The JCT 05 Standard Building Contract Law and Administration pot

The JCT 05 Standard Building Contract
Law and Administration
This page intentionally left blank
The JCT 05 Standard
Building Contract
Law and Administration
Second edition
Issaka Ndekugri

Michael Rycroft
AMSTERDAM • BOSTON • HEIDELBERG • LONDON • NEW YORK • OXFORD
PARIS
• SAN DIEGO • SAN FRANCISCO • SINGAPORE • SYDNEY • TOKYO
Butterworth-Heinemann is an imprint of Elsevier
Butterworth-Heinemann is an imprint of Elsevier
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First published by Arnold as The JCT 98 Building Contract: Law and Administration, 2000
Reprinted 2006
Second edition, 2009
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09 10 11 12 13 10 9 8 7 6 5 4 3 2 1

Contents
Preface to Second Edition xxi
Preface to First Edition xxiii
Glossary of Latin terms xxv
Abbreviations xxvii
1. Style of JCT 05 Standard Building Contract, contract
execution and related problems 1
1.1 Standard form contracts generally 1
1.2 The Joint Contracts Tribunal Limited 2
1.3 JCT 05: Use, style and criticism 4
1.3.1 Use of JCT 05 4
1.3.2 Style of JCT 05 6
1.3.3 Criticism of JCT 05 7
1.3.4 Scope of this book – JCT 05 Standard Building
Contract, With Quantities 9
1.4 Documents forming the Contract 10

1.4.1 JCT 05: the printed form 10
1.4.1.1 Contents 10
1.4.1.2 Articles of Agreement – Recitals, Articles,
Contract Particulars, Attestation 10
1.4.1.3 Conditions 15
1.4.1.4 Schedules 15
1.4.2 Contract Drawings 17
1.4.3 Bills of Quantities 17
1.4.4 Documents related to Contractor’s Designed
Portion (where applicable) 19
1.4.4.1 Employer’s Requirements 19
1.4.4.2 Contractor’s Proposals 20
1.4.4.3 CDP Analysis 20
1.4.5 Other documents: Standard Method of Measurement 20
1.4.6 Other documents: Adjudication Agreements 21
1.4.7 Other documents: Model Arbitration Rules 21
1.4.8 Other documents: Sundry descriptive documents 21
vi Contents
1.5 Preparing the Contract Documents 21
1.5.1 Generally 21
1.5.2 Agreement, Contract Particulars, Schedules 22
1.5.2.1 Articles of Agreement 22
1.5.2.2 Recitals 22
1.5.2.3 Articles 24
1.5.2.4 Contract Particulars – Part 1: General 25
1.5.2.5 Contract Particulars – Part 2: Third Party
Rights and Collateral Warranties 34
1.5.2.6 Attestation 37
1.5.2.7 Conditions 39
1.5.3 Drawings and Bills of Quantities 39

1.5.3.1 Drawings 39
1.5.3.2 Bills of Quantities 39
1.5.4 Optional documents 40
1.5.5 Amending the Standard Contract Form 41
1.5.5.1 Generally 41
1.5.5.2 Amendment by introduction in the Bills
and other documents 42
1.5.5.3 Amendments to the printed standard form 43
1.5.5.4 Amendments to the Conditions in breach of
the ‘Construction Act’ 1996

44
1.5.5.5 Amendments and additions in breach of the
Unfair Contract Terms Act 1977 48
1.5.5.6 Amendments to alter periods under the
Limitation Act 1980 49
1.5.6 Custody of Contract Documents 50
1.6 When things go wrong 50
1.6.1 Two versions of a drawing revision, the wrong
version of which is signed 50
1.6.2 Contract Drawings listed do not correspond with Drawings signed 50
1.6.3 Failure to complete the Contract Documents 51
1.6.4 Failure to complete the formalities 52
1.6.5 Discrepancies 53
1.7 Forming a contract and the ‘Battle of Forms’ 54
1.8 Letters of intent and the right to payment 58
1.8.1 Letters of intent: meaning and effect 58
1.8.1.1 Generally 58
1.8.1.2 Letters of intent and standard form contracts 61
1.8.2 Letters of intent: right to payment 64

1.8.2.1 Right to payment: introduction 64
1.8.2.2 Quasi-contract and restitution 65
1.8.2.3 What is quantum meruit? 66
2. Participants in the project and their roles under the Contract 72
2.1 The Employer 72
2.1.1 Express contractual duties 72
2.1.2 Implied contractual duties 74
Contents vii
2.1.3 Duty not to interfere with the discretion of the Architect or
Quantity Surveyor 75
2.1.4 Rights of third parties 75
2.1.5 The Employer as client under the Site Waste
Management Plans Regulations 76
2.2 The Employer’s Representative 77
2.3 The Contractor 78
2.3.1 Materials and workmanship 78
2.3.1.1 The common law position 78
2.3.1.2 The contractual position 80
2.3.1.3 Substitution of materials required under
the Contract 83
2.3.2 The Contractor’s duty to give notices 83
2.3.3 The Contractor’s design responsibility 85
2.3.4 The Contractor’s CDP obligations 86
2.3.5 The Contractor’s duty to warn

