission so as to place elements of work with a cheaper contractor may be considered a breach.

Second, imagine a scenario where works are omitted which are required in order to comply with Building Regulations or other legislative requirements.

A contractual right to omit works does not mean an employer can omit without consequence and so any decision to omit works must be properly assessed, having regard to the impact and effect of an omission under the contract and generally.

Payment is a fundamental mechanism under any contract. In the construction industry, cash-flow and disputes over payment have been major factors to contractor insolvency. To address these, and other, concerns, The Housing Grants, Construction and Regeneration Act 1996 (as amended) (the ‘Act’) introduced statutory requirements for payment mechanisms under construction contracts (and The Scheme for Construction Contracts (England and Wales) Regulation (the ‘Scheme’), which applies to payment mechanisms that are non-compliant (in part or in whole) with the Act.

The Act introduced payment requirements, including the right to payment by instalments, an ‘adequate mechanism’ for determining when payments become due, and various notice (including payment notices, default payment notices, and pay less notices). The JCT suite contains payment provisions which are compliant with the Act, whilst allowing parties to freely negotiate and agree their own payment terms (such as amounts, intervals, due dates etc.)

This is the principle that a party is entitled to be paid a reasonable sum for a reasonable amount of work.  It is the basis upon which a party who undertakes work on instruction of another but without agreement on costs or price is entitled to be paid.

It can be relevant in circumstances where work is carried out outside an existing contract or where work is undertaken under a contract which is found to be unenforceable.  In these cases the assessment of a reasonable sum might require consideration of the pricing principles agreed upon by the parties (whether in the parallel contract or in the unenforceable contract).  However there are no constraints on how a reasonable sum might be arrived at.

The role of quantity surveyors may be critical in assisting with the resolution of a dispute of an entitlement to be paid in such circumstances as the question can often be answered with reference to the reasonable price expected to be paid for such work in the market.

Particular constraints (whether in terms of site conditions, turnaround times, particular materials etc) fall to be taken into account when assessing what a reasonable sum should be.

Retention provisions are an important and common concept in the JCT suite. A retention is a pre-agreed percentage which is deducted and retained by the Employer during each payment cycle from each Interim Valuation. The default is 3%, but the parties can agree whatever percentage they like. The purpose of the retention is to give the Contractor incentive to return to site during the [LINK] defects liability period to rectify any defects as part of their contractual obligation. It is usual for half of the retention to be released to the Contractor once practical completion has been certified, with the remaining half released at the end of the defects liability period. If the Contractor does not return to site to rectify defects, the Employer has the comfort of knowing that a point of money has been retained which can be put towards employing another Contractor to deal with any defects.

The key when it comes to subcontracting is to ensure there is clarity over both the right to subcontract and who carries responsibility on the ground for the constituent elements of a project.

Most of the JCT suite of contracts include provisions relating to subcontracting.  These provisions typically incorporate the following distinct elements:

• Elements of the project which can be sub-contracted without reference to the employer. Typically this will be where the identity of the sub-contractor and the scope of the sub contracted works will be identified and agreed pre contract.
• Elements of the project which can be sub-contracted with consent of the architect, contract administrator or employer.
• Elements of the project that cannot be sub-contracted.

A contractor that chooses to sub-contract elements of a project remains primarily responsible for performance of such works under the terms of its own contract with the employer.  Unless the employer has a separate claim against the sub-contractor under a collateral warranty an employer has no direct claim in contract against a sub-contractor.

In order for a sub-contract to work it has to be both consistent and work with the main contract.  There are a suite of JCT sub-contracts which can be used, depending on the form of the main contract and the nature of the work being sub-contracted.  This may make the documentation of any sub-contracting arrangement simpler though any bespoke amendments to the main contract need to be reflected in the sub-contract also.

An employer should leave direct dealings with any sub-contractor to the main contractor.  If it does not then it may end up inadvertently creating a direct contractual relationship with the sub contractor which turn impacts

If a main contractor goes bust (see I for insolvency) or a decision to terminate a main contract is taken this will often have important consequences for any sub-contracting arrangement as well as the works itself.

The English law doctrine of privity of contract means that only the parties to a contract an enforce the terms of the contract. In construction projects, there are often third-parties with an interest in a project that are not a party to the underlying contract – e.g.. funders, tenants, purchasers etc. In order to create a legal route for a third party to enforce the terms of a contract, a construction contract will often include a schedule which sets out the rights that are enforceable by specific classes of beneficiaries (e.g.. funders, tenants, purchasers). The third party rights are usually granted by the Employer giving notice to the Contractor/ Consultant. Part 1 of Schedule 5 to the JCT B&B 2016 contains a default schedule of third-party rights.

An alternative, and more common method of giving a third party rights is through a collateral warranty – see our previous blog for more information: Back to basics: collateral warranties

UCTA applies to all business-to-business contracts (B2B) and to business to consumer contracts (B2C) entered into on or before 1 October 2015.  B2C created after 1 October 2015 are regulated by the Consumer Rights Act 2015.

