It does not seem 5 minutes, let alone 5 years, since we were last examining the ‘new’ JCT approach, in that case arising from new legislation.This time round, the JCT has taken the opportunity to pull in a number of key cases and pieces of relevant legislation to their updated contract suite, for which they have initially (rather cautiously in my view) only released the Minor Works family.
There are a number of interesting changes, some more obvious than others, but all relevant for suppliers, users and investors connected to the construction industry:
- The due and final dates for payment have been moved back by virtue of specific interim valuation dates, which are intended to make a back to back payment structure through the supply chain easier to achieve, but (as well as facing the Grove v Balfour Beatty case risk when using payment schedules) also have the effect of slowing down cashflow slightly.
- One benefit of this new structure is that contractors are encouraged to (but not obliged to) apply for payment, with new clauses entitling them to do so, making that the default payment notice (if compliant) and creating some extra breathing space in the payment timetable to factor that in.
- The post practical completion interim payment regime has reduced from two month to one month payments.
- Notified sums that are due and finally payable, but remain unpaid, are recoverable as a debt – presumably in light of the ISG v Seevic line of authority.
- Recognition and application of CDM 2015
- The insurance clauses have a new option of insuring existing structures “by other means”, designed to help domestic homeowners and commercial tenants. Linked to that is a new recognition that those policies may impose limitations that impact on the JCT’s previously used global indemnity wording.
- The employer has a choice at his sole discretion to demand defects are repaired or to impose an appropriate payment deduction (consistent with other JCT contracts and see the Mul v Hutton Construction case)
- For those dealing with the public sector, the 2015 Regulations have expanded the termination scenarios, demanded transparency for Freedom of Information, and require 30 day payment to the supply chain.
We wait to see the new loss and expense mechanism (and other changes) when JCT releases the remaining 2016 contracts.