86
2.3.6 Duty to comply with Architect’s Instructions (AIs) 88
2.3.7 Duties relating to the Contractor’s master programme 88
2.3.7.1 The Society of Construction Law’s Protocol 89
2.3.7.2 The contractual status of the Contractor’s programmes 90

2.3.8 Statutory Requirements 92
2.3.8.1 Divergence in contractual requirements

93
2.3.8.2 Unauthorized variations to comply with Statutory
Requirements

94
2.3.9 Duty to indemnify the Employer 94
2.3.10 Insurance obligations 95
2.3.11 Duties with respect to assignment and sub-contracting 95
2.3.12 Obligations in respect of other contractors of the employer 95
2.3.13 The principal contractor under the Site Waste
Management Plan Regulations 96
2.4 The Architect 96
2.4.1 Duty to provide drawings, instructions and other information 99
2.4.1.1 Items in the Information Release Schedule 99
2.4.1.2 Information not listed in the Information
Release Schedule 99
2.4.1.3 Information from other designers 101
2.4.1.4 Claims for delayed drawings and other information 102
2.4.2 Quality control duties 102
2.4.2.1 Evidence of Architect’s satisfaction and
appropriate materials and goods 102
2.4.2.2 Inspection and testing 103
2.4.2.3 Removal of non-conforming work and materials 103
2.4.2.4 Acceptance of non-conforming work 104
2.4.2.5 Variations and other instructions 105
2.4.2.6 Defective work and Interim Certifi cates 106
2.4.2.7 Exclusion of persons 107

2.4.2.8 Withholding the Practical Completion Certifi cate 107
2.4.2.9 Construction Skills Certifi cation Scheme 107
viii Contents
2.4.3 The extent of the Architect’s duty to supervise/inspect 107
2.4.4 Certifi cation duties 109
2.4.5 Duty to report on failings of other members of the design team 110
2.4.6 Standard of skill and care expected of the Architect 110
2.4.7 Liability of the Architect to the employer 111
2.4.8 Liability of the Architect to the Contractor and other third parties 112
2.5 The Quantity Surveyor 113
2.6 Designers 113
2.7 The Person-in-Charge (PIC) 114
2.8 The Clerk of Works (COW) 115
2.9 Suppliers and sub-contractors 117
2.10 Joint liability 117
3. JCT 05 timetable 118
3.1 Possession of site 120
3.1.1 General principles 120
3.1.2 Possession of site under the JCT 05 121
3.2 Completion Date 122
3.3 Practical Completion Certifi cate 123
3.3.1 Meaning of ‘practical completion’ 123
3.3.2 Effect of the Practical Completion Certifi cate 124
3.4 Non-Completion Certifi cate 125
3.5 Rectifi cation Period 126
3.5.1 Liability for defects that appear during the Rectifi cation Period 127
3.5.2 Defects after the Rectifi cation Period 127
3.5.3 Consequential loss from defects 128
3.5.4 Variations after practical completion?

129
3.6 Certifi cate of Making Good 129
3.7 Final adjustment of the Contract Sum 130
3.8 Final Certifi cate 130
3.8.1 Conditions precedent to a valid Final Certifi cate 131
3.8.2 Timetable for issue of the Final Certifi cate 133
3.8.3 Payment on the Certifi cate 133
3.9 Effect of Final Certifi cate 134
3.9.1 Role of the Architect 134
3.9.2 Adjustment of the Contract Sum and claims 135
3.9.3 Quality 135
3.9.4 Adjudication, arbitration or other proceedings 137
3.9.5 Dormant Proceedings 138
3.10 Partial possession 138
3.11 Early use/occupation by the Employer 139
4. Contractor designed work 141
4.1 General 141
4.2 Contractor’s Designed Portion Works (CDP Works) 141
4.2.1 Introduction 141
Contents ix
4.2.2 CDP Documents: Employer’s Requirements 142
4.2.3 CDP Documents: Contractor’s Proposals 145
4.2.4 CDP Documents: Analysis 146
4.2.5 Employer’s response to Contractor’s Proposals 147
4.2.6 Execution: Contractor’s Design Submission Procedure
(Schedule 1) 147
4.2.7 Execution: Integration into Architect’s design 154
4.2.8 Execution: Divergence and discrepancies 154
4.2.9 Execution: Variations 154
4.3 Specifi cation by performance 154

4.4 Liability for design and installation 155
4.4.1 Common law standard: fi tness for purpose 156
4.4.2 Reasonable skill and care 156
4.4.3 JCT 05 – Express obligation 157
4.4.4 JCT 05 – Liability for Employer’s design, and
obligation to check 158
5. Architect’s instructions 160
5.1 Power to issue instructions, confi rmations, etc. 160
5.2 Instructions 162
5.2.1 Instructions to be in writing 162
5.2.2 Instructions ‘other than in writing’ 163
5.2.3 Instructions given to the Contractor 163
5.3 Compliance and query 165
5.3.1 Contractor’s obligation to comply and entitlement to query 165
5.3.2 Non-compliance by Contractor 166
6. Variations and provisional sums 167
6.1 Variations: the general position 167
6.2 Variations ‘to’ or ‘under’ the contract? 168
6.3 Variations under JCT 05: defi nition 169
6.3.1 Instructed Variations 169
6.3.2 ‘Deemed’ Variations 170
6.4 Architect’s power to order Variations 171
6.5 Contractor’s right of objection 172
6.5.1 Objection to bona fi de Variations 172
6.5.2 Objection to purported Variations 172
6.6 Architect’s power to sanction Variations 173
6.7 Variations after practical completion 175
6.7.1 After due date for practical completion 175
6.7.2 After actual practical completion 175
6.8 Oral Variation instructions 176

