Amending JCT Design & Build Contract – lessons learnt from recent case law.
Ewan Anthony and David Owens provide a round up of the recent case law in the world of construction contracts.
In this article, we summarise some important considerations when negotiating standard form construction contracts based on lessons from two recent cases from the Technology and Construction Court (TCC):
Workman v Adi concerned a dispute regarding design responsibility under an amended JCT Design and Build Contract 2016.
In an adjudication prior to the court proceedings, the adjudicator found that a paragraph in the Employer’s Requirements amounted to a warranty from Workman that the design had reached RIBA Stage 4, which in turn meant that Workman was in breach due to some of the design having not developed to the required stage.
This then entitled Adi to additional time and money for completing the additional design work. Workman then brought Part 8 proceedings seeking a declaration from the court that Adi was responsible for completing the design to RIBA Stage 4. The court found in favour of Workman.
In BNP v B&F, the primary issue between the parties was the extent of the asbestos works required to be completed by B&F, namely whether it was required to carry out additional surveys and asbestos removal works which had not been foreseen as part of the original scope of work.
As a result, B&F suspended their works and issued a termination notice which BNP argued was a repudiatory breach of the contract.
The court held that under the terms of the contract B&F had accepted full design responsibility including terms which required B&F to accept responsibility for site conditions. B&F, therefore, wrongfully terminated the contract.
Consistency is key
Implementing clarity and consistency of terms throughout construction contracts is vital to avoid confusion and disputes occurring later down the line.
Workman demonstrated how even one sentence in the Employer’s Requirements could convince an adjudicator to override various other clear contractual terms.
The adjudicator had decided that a statement which said “Significant design has been developed to date which has been taken to end of RIBA Stage 4 with some parts of contractor specialist design elements together with Services design to Stage 4 (i)” constituted a contractual warranty.
This was despite various clear terms in the main contract which gave Adi full design responsibility, and responsibility for the Employer’s Requirements.
The subsequent Part 8 proceedings in the TCC found that, instead, Adi was responsible for the further required design. This was reflective of the terms of the main contract rather than the term contained in the Employer’s Requirements.
The judge concluded that “the words used in that second section are nowhere near sufficient to require the other unequivocal contract provisions to be read as so heavily qualified.”
This serves as a reminder that continuous review of the contract terms is vital – inconsistency between the main contract terms and technical documents can be a catalyst for disputes.
Parties should ensure that what they understand as agreed intentions for a project must be properly and consistently reflected throughout the contract and technical documents.
Added strength of amendments to standard forms
In the cases of both Workman v Adi and of BNP v B&F the judges commented on the impact of the employer relying on terms of the contracts, which were bespoke amendments made to the standard form. The conclusion of such comments is that these bespoke terms generally have greater weight when interpreting the contract.
For example, Workman sought to rely on various amendments made to the standard form JCT DB 2016 including terms which set out that Adi was entirely responsible for all design works including the information contained in the Employer’s Requirements.
The judge drew attention to the greater importance of these terms being specific amendments to the standard form, noting that “this is not merely a case of qualifying the unamended provisions of the JCT 2016 design and build contract, but of qualifying the bespoke conditions which impose a far more wide-ranging design responsibility, including a responsibility for the whole of the Employer’s Requirements.”
Again in BNP v B&F, BNP relied on various terms that were amendments to the standard form. Those that provided that B&F had inspected the physical condition of the site, that BNP made no warranty as to the accuracy of information given about the physical condition, and that no failure by B&F to discover issues with the physical condition of the site would entitle it to an extension of time or additional sums.
This again went much further than the standard form JCT DB. The judge gave weight to the fact that the provisions were bespoke amendments stating: “these were special conditions, not included in the JCT standard form, and thus representing the parties’ specific agreed intentions.”
The lesson here remains that the court will consider the true intention of the parties when entering into the contract – the amendments to a standard form being a good indication of the parties’ agreed positions and expectations.
Proper due diligence remains crucial in this regard and the parties should ensure they fully understand the terms being agreed and their practical impact.
Pre-contract discussions are weak evidence on issues of contractual interpretation
Where a party disagrees with a contract’s interpretation, they may seek to use pre-contract meetings and discussions as evidence as to what was truly intended.
However, Workman v Adi and BNP v B&F both demonstrated the difficulty in seeking to rely on such an approach.
As was outlined in Workman v Adi, the general proposition is that “pre-contractual negotiations are inadmissible, save where they explain the genesis and objective aim of the transaction or identify the meaning of a descriptive term or establish relevant facts known to the parties at the time”. Parties may have discussed principles about how they intended the contract to operate prior to the contract being signed, but this needs to be conveyed in the contract drafting.
In BNP v B&F, a quote for asbestos works from a subcontractor was included in the contract. When wider asbestos works were found necessary, B&F argued that this quote limited their scope of works – but this was not reflected in any actual term of the contract.
Though B&F attempted to argue that in pre-contract meetings the parties had agreed the quote would be included and set the scope of such works, the judge found that evidence of negotiations leading up to the contract to explain the purpose of the quote was inadmissible for the purpose of construing the terms of the contract.
It is a clear reminder that if the intentions of a party, contained in pre-contract negotiations, are not reflected in the actual words in the contract, the court is likely to have little sympathy and will generally enforce the literal meaning of the contract terms before them.
New asbestos provisions under the JCT DB 2024
As mentioned above, in BNP v B&F the issue arose between the parties as to the extent of the asbestos removal works required by B&F.
Employers often seek to include bespoke amendments to the standard form providing that the Contractor is responsible for the physical condition of the site, which was the case in BNP v B&F.
This was crucial for the court finding in BNP’s favour. The JCT DB 2016 form is silent when it comes to the impact of the discovery of asbestos.
The new JCT DB 2024 edition has added provisions which deal with such a discovery. Parties will need to consider this issue carefully when considering the extra time and expense the discovery of asbestos threatens.
Ewan Anthony is a Trainee Solicitor and David Owens is a Partner at Sharpe Pritchard LLP.
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