guide - jct 2005 design & built

Design and Build ContractGuide

DB/G

Design and Build Contract

Design

andBuild

Contract

Guide

Revision

2009

MembersBritish Property Federation LimitedConstruction ConfederationLocal Government AssociationNational Specialist Contractors Council LimitedRoyal Institute of British ArchitectsThe Royal Institution of Chartered SurveyorsScottish Building Contract Committee Limited

All parties must rely exclusively upon their own skill and judgment or upon those of theiradvisers when using this document and neither Sweet & Maxwell, Thomson Reuters(Legal) Limited nor its associated companies assume any liability to any user or any thirdparty in connection with such use.

2005

Revision 2009

DB_G_rev 2:S&M 432 JCT Design&Build(Sp) 22/04/2009 14:57

Design and Build Contract Guide (DB/G)

This Guide is intended to provide a general introduction to the contract and is not a substitute for professionaladvice.

Published by Thomson Reuters (Legal) Limited (Registered in England & Wales, Company No 1679046)trading as Sweet & Maxwell100 Avenue Road, London, NW3 3PF

First published September 2005Revision 2009 published May 2009

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, inany form or by any means, electronic, mechanical, photocopying, recording or otherwise, except in accordancewith the provisions of the Copyright, Designs and Patents Act 1988, without the prior written permission of thepublisher. Thomson Reuters and the Thomson Reuters Logo are trademarks of Thomson Reuters. Sweet &Maxwell ® is a registered trademark of Thomson Reuters (Legal) Limited.

© The Joint Contracts Tribunal Limited 2009

www.jctcontracts.com

© The Joint Contracts Tribunal Limited Terrorism Cover Update, December 2009 Page 1

Terrorism Cover Update Issued December 2009 JCT’s Works insurance provisions have been updated in relation to Terrorism Cover and the Contractor’s liability for loss or damage to the Works or Site Materials resulting from terrorism in cases where Insurance Option A applies. The amendments set out below have been agreed in relation to the Works insurance provisions of the Standard Building Contract in both its With Quantities (Q) and Without Quantities (XQ) versions. Amendments in substantially the same terms are required for the Approximate Quantities (AQ) version of that contract and for the Design and Build Contract, Management Building Contract, Prime Cost Building Contract and Intermediate Building Contract. In the case of the Measured Term Contract, similar amendments may also be appropriate.

Clause number and heading

Action

Contract Particulars, 6·10 and Schedule 3

Insert new entry:

‘6·10 and Schedule 3 Terrorism Cover – details of the required cover (State reference numbers and dates or other identifiers of documents setting out the requirements. Unless otherwise stated, Pool Re Cover is required.)

__________________________________ __________________________________ __________________________________ __________________________________ ’

Contract Particulars, 6·11

Delete ‘6·11’ and insert ‘6·12’ (twice)


Delete ‘6·13’ and insert ‘6·14’



Contract Particulars, Part 2 (E) (ii)


Clause 1·1 Funder Rights Particulars: delete ‘6·11’ and insert ‘6·12’ P&T Rights Particulars: delete ‘6·11’ and insert ‘6·12’

Clause 4·3·1·3 Delete ‘paragraph A·5·1 of Schedule 3’ and insert ‘clause 6·10·2’

Clause 4·3·3·5 After ‘clause 2·6·2’ insert ‘or 6·10·3’

Clause 4·16·2·1 After ‘3·17’ delete ‘or’ and insert comma; After ‘6·5’ insert ‘, 6·10·2 or 6·10·3’; After ‘paragraph’ delete ‘A·5·1,’

Clause 4·16·2·3 Delete ‘6·10·4·2’ and insert ‘6·11·5·2’

Clause 4·16·3·2 After ‘to the Employer’ insert ‘under clause 6·10·2 or’

Clause 6·8, Excepted Risks

Amend the existing definition by insertion of the words underlined:

‘Excepted Risks: the risks comprise:

(a) ionising radiations or contamination by radioactivity from any nuclear fuel or from any nuclear waste from the combustion of nuclear fuel, radioactive toxic explosive or other hazardous properties of any explosive nuclear assembly or nuclear component thereof (other than such risk insofar, but only insofar, as it is included in the Terrorism Cover from time to time required to be taken out and maintained under this Contract);,

(b) pressure waves caused by aircraft or other aerial devices travelling at sonic or supersonic speeds; and

(c) any act of terrorism that is not within the Terrorism Cover from time to time required to be taken out and maintained under this Contract.’



Action

Clause 6·8, Pool Re Cover

Insert as an additional defined term:

‘Pool Re Cover: such insurance against loss or damage to work executed and Site Materials caused by or resulting from terrorism as is from time to time generally available from insurers who are members of the Pool Reinsurance Company Limited scheme or of any similar successor scheme.’

Clause 6·8, Terrorism Cover

Amend the existing definition by deletion of the words crossed through and insertion of the words underlined:

‘Terrorism Cover: Pool Re Cover or other insurance against provided by a Joint Names Policy under Insurance Option A, B, C for physical loss or damage to work executed and Site Materials (and/or, for the purposes of clause 6·11·1, to an existing structure and/or its contents) caused by or resulting from terrorism.’