6.9 Instructions with regard to provisional sums 177
6.10 Variations instruction and Valuation 178
6.10.1 Introduction 178
6.10.2 Directions as to choice of method 179
x Contents
6.11 Variation rules – Agreement by Employer and Contractor 179
6.12 Variation rules – Valuation by the Quantity Surveyor 180
6.12.1 Variations required or acceded to by the Architect
including work covered by Approximate Quantities 180
6.12.1.1 Measured work 180
6.12.1.2 Work or other matters which cannot be
properly measured 181
6.12.1.3 Other work affected 182
6.12.2 Some typical problems 182
6.12.3 Work covered by Provisional Sums in the Contract Bills 186
6.12.4 Variations in respect of Work Specifi ed by Performance 187
6.12.5 Variations in respect of Contractor’s Designed Portion 188
6.12.6 Variations in respect of contractor-designed work: a
few typical problems 189
6.13 Variation rules – Quotations 193
6.13.1 Schedule 2 Quotation: overview 193
6.13.2 Schedule 2 Quotation: the instruction 195
6.13.3 Schedule 2 Quotation: the quotation 196
6.13.4 Schedule 2 Quotation: acceptance 197
6.13.5 Schedule 2 Quotation: not accepted 198
6.13.6 Schedule 2 Quotation: further variation 199
6.13.7 Schedule 2 Quotation: some typical problems 200
6.14 Errors, discrepancy and divergence in and between documents 202
6.14.1 Generally 202
6.14.2 Status of Contract Bills and CDP documents 202

6.14.3 Errors and inadequacy in the Contract Bills and CDP
documents 203
6.14.4 Notifi cation and correction of discrepancies, etc. 205
6.14.5 Divergencies, and compliance with Statutory Requirements 207
7. Risks to health and safety: allocation and insurance 209
7.1 General nature of the problem 209
7.2 Allocation of risks under JCT 05 211
7.2.1 The Specifi ed Perils 211
7.2.2 Risk of personal injury/death 212
7.2.3 Damage to property 213
7.2.4 Personal injury and property damage from Excepted Risks 218
7.2.5 Risk of damage or loss to Works and Site Materials 218
7.3 JCT 05 insurance requirements 219
7.3.1 Insurance against personal injury or death 220
7.3.2 Insurance against damage to property 221
7.3.3 Insurance against Employer’s Clause 6.5.1 Risks 221
7.3.4 Insurance of Works and Site Materials 222
7.3.4.1 All Risk Insurance 223
7.3.4.2 Insurance under Insurance Option A
(by Contractor) 223
Contents xi
7.3.4.3 Insurance of Works under Insurance Option B
(by Employer) 225
7.3.4.4 Insurance of Works, Insurance Option C,
Paragraph C.2 (by Employer) 225
7.3.4.5 Insurance of existing structures under
Insurance Option C Paragraph C.1 (by Employer) 226
7.3.4.6 Terrorism cover 226
7.3.4.7 Insurance and sub-contractors 228
7.3.5 Insurance of off-site materials 230

7.3.6 Contractor’s Designed Portion Professional Indemnity
Insurance 230
7.3.6.1 Level of cover 230
7.3.6.2 Period of cover 230
7.3.6.3 Commercial availability 231
7.4 Enforcement of insurance requirements 231
7.5 Effect of joint Fire Code 231
7.6 Commercial insurance products 233
7.7 Amendments to the insurance provisions 233
7.8 Role of the Architect 233
8. Novation, assignment and sub-contracting 234
8.1 Novation 234
8.2 Assignment 234
8.2.1 Assignment under JCT 05 236
8.2.2 Assignment after Practical Completion 237
8.3 Sub-contracting 239
8.3.1 Sub-contracting under JCT 05 240
8.3.2 Sub-contractors under JCT 05 240
8.3.3 Sub-contract conditions 242
8.3.3.1 Effect of termination of the Contractor’s
employment 242
8.3.3.2 Unfi xed materials 242
8.3.3.3 Access for the Architect 243
8.3.3.4 Interest on overdue payment 243
8.3.3.5 Fluctuations 244
8.3.3.6 Collateral Warranties 244
8.3.3.7 Incorporation of the terms into sub-contracts 244
9. Third Party Rights and Collateral Warranties 246
9.1 Introduction – the privity rule 246
9.2 The Contracts (Rights of Third Parties) Act 1999 248