In the context of most major construction projects (which will be B2B) UCTA restrains the ability of contracting parties to limit their liability for breach of contract or negligence.

The test is one of reasonableness.  Section 11 of UCTA allows exclusion or limitation provisions if they are considered fair and reasonable having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made.

Equality of bargaining position is a key consideration here.  The more equal the position of the parties the more likely it is that what may be considered an unusual or onerous exclusion or limitation provision may be allowed.

The fact that the circumstances in existence at the time a contract was entered into means that an exclusion or limitation provision considered lawful in contract A may be considered unlawful or unfair in contract B.

The impact of UCTA is perhaps less relevant to the standard form of JCT contracts but certainly is relevant when considering bespoke amendments to the same.

Valuations are a key component of the payment procedure under the JCT suite and The Housing Grants, Construction and Regeneration Act 1996 (as amended).

The JCT suite of contracts includes a suite of standard form collateral warranties.  Collateral warranties create contractual obligations where none previously existed. They are typically used to provide an employer with a direct cause of action against sub contractors and other professionals appointed by a main contractor.  They may also be available to funders and occupiers of a building.

Key points to bear in mind when considering claims under a warranty include:

Ensure the primary contract documents are retained alongside the warranty.  Typically a collateral warranty will warrant that the terms of a principal contract have been complied with.  Suing under a warranty requires an understanding of those primary obligations.

Warranties may contain express provisions relating to assignment.  This is particularly important when there is a change in ownership of land.  It is vital to ensure that, at the point of a land transfer, that the ability and mechanics for assigning the benefit of a warranty are followed.  Does the warranty, for example, limit the number of times it can be assigned or does it require consent of the warrantor.

An alternative to the use of warranties is to grant third party rights under a primary contract.  The Contract (Rights of Third Parties) Act 1999 allows parties to a contract to agree that certain third parties or third parties in general are given rights to enforce terms of the primary contract.  The scope or extent of these rights is a matter of a contractual interpretation.  Once granted, these third party rights cannot be rescinded by the promisor.

From the point of view of the party being fixed with an obligation under the 1999 Act it is important that, if using third party rights rather than warranties, the scope of the obligation, particularly in terms of the range of third parties entitled to rely upon the right, is carefully drafted so that the parties has clarity over the parties who may be entitled to rely upon the rights granted.

Known as ‘Adjusting the Completion Date’ under the JCT suite, building contracts acknowledge that delay to the works is inevitable, and therefore contains provisions which allow for the duration of the works to be extended in situations where delay arises that is not the fault of the contractor. If an extension of time is approved, the target date for completion of the works is pushed back, and delays the contractor’s liability to pay liquidated damages.

The JCT suite contains ‘Relevant Events’ which are a list of events which allow for time to be extended. The list includes, but is not limited to:

• Variations to the contract
• The employer impeding or preventing the works
• Force majeure
• Suspension of the works

The parties can agree to add to/ remove from the JCT’s list.

It is the responsibility of the contractor to notify the Employer forthwith if and whenever it becomes reasonably apparent that the progress of the works is being or is likely to be delayed. Such notice shall include the cause(s) of the delay, and shall identify any event which (in his opinion) is a Relevant Event. The Contractor must also (either in the notice or as soon as possible thereafter) give particulars of the expected effects, including an estimate of any expected delay.

The employer must endeavour to notify the contractor of his decision as soon as reasonably practicable .

It may be self-evident but it is worth restating that if parties choose to regulate their relationship on trust then that is fine provided the level of trust needed continues throughout a contractual relationship.  That is very much the exception rather than the rule, particularly where parties have competing interests.

• In a construction context the importance of having a written agreement cannot be understated. This will provide clarification on a number of critical issues including:
• The entitlement to be paid;
• The entitlement to make changes to a project and the consequences of that;
• The allocation of risk and responsibilities; and
• How to resolve disputes.

The above is not intended to be exhaustive and the list is intended to illustrate that a written contract (as opposed to an implied one) provides clarity and certainty to all parties and to the outside world.

While it is of course possible to create a contract other than in writing and there is a cost associated with putting a clear and comprehensive written contract in place the cost saving is very much a drop in the ocean compared with the consequences flowing from the uncertainty created by an implied contract and the cost of resolving disputes in the event that the parties have no certainty (or are not in agreement) over the full extent and scope of their respective rights and obligations.

‘Z Clauses’ are the NEC (‘New Engineering Contract’) equivalent of a schedule of amendments to a JCT building contract; the main purpose of both are (subject to statutory requirements) to add, amend, or delete standard provisions of the underlying contract (NEC and JCT), most commonly to address any specific project requirements, increase a party’s obligations (eg. granting collateral warranties, security bonds etc).

Common additional clauses include: confidentiality, copyright, data protection, caps on liability.

Common amended clauses include: assignment, design responsibility, payment terms, termination, dispute resolution, insurance provisions.