New Clause 6·10 Insert as clause 6·10 the following new clause:

‘Terrorism Cover – policy extensions and premiums

6·10 ·1 To the extent that the Joint Names Policy for the Works and Site Materials excludes (or would otherwise exclude) loss or damage caused by terrorism, the Contractor, where Insurance Option A applies, or the Employer, where Insurance Option B or C applies, shall unless otherwise agreed take out and maintain, either as an extension to the Joint Names Policy or as a separate Joint Names Policy, in the same amount and for the required period of the Joint Names Policy, such Terrorism Cover as is specified in or by the Contract Particulars, subject to clauses 6·10·4 and 6·11.

·2 Where Insurance Option A applies and the Contractor is required to take out and maintain Pool Re Cover, the cost of that cover and its renewal shall be deemed to be included in the Contract Sum save that, if at any renewal of the cover there is a variation in the rate on which the premium is based, the Contract Sum shall be adjusted by the net amount of the difference between the premium paid by the Contractor and the premium that would have been paid but for the change in rate.

·3 Where Insurance Option A applies and Terrorism Cover other than Pool Re Cover is specified as required, the cost of such other cover and of its renewal shall be added to the Contract Sum.

·4 Where Insurance Option A applies and the Employer is a Local Authority, if at any renewal of the Terrorism Cover (of any type) there is an increase in the rate on which the premium is based, he may instruct the Contractor not to renew the Terrorism Cover. If he so instructs, the provisions of clauses 6·11·5·1 and 6·11·5·2 shall apply with effect from the renewal date.’

Clause 6·10 Renumber existing clause 6·10 as clause 6·11 and amend the re-numbered clause by deletion of the words crossed through and insertion of the words underlined:

‘Terrorism Cover – non-availability – Employer's options

6·1110 ·1 If the insurers named in the any Joint Names Policy, or (where Insurance Option C applies) the insurers named in either or both such policies, notify either Party that, with effect from a specified date (the 'cessation date'), Terrorism Cover will cease and will no longer be available or will only continue to be available with a reduction in the scope or level of such cover, the recipient shall immediately notify the other Party.

·2 The Employer, after receipt of such notification but before the cessation date, shall give notice to the Contractor either:

·1 that, notwithstanding the cessation or reduction in scope or level of Terrorism Cover, the Employer requires that the Works continue to be carried out; or

·2 that on the date stated in the Employer’s notice (which shall be a date after the date of the insurers' notification but no later than the cessation date) the Contractor’s employment under this Contract shall terminate.



Action

·3 Where Insurance Option A applies and the Employer gives notice under clause 6·11·2·1 requiring continuation of the Works, he may instruct the Contractor to effect and maintain any alternative or additional form of Terrorism Cover then reasonably obtainable by the Contractor; the net additional cost to the Contractor of any such cover and its renewal shall be added to the Contract Sum.

·43 If the Employer gives notice of termination under clause 6·1110·2·2, then upon and from such termination the provisions of clauses 8·12·2 to 8·12·5 (excluding clause 8·12·3·5) shall apply and, notwithstanding any the other provisions of this Contract, no further sum shall become due to the Contractor other than the amounts referred to in clauses 8·12·3·1 to 8·12·3·4 which require any further payment or any release of Retention to the Contractor shall cease to apply.

·54 If the Employer does not give notice of termination under clause 6·1110·2·2, then:

·1 if work executed and/or Site Materials suffer physical loss or damage caused by terrorism, the Contractor shall with due diligence restore the damaged work, replace or repair any lost or damaged Site Materials, remove and dispose of any debris and proceed with the carrying out of the Works;

·2 the restoration, replacement or repair of such loss or damage and (when required) the removal and disposal of debris shall be treated as a Variation, without deduction of Retention and with no reduction in any amount payable to the Contractor pursuant to this clause 6·11·5 6·10·4 by reason of any act or neglect of the Contractor or of any sub-contractor which may have contributed to the physical loss or damage; and

·3 (where Insurance Option C applies) the requirement that the Works continue to be carried out shall not be affected by any loss or damage to the existing structures and/or their contents caused by terrorism but not so as thereby to impose any obligation on the Employer to reinstate the existing structures or affect the rights of either Party under paragraph C·4·4 of Schedule 3.’

Clause 6·11 Renumber existing clause 6·11 as clause 6·12

Clause 6·12 Renumber existing clause 6·12 as clause 6·13; Delete ‘6·11’ and insert ‘6·12’

Clause 6·13 Renumber existing clause 6·13 as clause 6·14; Delete ‘6·14 to 6·16’ and insert ‘6·15 to 6·17’


Clause 6·15 Renumber existing clause 6·15 as clause 6·16; Delete ‘6·15·1·2’ and insert ‘6·16·1·2’ (four instances)


Clause 8·12 Delete ‘6·10·2·2’ and insert ‘6·11·2·2’

Schedule 3, paragraph A·4·2

Delete ‘6·10·4·2’ and insert ‘6·11·5·2’

Schedule 3, paragraph A·4·6

After ‘Joint Names Policy’ insert ‘or payable to him under clause 6·11·5·2, where applicable’

Schedule 3, paragraph A·5

Delete the whole of paragraph A·5 and its heading

Schedule 3, paragraph B·3·2


Schedule 3, paragraph C·4·2


Schedule 5, Part 1, paragraph 5


Schedule 5, Part 2, paragraph 9



Guidance Notes to the Terrorism Cover Update JCT has previously highlighted through contract footnotes and guides certain possible issues regarding the extent of Terrorism Cover and compliance with the requirements of Insurance Options A, B and C. This Update is intended to rationalise the position, in particular with respect to the Contractor’s liability for loss or damage to the Works and Site Materials in cases where Insurance Option A applies.