9.2.1 Generally 248
9.2.2 Third parties 248
9.2.3 Enforcing a term of the contract 249
9.2.4 Restriction on the parties 250
xii Contents
9.3 JCT 05 – rights of third parties 250
9.3.1 JCT 05 – Third Party Rights Generally 250
9.3.2 JCT 05 – Third parties 251
9.3.3 JCT 05 – Enforcing a term of the contract 251
9.3.4 JCT 05 – Third Party Rights for Purchasers and Tenants
(dealing with ‘P&T Rights’ under Schedule 5: Part 1) 253
9.3.5 JCT 05 – Third Party Rights for Funder (Schedule 5,
Part 2: ‘Funder Rights’) 255
9.4 JCT 05 – Collateral Warranties 258
9.4.1 JCT 05 – Collateral Warranties generally 258
9.4.2 JCT 05 – Collateral Warranties from Contractor 259
9.4.3 JCT 05 – Collateral Warranties from Sub-Contractors 260
9.5 JCT 05 – Third Party Rights, or Collateral Warranties? 261
10. Health and Safety obligations under the CDM Regulations 264
10.1 Cooperation and coordination 265
10.2 Competence of CDM dutyholders 265
10.3 Prevention 266
10.4 Duties of CDM client 266
10.5 CDM Co-ordinator 268
10.5.1 Pre-construction duties 268
10.5.2 Duties during construction 269
10.6 Contractors under CDM 270
10.7 Principal Contractor 270
10.8 Designers 273
10.9 Enforcement of Regulations 275

10.9.1 Improvement/prohibition notices 275
10.9.2 Prosecution for criminal offence 276
10.9.3 Disqualifi cation of Directors 277
10.9.4 Prosecution for common law gross negligence
manslaughter 277
10.9.5 Prosecution for corporate manslaughter 277
10.10 Civil liability for breaches of the Regulations 278
10.10.1 Breach of contract 278
10.10.2 Liability in negligence 278
11. Delays, extension of time and liquidated damages 279
11.1 Concept and application of liquidated damages 279
11.1.1 Concept of liquidated damages 280
11.1.2 Concept and sectional completion obligation 283
11.1.3 Application of liquidated damages 284
11.1.4 Fixing liquidated damages in construction contracts 286
11.2 Effect of delay: general principles 287
11.3 Extension of time and liquidated damages under JCT 05:
an outline 291
Contents xiii
11.4 Relevant events 292
11.4.1 Variations 294
11.4.2 Compliance with certain instructions of the
Architect 294
11.4.3 Deferment of possession of site 294
11.4.4 Work with Approximate Quantity 295
11.4.5 Suspension for non-payment 295
11.4.6 Impediment/prevention/default by the Employer 296
11.4.7 Statutory undertakers 298
11.4.8 Exceptionally adverse weather conditions 298
11.4.9 Loss/damage from the Specifi ed Perils 299

11.4.10 Civil commotion/terrorism 300
11.4.11 Industrial actions 300
11.4.12 Statutory intervention 301
11.4.13 Force majeure 302
11.5 Pre-agreed Adjustment 301
11.6 Relevant Omissions 302
11.7 Administrative procedures 302
11.7.1 Obligations of the Contractor 302
11.7.2 Duties of the Architect 304
11.7.3 Importance of the notices of delay 305
11.7.4 Review of extensions of time 305
11.7.5 Adjudicating on extension of time 306
11.7.6 Effect of an adjudicator’s extension of time decisions 307
11.8 Deduction of liquidated damages 308
11.9 The Contractor’s duty to update the master programme 309
11.10 Deduction of liquidated damages from money decided by
an adjudicator 309
11.10.1 Refund of liquidated damages 312
11.10.2 Non-Completion Certifi cate and Withholding Notices 313
11.11 Resisting liability for liquidated damages 314
11.11.1 Penal liquidated damages provisions 314
11.11.2 Completion Date at large 315
11.11.3 Programme specifi cation defect 315
11.11.4 No Non-Completion Certifi cate 315
11.11.5 No Notice of Liquidated Damages 315
11.11.6 Estoppel 317
11.12 Concurrent delays 317
11.12.1 The fi rst-in-line approach 318
11.12.2 The ‘but for’ approach 319
11.12.3 The dominant cause approach 319

11.12.4 The apportionment approach 320
11.12.5 The
Malmaison
approach 320
11.13 Delays within culpable delay 321
11.14 Extension of time and professional negligence 322
11.15 The SCL Protocol 323
11.15.1 Preparation and submission of contractor’s programme 324
xiv Contents
11.15.2 Record keeping 324
11.15.3 Extension of time procedures 325
12. Claims for damages and contractual claims: an overview 326
12.1 Introduction 326
12.2 ‘Contractual’ and ‘common law’ claims: similarities 327
12.3 ‘Contractual’ and ‘common law’ claims: differences 328
12.3.1 Architect to ascertain 328
12.3.2 Interim payment 328
12.3.3 Notices 328
12.4 ‘Contractual’ and ‘common law’ claims: as alternatives 329
12.5 Common principles 329
12.5.1 Cause and effect and global claims 329
12.5.2 Measure of recovery 333
12.6 Employer’s claims 337
12.6.1 Delay in completion of the Works 338
12.6.2 Failure to complete the Works 338
12.6.3 Failure to comply with Architect’s Instructions 338
12.6.4 Correction of defects: limitations and Employer’s
additional losses 339
12.7 Excessive claims: criminal liability 341
13. Contractual money claims under JCT 05 342

