What UK architects and builders must know about JCT Contracts advice, Buildings construction guide

What UK Architects and Builders Need to Know About JCT Contracts

31 May 2022

Before beginning any construction project, architects and builders will usually need to make sure there is a contract in place. However, there are no standard contracts in the construction industry. Instead, the majority of large construction companies use JCT contracts that can incorporate numerous amendments.

A brief history of JCT contracts

There can be several JCT contracts in place during a construction project. The initial contract is agreed between the building owner and the contractor or builder. Then, the second contract is made between the main contractor or builder and the subcontractors carrying out the work. JCT contracts can cover a variety of fundamental issues:

• The specified obligations of every party involved
• The specific details of the construction project
• The costs involved (a breakdown and the total amount)

In fact, JCT contracts have become essential in the construction industry as they set out all the pertinent details, including:

• What must be done
• When it should be done
• Who should perform specific tasks
• The overall project cost

They also reduce the likelihood of disputes as all the tasks and responsibilities are outlined in writing. For this reason, in order to avoid potential lawsuits and financial liabilities, parties always strive to ensure the work is carried out according to the precise contract specifications.

How do JCT contracts benefit architects and builders?

Before setting a construction project in motion, architects and builders should consider signing a JCT contract for the following reasons:

1. It will provide protection against the numerous construction-related issues that can often arise.
2. It will offer an immediate resolution of disputes.
3. It will reduce or eliminate unnecessary costs.
4. It will assure employers of a builder’s reliability.

Are there any disadvantages?

Unfortunately, there are some disadvantages associated with JCT contracts, especially if you are a subcontractor. For instance, you will assume a greater risk if your project experiences a delay. It is also common for subcontractors to pay penalties for the late completion of work, whether it is their fault or not. Furthermore, as JCT contracts can contain a great deal of legal jargon, you may not have the expertise or time to review and understand it all.

How to negotiate a fair JCT contract agreement

When negotiating a JCT contract, it is essential that you include a clause that will ensure timely payment. In addition, remember to bear in mind the following factors when negotiating the price:

1. Payment terms

Make sure you discuss the payment terms during the negotiation phase and before taking on the project.

2. Provisions for deposit/interim/staged payments

You can include a clause in the JCT contract whereby you agree on interim or staged payments, especially if the work takes more than 45 days to complete.

3. Dates for valuation

You can also negotiate valuation dates. For instance, you can agree to receive 20% of the total payment once the project design has been completed.

4. Clauses for suspension or termination of work

It is vital that you include provisions that will allow you to suspend or even terminate work due to non-payment. This will enable you to avoid or at least minimise potential financial losses.

Make sure you obtain payments for variations

JCT contracts can also take account of additional work, known as “variations”. However, before undertaking this type of work, make sure you have already agreed on the “3 Ps”:

• Price – Ensure the contract work plus the variation costs are re-valued and re-priced. This will enable you to obtain the correct amount of compensation.
• Payment – Ask for payment once the extra work has been completed.
• Programme – Ensure you have the time to carry out the extra work (to avoid potential penalties for delays).

Conclusion

As an architect or builder, you will often need to have a JCT contract in place for your construction projects. For this reason, it is vital that you understand the importance of these contracts as well as their associated benefits and disadvantages. This will help you negotiate a contract that will cover your concerns, especially in relation to the scope of work and payment terms. If your contract will incorporate numerous complicated legal terms, you may wish to enlist the services of an expert who specialises in such agreements.

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