In the absence of any relevant limitation or exclusion, the Contractor’s underlying obligation to restore, replace or repair any fire or other damage to the Works under that Insurance Option in effect meant that he bore the risk of any such loss or damage to the extent that it fell outside Pool Re or other terrorism cover that he ‘bought back’, whether by way of an extension to his CAR or specific Works Insurance policy or through a separate policy.

Originally the risk was substantially covered by the buy-back of cover under the Pool Re scheme established by the Reinsurance (Acts of Terrorism) Act 1993 (‘the 1993 Act’), since insurers’ original exclusions of terrorism risk and Pool Re cover were both based on that Act’s definition of terrorism. The gap between exclusion and cover arose after the passing of the Terrorism Act 2000 (‘the 2000 Act’). In the 2000 Act, terrorism was defined as including not only acts connected to organisations with activities directed towards overthrowing or influencing any government by force or violence (the 1993 Act definition) but also acts of individuals (alone or on behalf of any organisation) committed for political, religious, ideological or similar purposes, not only where directed towards the overthrow or influencing of governments but also any intended to put any section of the public in fear. Adoption of the wider definition by insurers enlarged their standard terrorism exclusion beyond the 1993 Act risks covered by Pool Re but Pool Re cover was not extended in this respect. The gap was illustrated by the ‘Unibomber’ Soho bombing and Huntingdon Life Sciences cases.

Not all insurers adopted the wider exclusion and an alternative to Pool Re, Lloyds market cover, has been available to cover the wider 2000 Act risks. Unlike Pool Re cover, however, that alternative cover does not extend to chemical or biological damage in commercial cases and also normally requires an extension for nuclear risks. The JCT has therefore agreed that both the Contractor’s liability (where Insurance Option A applies) and, for each Insurance Option, the contractual obligation of the relevant Party to obtain Terrorism Cover should be limited to the risks insured by Pool Re or by such other insurance cover as is specified in the Contract Particulars for clause 6·10. Pool Re cover is the default position.

A new clause 6·10 sets out the underlying obligation to effect Terrorism Cover. This is coupled with an extension to the clause 6·8 definition of Excepted Risks, which operates through the clause 6·6 exclusion of Contractor’s liability for those risks and also limits the required ambit of All Risks Insurance, as defined in clause 6·8.

Where the Contractor is to obtain the Works Insurance and Pool Re Cover is required, the anticipated cost is intended to be included in the Contract Sum as tendered (clause 6·10·2), subject to adjustment for changes in renewal costs. Where Terrorism Cover other than Pool Re is required, the costs of effecting and renewing cover are treated as an addition to the Contract Sum, since at present the cost may not be as predictable as that of Pool Re (see clause 6·10·3). Clauses 6·10·2 and 6·10·4 incorporate the provisions formerly in paragraph A·5 in Schedule 3.

Clause 6·11 (the former clause 6·10) retains the provisions regarding non-availability at the renewal date and the Employer’s consequent option to terminate. However, it also now extends the provision to cover any reduction in the scope or level of cover by insurers and contains an option for the Employer, where the Contractor is responsible for Works Insurance, to require him to switch to any alternative form of Terrorism Cover reasonably available at the renewal date.

It will be noted that in the case of residential property, i.e. houses and blocks of flats and other dwellings insured in the name of a private individual, Pool Re continues to exclude nuclear, chemical and biological risks.

In all cases Pool Re Cover requires annual renewal: Lloyds market cover may be available for the duration of the project. Effecting Terrorism Cover may still be difficult in certain situations. The JCT would again stress that relevant details of this, and of Works insurance generally, require discussion and agreement between the Parties and their insurance advisers prior to entering into the Contract.

Use of Terrorism Cover Update Either amend the contract in accordance with this Update and execute it as so amended. Each amendment should be

initialled by or on behalf of the parties.

or attach this Update to the Agreement; and insert in the Articles an additional Article which states: “Article *…..: Terrorism Cover Update – incorporation The Conditions shall have effect as modified by the amendments in the attached Terrorism Cover Update.” * Allocate the next available Article number.

© The Joint Contracts Tribunal Limited 2009 DB/G (2009) Page i

Introduction

GeneralRevision 1Revision 2FormatRisk allocationContent of the Guide

Page 1

New Supplemental Provisions 3

Articles of Agreement 6

Recitals

Articles

Contract Particulars

Attestation

6

6

6

7

Conditions 9

Section 1 – Definitions and Interpretation

Definitions (clause 1·1)Interpretation (clauses 1·2 to 1·10)

Section 2 – Carrying out the Works

Contractor’s obligations (clauses 2·1 and 2·2)Possession (clauses 2·3 to 2·6)Supply of Documents, Setting Out etc. (clauses 2·7 to 2·9 and Schedule 1 (Contractor’s DesignSubmission Procedure)Discrepancies and Divergences (clauses 2·10 to 2·16 and Supplemental Provision 3)Design Work (clause 2·17)Fees, Royalties and Patent Rights (clauses 2·18 to 2·20)Unfixed Materials and Goods (clauses 2·21 and 2·22)Adjustment of Completion Date (clauses 2·23 to 2·26)Practical Completion, Lateness and Liquidated Damages (clauses 2·27 to 2·29)Partial Possession by Employer (clauses 2·30 to 2·34)Defects (clauses 2·35 and 2·36)Contractor’s Design Documents (clauses 2·37 and 2·38)