13.1 Introduction 342
13.2 Procedures 343
13.2.1 Application by Contractor (notices) 343
13.2.2 Architect to ascertain 345
13.2.3 Relevance of extensions of time 347
13.3 Matters giving rise to entitlement 348
13.3.1 Deferment of giving possession of the site 348
13.3.2 List of Relevant Matters affecting regular progress 349
13.4 Heads of claim 351
13.4.1 Introduction 351
13.4.2 Site establishment costs, and other-project related
overheads 352
13.4.3 Head offi ce overheads 354
13.4.4 Visiting head offi ce staff 357
13.4.5 Uneconomical working 357
13.4.6 Uneconomical procurement 358
13.4.7 Loss of profi t 359
13.4.8 Acceleration 359
13.4.9 Third party settlements 362
13.4.10 Infl ation 363
13.4.11 Financing other heads of claim 364
13.4.12 Financing retentions 365
Contents xv
13.4.13 Interest 365
13.4.14 Cost of producing claim 368
13.4.15 VAT on damages 369
14. Fluctuations 370
14.1 Fluctuations under Option A 370
14.1.1 Statutory contributions, levies and taxes in respect
of employees 371

14.1.2 Duties and taxes in respect of materials 372
14.1.3 Percentage for additional payment 372
14.1.4 Notices, evidence and calculations 372
14.1.5 Exclusions from fl uctuations under Fluctuations Option A 373
14.2 Fluctuations under Option B 373
14.2.1 Labour costs 373
14.2.2 Statutory contributions, levies or taxes 374
14.2.3 Materials 374
14.2.4 Sub-contractors and suppliers 375
14.2.5 Percentage addition 375
14.2.6 Exclusions from fl uctuations under Option B 375
14.2.7 Notices, evidence and calculations 375
14.3 Fluctuations under Option C 375
14.3.1 Calculation of fl uctuations 378
14.3.2 Work Categories/Work groups 378
14.3.3 Fluctuations after Practical Completion 379
14.3.4 Imported articles 380
14.3.5 Delay, suspension and cessation of publication of
the indices 380
14.4 Errors, certifi cation and retention 380
14.5 Extension of time, delayed completion and fl uctuation 381
15. Payment 382
15.1 Advance Payment 382
15.2 Interim Certifi cates 383
15.2.1 Timing of issue of Interim Certifi cates 383
15.2.1.1 Timetable up to Practical Completion 384
15.2.1.2 Timetable after Practical Completion 384
15.2.2 Payment on Interim Certifi cates 385
15.2.3 Payment Notice 385
15.2.4 Withholding Notice 387

15.2.5 Contractual grounds for withholding 387
15.2.6 Other grounds for withholding 388
15.2.7 Effect of failure to serve the notices 389
15.3 Responsibility for valuation and certifi cation 393
15.4 Valuation for certifi cation 395
15.4.1 The Gross Valuation 395
xvi Contents
15.4.2 Sums subject to retention 395
15.4.3 Sums not subject to retention 396
15.4.4 Deductions to be allowed by the Contractor 397
15.4.5 Negative Interim Certifi cates 397
15.5 Unfi xed materials and interim Certifi cates 398
15.5.1 On-site materials and goods 399
15.5.2 Off-site materials and goods 401
15.6 Remedies for non-payment by the Employer 401
15.6.1 Interest 402
15.6.2 Suspension of performance/termination 403
15.6.3 Adjudication 404
15.6.4 Litigation 404
15.6.5 Arbitration 405
15.7 The treatment of retention funds 405
15.7.1 The concept of a trust 406
15.7.2 Trusts of retention funds 406
15.7.3 Set-off against retention 408
15.8 The fi nal adjustment of the contract sum 408
15.8.1 Timetable for fi nal accounts and the fi nal certifi cate 410
15.8.2 The effect of the fi nal certifi cate 410
15.9 Architect’s liability for negligent certifi cation 410
15.10 Bonds 412
15.10.1 The Advance Payment Bond 413

15.10.1.1 The Advance Payment Bond Form 413
15.10.2 The Off-site Materials Bond 414
15.10.2.1 The Off-site Materials Bond Form 414
15.10.3 The Retention Bond 415
15.10.3.1 The Retention Bond Form 415
15.11 The Local Democracy, Economic Development and Construction
Bill, payment and Notices 416
15.11.1 Payment Notice 416
15.11.2 Default Payment Notice 417
15.11.3 Withholding Notice 417
15.11.4 Disputes over notifi ed sum and Withholding Notices 417
16. Termination 419
16.1 Termination at common law for repudiation 419
16.1.1 Conditions and warranties 420
16.1.2 Wrongful termination at common law 421
16.2 Common law versus the Contract 422
16.3 JCT 05 termination clauses: an overview 423
16.4 Notices required by the termination procedures 423
16.5 Defi nition of insolvency 424
16.6 Termination by the Employer for specifi ed defaults 426
16.6.1 Suspension of the Works by the Contractor 426
16.6.2 Failure to proceed regularly and diligently 427
16.6.3 Refusal to remove defective work and materials 428
Contents xvii
16.6.4 Assignment and sub-letting 428
16.6.5 CDM Regulations

