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Fri September 21 2018

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Groaning Shelves: a year of revision for standard forms of contract

18 Dec 17 It seems that 2017 was the year that most of the familiar standard forms of construction contract were revised, rewritten and updated. In case any of them passed you by, Sarah Phillips of Irwin Mitchell provides a brief overview.

NEC4 was one of several new standard forms of contract published this year
NEC4 was one of several new standard forms of contract published this year

First was the JCT 2016 suite which finally arrived in 2017 – albeit on a drip feed. The new NEC4 suite followed hot on the JCT’s heels and now an update to the colour coded FIDIC forms is on its landing approach.

Taking the JCT first, and specifically the Design and Build contract (DB), the changes are extensive but not particularly dramatic in effect. Importantly, though, they do address some of the issues that users had with the 2011 version.

The payment provisions in section 4 have been quite heavily amended but this appears to have mainly had a welcome streamlining effect. For example the payment terms have been extended to cover final as well as interim payments (clauses 4.7 to 4.11), the somewhat confusing change in the intervals for interim application submissions after practical completion has been removed and the terms have been amended to allow the JCT sub-contracts payment terms to ‘nest’ into them.

Other changes include a very cursory nod to the possible inclusion of Building Information Modelling/Management (BIM) on a project. It is such a cursory nod, in fact, that it is actually more of an aide memoire to remind you to think about BIM; the relevant terms will certainly need to be expanded if BIM is actually required.

The somewhat overly complex arrangements relating to Third Party Rights have been attended to. Part 2 of the contract particulars has been removed and consequential amendments made in part 1 to streamline the third party rights and collateral warranty provisions and clauses 3.4 and section 7 have been amended to cover third party rights obligations that are to be passed on to sub-contractors.

Contractors should note that the notification requirements associated with a loss and expense claim have been expanded (clause 4.20) and both parties will be happy to see that changes have been made to the insurance provisions in section 6 to build in more flexibility to cover different types of project.

Finally, security requirements have been formalised by clause 7.2 which allows for the Contractor to be required to provide performance bonds and guarantees, something that was clearly lacking before.

Moving on to NEC4 and specifically to the ECC form: the changes to the NEC3 forms were signposted early as being in response to feedback from the industry and resulting from statutory changes rather than major changes and this has proved to be the case.

Amendments that should improve certainty and assist with the proper administration of the contract include the requirement for the contractor to submit a payment application (clause 50.2), for a final certificate to be issued once all the works have been completed (clause 53), and the addition in clause 31.3 of deemed acceptance of a submitted programme if the Project Manager fails to deal with it in accordance with the contract requirements.

New additions and amendments that fill perceived gaps in the terms include new core clause 29 dealing with confidentiality, new option X8 making allowance for an obligation to provide collateral warranties, new option X11 formally setting out a client’s right to terminate at will and amendments to option X15 relating to liability for design which require that professional indemnity insurance cover is provided and setting down some (limited) intellectual property rights for the client.

A new core clause 18 has been added to import obligations arising from the Bribery Act 2010 and aimed at preventing corrupt practices and there is also a new option X10 to allow for the inclusion of BIM. The latter is an unsurprising addition given government requirements regarding the implementation of BIM and the use of the NEC forms of contract for publically funded works.

And finally what are the new FIDIC forms likely to bring us? The 1999 editions were significantly different in both form and content from the 1987 editions and consequently caused a bit of a stir amongst end users. At the end of last year an advance copy of the new Yellow Book edition was issued and both its increased length and some of the new clauses in it raised a few eyebrows so we wait with interest to see what the final versions will look like, watch this space...

The points highlighted above are a small selection, there are of course many more and it goes without saying that whichever of the standard forms you use and whichever side of the industry you work on, you should take a close look at the updated form before using it and review and update your risk profile in line with the changes. 

About the author:  Sarah E Phillips is an associate solicitor with Irwin Mitchell LLP

MPU

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