Section 3 – Control of the Works

Access and Representatives (clauses 3·1 and 3·2 and Supplemental Provision 1)Sub-Contracting (clauses 3·3 and 3·4 and Supplemental Provision 2)Employer’s instructions (clause 3·5 to 3·15 and Schedule 4)CDM Regulations (clauses 3·16 and 3·17 and Supplemental Provision 8)

Section 4 – Payment (and Schedule 6 – Forms of Bonds)

Contract Sum and Adjustments (clauses 4·1 to 4·3)Payments (clauses 4·4 to 4·12)Gross Valuation (clauses 4·13 and 4·15)Retention (clauses 4·16 to 4·18)Fluctuations (clause 4·19 and Schedule 7)Loss and Expense (clauses 4·20 to 4·23)

9

9

13

14

Contents

Page ii DB/G (2009) © The Joint Contracts Tribunal Limited 2009

Section 5 – Variations

General (clauses 5·1 to 5·3 and Schedule 2)The Valuation Rules (clauses 5·4 to 5·7)

Section 6 – Injury, Damage and Insurance (and Schedule 3 – Insurance Options)

Injury and property damage – indemnity and insurance (clauses 6·1 to 6·6)Works insurance (clauses 6·7 to 6·10 and Schedule 3)Professional Indemnity insurance (clauses 6·11 and 6·12)Joint Fire Code (clauses 6·13 to 6·16)Financial Services and Markets Act 2000

Section 7 – Assignment, Third Party Rights and Collateral Warranties (and Schedule 5 –Third Party Rights)

Section 8 – Termination

General (clauses 8·1 to 8·3)Termination by the Employer (clauses 8·4 to 8·8)Termination by the Contractor (clauses 8·9 and 8·10)Termination by either Party (clause 8·11)Consequences of Termination under clauses 8·9 to 8·11, etc. (clause 8·12)

Section 9 – Settlement of Disputes

Mediation (clause 9·1) and ADRAdjudication (clause 9·2)Arbitration (clauses 9·3 to 9·8) and litigation (Article 9)

16

16

19

20

21

Appendix A – Amendment 1 (DB) 23

Appendix B – Revision 2 changes 27

Appendix C – DB User Checklist 29

Appendix D – Related Publications 35

© The Joint Contracts Tribunal Limited 2009 DB/G (2009) Page 1

General

1 This edition of the Guide to the 2005 edition of the Design and Build Contract (DB 2005) is being issuedcontemporaneously with the publication of Amendment and Revision 2 to DB 2005.

2 DB 2005 is primarily appropriate for larger works where the Employer has defined his requirements and wherethe Contractor is not only to carry out the works, but also to complete the design for them in accordance withthose requirements. It retains the provisions designed to meet the needs of both the Private and Local Authoritysectors and allows for the works to be carried out in sections.

3 For the purpose of contract administration, DB 2005 requires the appointment of an Employer’s Agent; thatagent may be either an external consultant or an appropriate member of the Employer’s staff.

Revision 1

4 Revision 1 to DB 2005 was published in June 2007 and incorporated Amendment 1, issued in April that year.The principal purpose of that Amendment was to reflect the coming into effect on 6 April 2007 of theConstruction (Design and Management) Regulations 2007; it also reflected the publication of the JCT Sub-Contractor Collateral Warranty for Employer (SCWa/E) and made certain other minor updates and corrections. Acopy of the Amendment 1 documentation forms Appendix A to this Guide.

Revision 2

5 The principal purposes of Revision 2 are:

(a) to introduce into DB 2005, and most other JCT contracts, additional provisions which build upon thetraditional JCT approach and reflect principles adopted by the Office of Government Commerce in itsAchieving Excellence in Construction (AEC) initiative;

(b) to simplify the provisions of section 4 (Payment), at the same time including the standard JCT RetentionBond option and a minor modification of the provisions relating to payment applications after practicalcompletion; and

(c) to recognise the increasing importance of sustainability.

6 The additional provisions relating to AEC principles are:

AccelerationCollaborative workingHealth and safetyCost savings and value improvementsSustainable development and environmental considerationsPerformance Indicators and monitoring, andNotification and negotiation of disputes.

7 Revision 2 also makes certain textual refinements. These include wider usage of defined terms, a consolidatednotices and communications provision at clause 1·7, which helps to simplify the text generally, and more detailedparticulars with respect to Professional Indemnity insurance requirements.

Format

8 The section-headed format adopted for DB 2005 was aimed at greater standardisation over the JCT range ofcontracts and greater adaptability to change.

9 Revision 1 resulted in the deletion of only one clause (7F). In the case of Revision 2, four existing clauses havebeen deleted or renumbered (clauses 1·8, 3·16, 3·17 and 7·3) and a single new clause (4·17) added, togetherwith two new recitals (the Sixth and Seventh). The additional provisions reflecting AEC principles have beenincluded as Part 2 of Schedule 2 (Supplemental Provisions), alongside the existing provisions (now Part 1). Thestandard form of Retention Bond has been included as Part 3 of Schedule 6. The format therefore remainssubstantially unchanged.