428
16.6.6 Procedure for termination for the Contractor’s
default 429

16.7 Termination for the Contractor’s insolvency 432
16.7.1 Instruction to the Contractor to continue 433
16.7.2 Continuation contracts 433
16.7.3 Novation 434
16.8 Corruption 434
16.9 Termination by the Contractor for Employer’s defaults 434
16.9.1 Failure of the Employer to pay 434
16.9.2 Interference/obstruction by the Employer 435
16.9.3 Assignment 435
16.9.4 CDM Regulations 436
16.9.5 Procedure for termination for Employer’s defaults 436
16.10 Termination by Contractor for the specifi ed suspension events 436
16.11 Termination by Contractor for the Employer’s insolvency 438
16.12 Termination for withdrawal of Terrorism Cover 438
16.13 Termination by either party for loss/damage to the Works 439
16.14 Termination by either party for
force majeure
and the like 440
16.15 Post-termination rights, obligations and procedures 442
16.15.1 Termination by Employer for default,
insolvency or corruption 442
16.15.1.1 Protection of the Works 442
16.15.1.2 Assignment of Contractor’s contracts
with third parties 442
16.15.1.3 Removal of temporary buildings,
plant and the like 442
16.15.1.4 Suspension of further payment to
the Contractor 443
16.15.1.5 Supply of as-built drawings for CDP 445
16.15.1.6 Completion of the Works 445

16.15.2 Other termination under the Contract 445
16.16 Financial settlement 446
16.16.1 Where the Works are completed after termination
by the Employer for Contractor’s default,
insolvency or corruption 446
16.16.1.1 Expense, loss and/or damage 446
16.16.1.2 Notional Final Account 447
16.16.1.3 Calculations involved 447
16.16.2 Where the Works are abandoned after termination
by the Employer for Contractor’s default,
insolvency or corruption 448
16.16.3 Other termination under the Contract 448
16.17 Contingent liability claims against an Insolvent Contractor 449
16.18 Recoverability of liquidated damages 450
16.19 Meaning of ‘unreasonably or vexatiously’ 451
xviii Contents
16.20 Performance bonds and guarantees 451
16.21 Contesting Termination 452
17. Dispute resolution 456
17.1 The meaning of ‘dispute’ or ‘difference’ 457
17.1.1 The arbitration cases 457
17.1.2 The adjudication cases 460
17.1.3 The current approach 464
17.2 Ambit of the dispute resolution clauses 466
17.3 Matters expressly not subject to review 468
17.4 Adjudication 469
17.4.1 Notice of adjudication 471
17.4.2 Appointment of the adjudicator 472
17.4.3 Referral of the dispute 473
17.4.4 The response to the Referral Notice 474

17.4.5 The powers of the adjudicator 475
17.4.5.1 Fees and expenses of the adjudicator 476
17.4.5.2 Costs incurred by the parties 476
17.4.5.3 The Local Democracy, Economic Development
and Construction Bill and adjudication costs 478
17.4.5.4 Interest 478
17.4.5.5 VAT 479
17.4.6 The adjudicator’s decision 480
17.4.6.1 Reasons 480
17.4.7 Immunity of the adjudicator 481
17.4.8 Enforcing the decision of an adjudicator 481
17.4.8.1 Summary judgment/interim payment 482
17.4.8.2 Mandatory injunction 482
17.4.8.3 Statutory demand 483
17.4.8.4 Part 8 proceedings (Civil Procedure Rules) 483
17.4.9 The adjudicator’s powers to correct errors in his decision 484
17.4.10 Advantages of statutory adjudication 484
17.4.11 Disadvantages of statutory adjudication 485
17.5 Litigation 485
17.5.1 The Civil Procedure Rules 486
17.5.2 Compliance with the Pre-Action Protocol 486
17.5.2.1 Letter of Claim 487
17.5.2.2 The defendant’s response 487
17.5.2.3 Pre-action meeting 487
17.5.3 Non-compliance with the Protocol 488
17.5.4 Recovery of cost of compliance with Protocol 489
17.6 Arbitration 489
17.6.1 JCT 05 arbitration agreement 490
17.6.2 Enforcement of the arbitration agreement 491
17.6.3 Arbitration procedure 491

17.6.3.1 Choice of three types of procedure 492
Contents xix
17.6.3.2 Commencement of arbitration proceedings 492
17.6.3.3 Appointment of the Arbitrator 493
17.6.3.4 Multi-party disputes 493
17.6.4 Enforcement of an arbitrator’s award 494
17.6.5 Court intervention into arbitration 495
17.6.5.1 Appointment of arbitrators 495
17.6.5.2 Extension of time for commencement of
arbitration 496
17.6.5.3 Removal of an arbitrator 496
17.6.5.4 Resignation of an arbitrator 496
17.6.5.5 Interlocutory orders 496
17.6.5.6 Determination of recoverable costs 496
17.6.5.7 Determination of preliminary points of law 497
17.6.5.8 Appeals against an arbitration award 497
17.7 Arbitration or litigation 499
17.7.1 Expertise 499
17.7.2 Advocacy 500
17.7.3 Costs 500
17.7.4 Simplicity 500
17.7.5 Expedition 501
17.7.6 Convenience 501
17.7.7 Courtesy 501
17.7.8 Privacy/confi dentiality 501
17.7.9 Future business relations 502
17.7.10 Powers of the arbitrator 502
17.7.11 Summary relief 502
17.7.12 Finality 503
17.7.13 National sovereignty 504

17.7.14 Multiple parties 504
17.7.15 Compound interest 506
17.7.16 Legal aid 506
17.8 Mediation 506
Table of Cases 509
Table of Clause References 530
Table of Statutes and Statutory Instruments 539
Subject Index 545
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Preface to Second Edition
In the nine years since the publication of the fi rst edition of this book, much has changed
for those contracting with the Joint Contracts Tribunal’s forms of contract. Developments
in both statutory and common law and innovation in procurement methods have had some
effect; but the greatest impact has been from the re-drafting by the JCT in 2005 of their
entire suite of contracts, giving participants in the building industry a new set of forms of
contract for a wider range of procurement options. Nevertheless, the Standard Building
Contract, the subject of this book, remains the JCT’s fl agship form and, despite the devel-
opment of procurement systems such as partnering, and framework arrangements, it still
appears to be the model of administrative and risk allocation norms in not only the build-
ing sector but also the wider construction industry.
This book is published as a second edition to our earlier book, The JCT 98 Building
Contract: law and administration , simply because the 2005 version of the standard contract,
despite the change of title, is in essence a re-presentation of it’s predecessor JCT 98. Whilst
the 2005 edition is a dramatic change in form, the allocation of risk has remained largely
the same. Indeed, the JCT have gone to considerable lengths to assist those familiar with the
1998 contract to adapt to the new contract, particularly with the provision of tables showing
how clauses in the new contract map onto equivalent clauses in JCT 98. We have, therefore,
tried to keep chapters and section numbers of our book the same as those in the fi rst edition
wherever possible. There are some obvious changes, such as the introduction of chapters on
third party rights and CDM obligations, but they conveniently fi ll the gaps left by the exclu-

sion of the provisions on Nominated Sub-contractors and Suppliers.
We have concentrated on the With Quantities version of the JCT Standard Building
Contract, as that form contains the widest variety of features. We considered, at length, the
short title for use throughout the book. Strictly, JCT 05 describes the whole suite of JCT
contracts, and the particular contract form we deal with is designated ‘ SBC/Q ’ by the JCT.
However, ‘ SBC/Q ’ is not a term used much in the industry, where simply ‘ JCT 05 ’ is often
used to describe the Standard Building Contract, which distinguishes it from ‘ JCT 05
Design and Build ’ , or ‘ JCT 05 Major Projects ’ etc. We therefore hope and pray that our
readers will treat our use of ‘ JCT 05 ’ as the short title with indulgence.
In the preface to the fi rst edition, we noted that disputes appeared to result largely
from lack of understanding of the standard terms then current, or confusion arising from
poorly prepared contract documents. Our observations suggest that, in this respect, little
has changed, and that considerable risk remains for any of the participants in the con-
tracting process to become embroiled in dispute. Accordingly, our book is still aimed at
xxii Preface to second edition
all construction participants in developer, management, design, or construction organi-
zations involved in the planning, execution or administration of building contracts and,
also, at undergraduate and postgraduate students studying towards careers in the industry.
Feedback from the fi rst edition suggests that even experienced construction Lawyers are
likely to fi nd it very useful.
We are aware that readers will use this book in different ways; some will approach it chap-
ter by chapter, but many will dip into a particular topic from the index to research the prob-
lem in hand. For that reason, there is a certain amount of duplication of the general cover of
some topics. For example, the principles underlying liquidated damages can be found in the
chapter dealing with time and liquidated damages, and also in the chapter dealing with prepa-
ration of the contract documents. Whilst we cover the effect of the provisions in the JCT con-
tract in considerable detail, our aim is also to put the contract into context by explaining the
statutory and common law background to each topic. This inevitably results in some overlap,
and we have tried to cross-reference to other chapters where wider reading is necessary.
The last nine years have seen a dramatic increase in access to case law through the

Internet. In particular, the publication on-line of most House of Lords, Court of Appeal
and High Court judgments, together with Commonwealth Courts ’ and other common law
decisions has produced a plethora of examples to demonstrate particular points. However,
readers should bear in mind that only a few cases produce new principles; many of the
cases cited simply demonstrate established principles in action, applied to the particular
facts, and often infl uenced by unique agreements between the parties.
At the publication of the fi rst edition in 2000, the 1996 Construction Act was still in its
infancy. Our chapters on payment and dispute resolution in particular were, therefore, writ-
ten with the benefi t of only a few cases. Whilst we now have the judicial help of several
hundred cases, a few may become redundant as, at the time of going to print, a long-awaited
amendment to the 1996 Act under the title ‘ Local Democracy, Economic Development and
Construction Bill, Part 8 Construction Contracts ’ was working its way through Parliament.
When it becomes law the JCT will be obliged to amend their contract to implement the
changes. Although we have dealt with payment, dispute resolution and parties ’ attempts to
amend the standard contract by reference to the 1996 Act, we have also outlined the proposed
statutory amendments to give an indication of the changes that may come about in 2010.
On the matter of style, for the reasons given in the Preface to the fi rst edition, we have
again followed the JCT in their use of ‘ he ’ for reference to contractual dutyholders. We
have also retained the use of capital letters when referring to specifi c JCT terminology
(e.g. the Architect, the Employer, Variation, Parties), and lower case where the reference
is general (architects, employers, variations, parties). In many places we have referred to
judges, some of whom later went on to higher positions. Where we cite a judge’s rank
(e.g. HHJ, LJ, etc) it is the rank at the time of the relevant judgment but we have tried to
avoid the repetitive use of ‘ as he/she then was ’ .
We owe thanks to the University of Wolverhampton for the use of its extensive facili-
ties, to Hill International Midlands offi ce for the kind use of research materials, and to
Mr John Wood, a director of Quantex Consulting who again gave time freely to bench test
the user-friendliness of our style. Thanks also go to the production team for their contri-
bution. Finally, but by no means least, we are indebted to our wives Mariama and Judith,
without whose patience and support this book would never have been fi nished.