Introduction

DB/G (2009) © The Joint Contracts Tribunal Limited 2009

Risk allocation

10 In JCT’s view, none of the Revision 2 changes has a material effect on the current allocation or balance of risk.The general thrust of the AEC principles and the new Supplemental Provisions is to reduce cost and avoidablerisk; most of the related provisions are in substance a statement and reflection of good management practicethat is already common in many sectors. Similarly, none of the ancillary changes affects the status quo in termsof risk. Of the deletions mentioned, the substance of clause 1·8 (Electronic communications) is included inclause 1·7·2, clause 3·16 (Instructions on antiquities) is merely renumbered as clause 3·15·2 and clause 3·17(Loss and expense arising) is included in the general loss and expense provision at clause 4·21·3. In view of theminor alterations to Part 2 of the Contract Particulars referred to below, clause 7·3 is now superfluous.

Content of the Guide

11 This Guide reviews the new, Revision 2 Supplemental Provisions and then deals sequentially with the otherprovisions of DB, starting with the Articles of Agreement, followed by the Conditions. The commentary indicatesthe principal drafting and other ancillary Revision 2 amendments and deals with the Schedules (includingexisting Supplemental Provisions) in conjunction with the sections or sub-sections to which they most closelyrelate. The commentary is followed by:

Appendix A – Amendment 1

Appendix B – Revision 2 changes

Appendix C – DB User Checklist

Appendix D – Related Publications.

12 Appendix C is a straightforward listing, by reference to relevant provisions of the Articles of Agreement, of theinformation and decisions on options that are required to complete the DB 2005 contract form; Appendix D liststhe other JCT documents that comprise the DB 2005 suite of documents or that can readily be used inconjunction with the Contract.


13 AEC or similar principles are already incorporated in the JCT Framework Agreement. The intention of Revision 2is to incorporate those principles into DB 2005 either where there is no applicable framework or frameworkprovision, or where there is no other contractual coverage of the particular issue. As indicated above, theprovisions that give effect to those principles are now set out in Part 2 of Schedule 2, alongside the existingSupplemental Provisions which now form Part 1 of that Schedule.

14 The existing Supplemental Provisions comprise: Site Manager; Named Sub-Contractors; Bills of Quantity;Valuation of Changes – Contractor’s estimates; and Loss and Expenses – Contractor’s estimates. (It will benoted that in these cases the headings have now been abbreviated, but they remain substantially in their originalform.)

15 The new Supplemental Provisions comprise the seven principles listed at paragraph 6 above, i.e. acceleration,collaborative working, additional illustrative Health and Safety requirements, an outline procedure governingContractor’s value engineering suggestions, general sustainable development and environmental provisions, aprovision for KPI monitoring and additional provisions for dispute resolution.

16 The Sixth Recital provides for any applicable Framework to be recorded in the Contract Particulars and theSeventh incorporates into the Contract those Supplemental Provisions identified in the Contract Particulars.

17 It should be noted that the Contract Particulars contain different default positions for Parts 1 and 2 of Schedule2. The existing Supplemental Provisions apply only where they are stated to apply, but the new SupplementalProvisions apply unless stated not to apply; they are generally intended to be disapplied only where there is aFramework Agreement or other contract documentation that covers the same ground. More detailed coverage ofsuch issues is commonplace and is often quite properly contained in the Preliminaries rather than the contractconditions; Revision 2 is not intended to discourage more detailed coverage.

18 In terms of the new Supplemental Provisions, the following points merit mention:

Acceleration

19 This consists of an acceleration quotation procedure based on those in several existing JCT contracts. In thiscase it is not combined with the Variation Quotation procedure, for which there is an existing SupplementalProvision in Part 1 of Schedule 2 (paragraph 4).

20 With a view to an earlier date of practical completion, the Employer may ask for an Acceleration Quotation at anytime and may on or before receipt seek revised proposals; the Contractor is not bound to make such a quotation,but, if he is unwilling to make one, he is required to explain why acceleration is impracticable.

Collaborative working

21 This is a simple restatement of the principle that in effect underpins most of the other AEC principles.

Health and safety

22 DB 2005, like all other JCT contracts and sub-contracts, already contains an express undertaking to comply withthe Statutory Requirements (clause 2·1). This by definition covers Health and Safety legislation. The Contractalso makes specific provision with respect to CDM Regulations (clauses 3·16 and 3·17). This SupplementalProvision (at paragraph 8·2·1 in Part 2 of Schedule 2) adds an obligation to comply with non-statutory HSE andHSC approved codes, which is clearly good practice, and, as a useful complement to the existing DB 2005clauses, goes on to highlight specific training and consultation aspects of the legislation.

Cost savings and value improvements

23 Consultants generally are professionally bound to report potential value improvements of which they are aware.It is obviously right that contractors should be encouraged to do the same; it is not unreasonable that theyshould receive a fair share of the benefit for doing so. When making suggestions, however, care should be takenabout the possible assumption of design liabilities.

24 It is of course during the pre-construction period, not during the construction phase covered by DB 2005, that theEmployer, assisted by the Contractor and relevant specialists as well as his consultant team, is able to derive thegreatest benefit from value-engineering exercises. It is to cover that earlier period that the JCT has recently

New Supplemental Provisions


produced its two Pre-Construction Services Agreements, PCSA (between Employer and Main Contractor) andPCSA/SP (between Employer or Main Contractor and a Specialist contractor).