We have tried to state the law at January 2009; any errors or omissions are, of course, ours.
Issaka Ndekugri
Mike Rycroft
February 2009
Preface to First Edition
Periodic surveys of standard building contract forms suggest that the Joint Contracts
Tribunal stable of forms is in widespread use. In particular its fl agship, the Standard Form
of Building Contract, in its various versions is popular where works are of more than
minimal complexity; and to the extend that the industry can be said to adopt a norm, the
administrative principles of the JCT Standard Form appear to be the nucleus of that norm.
However, use of the Standard Form has been dogged by a high incidence of disputes. It
is an open secret that many of these disputes have been attributed either to lack of under-
standing of the terms, or to confusion arising from cavalier preparation and alteration of
documents. Our personal observations indicate that the problem affects all participants in
the contracting process, including Employers ’ professional teams and Contractors ’ site or
offi ce management. In recent years there has been a huge increase in the law and proce-
dures content of academic built environment courses; this is matched by a similar increase
in continuing professional development courses dealing with contractual issues. Our book
results from our considerable involvement in both types of course, together with the reali-
zation that diffi culties faced by practising construction professionals and individual stu-
dents are commonplace.
This work is aimed at all construction professionals, whether they be in design or con-
struction organizations, who are involved in the planning, execution or administration of
building contracts; it is also aimed at undergraduate and post-graduate students studying
towards careers in the industry. Of course we must not forget the lawyers; we hope the form
and content of this book will assist in particular, those encountering their fi rst construction
cases, who may be unfamiliar with the jargon or traditions of the construction world.
We have not dealt with all versions of JCT Standard Form, but have concentrated on the
Private Edition with Quantities; comparison of the major differences from other versions
are noted in the text. To comply with tradition we have used JCT 98 as the short title.

The book was commenced when the 1980 Edition with Amendments 1 to 17 was cur-
rent, and was necessitated by a dearth at that time of up-to-date texts. The publication of
Amendment 18 in April 1998, followed, in November 1998 by the 1998 Edition, seriously
delayed drafting; no event could have highlighted more dramatically for us the ongoing
problem faced by students and practitioners alike in trying to keep up with change. The
inevitable Amendment 1 was issued by the JCT in June 1999. The amendment deals with
tax matters which we had previously decided would be outside the scope of the book, and
consequently it receives only passing mention in the commentary on preparing documents,
xxiv Preface to fi rst edition
and payment obligations. Just before publication, JCT 98 became available on CD with the
facility for completing the form including incorporating the standard amendments. This
must ease the onerous task described in Chapter 1.
One change in the construction industry which is not refl ected in the book, but which
deserves special mention, is the welcome increase in the numbers of female practitioners
throughout all disciplines. We gave considerable thought to getting around the inadequacy
of the English language, which thwarts any attempt to neutralise contractual duty holders.
Rather than reduce everyone to ‘ it ’ , or resort to the clumsy ‘ s/he ’ or ‘ he/she ’ , we reluctantly
decided on the use of ‘ he ’ throughout; this was principally because recurring reference
needs to be made to the contract terms, and ‘ he ’ is the term used exclusively by the JCT.
Change is not confi ned to the construction industry, and in April 1999 new Court Civil
Procedure Rules came into force as a result of Lord Woolf’s Access to Justice Report.
The main effect of the Rules on this book is on the terminology. Where reference is made
in a general sense to the rights or obligations of a party bringing a case to the Court, we
have used the term ‘ claimant ’ in accordance with the Rules. Where we have used the term
‘ plaintiff ’ it refers to the plaintiff in a case preceding the new Rules.
On the matter of style, at the risk of confusing the reader we have adopted the use of
capital letters when referring to specifi c JCT terminology (e.g. the Architect, the Employer,
Variation), and lower case where the reference is general (architects, employers, variations).
We owe much to Mr John Wood, a director of James R. Knowles, who gave his time
freely to act as a sounding board for our ideas and to bench test the user-friendliness of our

style. We are also indebted to the editorial and production team who waited so patiently
while we struggled to catch up with the Joint Contracts Tribunal.
Finally, we have tried to state the law at September 1999; any errors or omissions
are ours.
Issaka Ndekugri
Michael Rycroft January 2000