25 However further opportunities for value engineering do arise, often in the context of prospective variations.

26 It should be recognised that provisions of this type are not straightforward. On the one hand, for instance, theContractor will wish to be paid his share of the benefits before Final Statement, while on the other hand it may bedifficult for several – perhaps many – years to establish the true benefit to the Employer, in particular where itconsists in lower operating or life-cycle costs. It is difficult to prescribe particular sharing arrangements coveringsuch a wide field of possible benefits. Adjustments also have to be made for the value/cost of the additional workinvolved and/or the saving to the Employer from any resultant omissions.

27 In commercial terms, the provision is therefore limited to giving the Contractor a measure of protection forproposals that he originates and puts forward under this Supplemental Provision by making any instruction toimplement them conditional upon those terms being agreed. As there is no standard approach, there is no entryin the Contract Particulars covering methodology or share of benefits.

28 In areas where the scope for further value engineering is clear and benefits can more readily be established,there is nothing to prevent agreement between the Parties on benefit shares at an earlier stage. However, asindicated above and by the paragraph 9·3 reference to negotiations, there may then be several other interrelatedmatters to be agreed – not only in terms of price but also matters such as design liability (on which a Contractormay wish to reserve his position in making the proposal). In the context of this provision, the paragraph 9·2reference to the Contractor’s quotation is intended to connote a considered, bona fide estimate rather than acomplete, legally binding offer.

Sustainable development and environmental considerations

29 This Supplemental Provision may often be linked to the previous provision. The legislative framework hashistorically been the principal driver for sustainable development and on environmental issues generally but, formany clients, sustainability is now becoming an increasingly important commercial factor. Decisions on thesematters are principally matters for the client and his professional team which generally fall to be made during thepre-construction period; the Contractor’s obligations to comply with the Employer’s Requirements andinstructions, combined with clauses 2·2 and 2·8, are intended to give the Employer continuing control overfurther design work and selection of materials by the Contractor during the construction period. However, theJCT, which has taken and continues to take an active role in establishing common ground on contractualprovisions, recognises both the need for positive continuing dialogue reflected in paragraph 10·1 and, in terms ofparagraph 10·2, the importance of proper information on the environmental impact of materials and goodsselected by the Contractor being available as part of the clause 2·2 and clause 2·8 approval processes.

Performance Indicators and monitoring

30 Performance indicators are generally most relevant to Framework or other longer-term agreements betweenEmployer and Contractor where there is benchmarking of performance against competitors as part of contract-allocation or other incentive arrangements. However, those indicators may also perform a valuable role inindividual contracts, for project-specific incentives, (pre-)qualification purposes and the like.

31 It is important that the indicators and targets should be clearly stated or identified, normally as part of thePreliminaries, that performance should be regularly and properly monitored and that assessments should bemade strictly in accordance with the indicators/targets.

Notification and negotiation of disputes

32 In terms of avoidance or early resolution of actual or potential disputes, it makes obvious sense that each Partyshould notify disputes promptly and nominate an employee of sufficient seniority and authority with a view toresolving them quickly. Such provisions have for many years been commonplace in the field of generalcommercial agreements, frequently coupled with express agreement that a specified period will be allowed to theParties’ appointees to resolve the matter before steps are taken to initiate any external dispute resolutionprocedure.

33 As indicated by the reference to Article 7 at the beginning of the provision, section 108 of the HGCR Act 1996[1]requires that a construction contract should enable a party to give notice at any time of his intention to refer adispute to adjudication, so that there cannot in construction contracts (within the meaning of the Act) be anyprescribed period of delay in respect of any reference to adjudication.

[1] The Housing Grants, Construction and Regeneration Act 1996


34 The costs of adjudication are generally less than those of litigation or arbitration, but they are not inconsiderableand are often not recoverable. If a dispute arises, whether or not this Supplemental Provision applies, the Partiesshould consider whether to allow a reasonable period for negotiation before recourse to adjudication or otherexternal means of resolving the dispute.


35 DB 2005 retains the traditional form of Articles of Agreement, comprising the Recitals, Articles and theAttestation clause, but also includes within them the Contract Particulars, comprising, as Part 1, the Generalparticulars that are required and, as Part 2, the entries for Third Party Rights and Collateral Warranties.

Recitals

36 The sole alteration to the DB 2005 Recitals has been the Revision 2 insertion of the new Sixth and SeventhRecitals (Framework Agreement and Supplemental Provisions). Entries are provided against the references tothem in Part 1 of the Contract Particulars.

37 The only insertion required by the Recitals is a brief description of the Works; division of the Works into Sectionsis dealt with by the Contract Particulars for the Fifth Recital and the identifiers of the documents comprising theEmployer’s Requirements, the Contractor’s Proposals and the Contract Sum Analysis are for insertion againstthe Contract Particulars entries for Article 4.

38 As indicated by the footnote to the Third Recital, the JCT would stress the need for proper identification of thedocuments that are to comprise the Employer’s Requirements and Contractor’s Proposals respectively and theneed for consistency between them. Last minute changes are often inevitable but the constituent documentsneed to be checked before execution; the fact that identifiers are not always changed to reflect a change in therelevant drawing or document reinforces the desirability of initialling or signing the constituent documents.

Articles

39 The Articles remain substantially the same as they were in the 2005 edition, subject only to the Revision 1change in Article 5 (CDM Co-ordinator) to reflect the 2007 CDM Regulations and the Revision 2 abbreviation ofArticle 8 (Arbitration), which can now safely be made following a 2007 decision of the House of Lords[2].

40 Articles 1 and 2 summarise the primary obligations under the Contract; Articles 3 to 6 deal with relevantcontractual and CDM appointments and Articles 7 to 9 with dispute resolution.

41 In terms of Article 7 (Adjudication) and clause 9·2 of the Conditions, care needs to be taken when DB 2005 isused for a contract to be let by a residential occupier within the meaning of section 106 of the HGCR Act 1996(i.e. a contract which principally relates to operations on a dwelling which one or more of the parties to thecontract occupies, or intends to occupy, as his or her residence). Part 2 of that Act does not apply to contractswith residential occupiers, so that any Employer who is a residential occupier should take advice on the point, inparticular with respect to adjudication and the question of whether or not to delete that Article and clause.

42 Article 8 (Arbitration) applies only if the Contract Particulars specifically state that it and clauses 9·3 to 9·8 apply.If they do not apply (and subject to either Party’s right to refer any dispute to adjudication or subsequently toagree to arbitration) final resolution of disputes is a matter for the courts.

Contract Particulars

43 Both Part 1 (General) and Part 2 (Third Party Rights and Collateral Warranties) remain substantially in theiroriginal DB 2005 form, with only minor adjustments. In the case of Part 1, those include five new or extendedentries or groups of entries and the deletion of one existing entry; in the case of Part 2, they consist of a fewminor deletions only.

Part 1

44 In Part 1, an entry has been included for the Sixth Recital (Framework Agreement) and the SupplementalProvisions entries are now by reference to the Seventh Recital. The entries for the existing SupplementalProvisions (those in Part 1 of Schedule 2) have been expanded to allow for the selection of each of thoseprovisions separately; previously it was envisaged that all or only the first of those provisions (Site Manager)

[2] Fiona Trust v. Privalov [2007] UKHL 40

Articles of Agreement


would apply. In contrast to those entries, the default position for each of the new Supplemental Provisions is thatit applies unless otherwise stated. Where there is no Framework Agreement or contractual provision thatoverlaps with any of the Supplemental Provisions, no entry need be made. If there is an overlap either throughan applicable Framework Agreement or other intended contractual provision (whether in the Preliminaries orelsewhere) the Parties should consider removing that overlap by disapplication of the Supplemental Provision. Inthe case of Supplemental Provision 12 (Notification and negotiation of disputes), there is a further entry fornominated employees. There are new entries for the Retention Bond (clause 4·17) and Daywork (clause 5·5).

45 In relation to clause 6·11 (Professional Indemnity insurance) and in line with market realities, the default positionwith respect to pollution and contamination cover is no longer that the required limit of indemnity is the amount ofthe general cover under the policy; the limit for pollution and contamination claims must be expressly specified ifsuch cover is required. There are also new, separate entries for asbestos and fungal mould cover, with a coverlimit for the asbestos claims. Coverage of these specific categories of risk, which may not be required in certaincases, is intended to be within the overall policy, not as separate insurances in their own right, and cover levelsare intended to be sub-limits of the general level of cover. (Where there is fungal mould cover, it is understoodthat there is normally no separate cover limit.) The required cover levels should in each case be reasonable.

Part 2

46 Prior to Revision 2, Part 2 commenced with a preliminary entry which expressly envisaged that the requireddetails of Third Party Rights or Collateral Warranties might for convenience be set out in a separate identifieddocument (or Annex), as did an entry at the beginning of (E) (Collateral Warranties from Sub-Contractors).Those have now been omitted.

47 The JCT considers that wherever possible the required details be included in the Contract Particularsthemselves. That is considered desirable not least because the Design and Build Sub-Contract is predicatedupon these (Main) Contract Particulars being made available in substantially completed form for sub-contracttendering purposes and it is clearly good practice, so far as is reasonably practicable, to reduce the number oftender documents involved. (In that connection, it will be noted that certain sub-contractor details required for (E)are linked to details given at (B) and (C) and that the Table (E) now requires an entry indicating the types ofwarranty required from each specified sub-contractor.) Where warranties are required from consultants who aresub-contracted to the Contractor a form of warranty other than the specified JCT warranties may be necessary.

48 If Employers nevertheless consider it easier to retain separate, standard documentation which they use for thepurpose of third party rights or warranty requirements, or if in hard copy cases inclusion of those details isphysically difficult, an appropriate entry can still be made in the Tables at (A) and (E) stating that the requiredparticulars are set out in the separate, identified document.

49 Further comments on the requirements are made below in the context of section 7. However, to avoid laterdisputes and delays, it is important that full details of the requirements be given to prospective contractors andsub-contractors in the tender process and properly incorporated in the Contract.

Attestation

General

50 The attestation provisions are in the revised standard JCT layout introduced as from 1 April 2008. This retainsseparate forms for execution under hand and execution as a deed. For execution as a deed by a company,these now include entries for the additional, Companies Act 2006 method of execution as a deed throughsignature by a single director signing in the presence of an attesting witness. Different attestation provisions arestill required under the law of Scotland (for which the Scottish Building Contract Committee Limited issuesScottish contract forms); other attestation clauses may also be needed in the case of certain housingassociations, partnerships and possibly, as discussed below, foreign companies.

Execution under hand or as a deed

51 The primary factor governing the decision to execute the Contract under hand or as a deed is whether thelimitation period for instituting proceedings is to be 6 years, as in the case of execution under hand, or 12 years,where the Contract is executed as a deed. The mode of execution of the Contract will also determine the modeof execution of collateral warranties (clause 7·4) and (for both third party rights and collateral warranties) thelimitation period that applies to them.

Foreign companies

52 Many foreign companies involved in development and construction now themselves carry on business in the UK,rather than operating here through UK subsidiaries.


53 Under the Companies Act 1989, as applied by the Foreign Companies (Execution of Documents) Regulations1994 and the 1995 amendments to those regulations, a foreign company can execute deeds either:

• by affixing its common seal or any manner of execution permitted under the laws of its place ofincorporation; or

• by expressing the document to be executed by the company under the signature of persons authorised tosign on its behalf in accordance with its domestic law.

54 Many foreign companies do not have a seal and the authority of relevant signatories needs to be checked but ifthere is any doubt, professional advice should be obtained.

55 To avoid complications in the service of claims or notices outside the jurisdiction, consideration should also begiven to inserting an obligation on the foreign company for the duration of the Contract to maintain an agent forservice within England and Wales or within Scotland or Northern Ireland, where appropriate.


Section 1 – Definitions and Interpretation

Definitions (clause 1·1)

56 Clause 1·1 contains few changes from the DB 2005 original. The changes introduced by Revision 2 primarilycomprise the insertion of the Acceleration Quotation and Confirmed Acceptance definitions, the deletion ofreferences to Final Account in relation to the Final Statement and consequential changes in certain cross-references. The Joint Fire Code definition, as a corollary of the point reinforced in clause 6·14, now takes theBase Date as its starting point; it has also been abbreviated. For consistency and brevity, the term ‘SiteMaterials’, originally used only in the context of insurance, is now used throughout.

Interpretation (clauses 1·2 to 1·10)

57 In the Interpretation sub-section, the primary change is that previously referred to, i.e. the revised and extendedclause 1·7 (Notices and other communications), coupled with the deletion of the existing clause 1·8 (Electroniccommunications), a matter now dealt with in clause 1·7·2.

58 At clause 1·7·1 there is a requirement that all notices and other communications between the Employer (orEmployer’s Agent) and the Contractor that are referred to in the Articles of Agreement or Conditions are to be inwriting. This simplifies the text of the Conditions and now applies across the range of JCT contracts and sub-contracts, apart from the Minor Works Building Contracts and the other, shorter contracts and sub-contracts thatcontain few express notification procedures.

59 Clause 1·7·4 retains a formal hand delivery/Recorded Signed for or Special Delivery post requirement for keynotices, e.g. those relating to defaults/termination and third party rights/collateral warranties. (Reference to handdelivery is now used in place of the traditional ‘actual delivery’; this reflects recent case law indicating a wider,unintended construction that may be given to the traditional expression.)

60 In relation to electronic and other communications, and as indicated by the footnote to clause 1·7·2, the Partiesare encouraged to agree a communications protocol as early as possible, preferably on or before execution ofthe Contract, so that it can from the outset be applied to the supply chain generally. There is nothing to preventthe basic document being included in the Preliminaries or in other tender documents, with adjustment forparticular aspects at a later stage. It is clearly important that appropriate arrangements are in place before theflow of Contractor’s detailed design work commences. Once the protocol is in place, there needs to be regularupdating of relevant contact points, e-mail addresses and so forth.

61 Where design or other contractual information flows are still in whole or in part to be in hard copy form, it shouldbe noted that Revision 2 has eliminated several traditional references to numbers of copies to be supplied, sothat a protocol may be useful in this area also, particularly if any wider direct distribution of hard copy documentsis required.

62 There are two other minor changes in the Interpretation sub-section. The first, at clause 1·3, reflects theoverriding nature of the building contract, which is recognised in the JCT Framework Agreement and also bymany other such agreements. The second, the abbreviation of what is now clause 1·8, merely reflects thesimplification of Final Statement terminology.

Section 2 – Carrying out the Works

63 Section 2 remains substantially in its original DB 2005 form, dealing sequentially with various aspects of theconstruction process, starting with the Contractor’s basic obligations with respect to the carrying out andcompletion of the Works.

Contractor’s obligations (clauses 2·1 and 2·2)

64 Clause 2·1·1 develops the Contractor’s principal obligation under Article 1. It requires that the Works be carriedout in a proper and workmanlike manner and in compliance not only with the Contract Documents but also withthe Construction Phase Plan and other Statutory Requirements, e.g. development control requirements, localbye-laws and health and safety legislation generally, including CDM Regulations. It also requires completion ofthe design, including specifications and standards for materials, goods and workmanship that have not alreadybeen established by the Employer’s Requirements or Contractor’s Proposals. In addition, the Contractor is to

Conditions


give all necessary notices under the Statutory Requirements, e.g. those under building regulations, those to thelocal authority in relation to the operation of the site and any required in relation to health and safety matters,including incident reports. (Clause 2·1·2 may in certain circumstances modify the Contractor’s contractual liabilityto the Employer in relation to the Statutory Requirements, but does not of course affect his position and dutyunder general law.) Clause 2·1·4 then sets out the Contractor’s duty of compliance with the Employer’sinstructions and decisions.

65 Clause 2·2 makes further provision with regard to materials, goods and workmanship, to the effect that, wherethe relevant kinds or standards are not established by the Employer’s Requirements or Contractor’s Proposals,they are to be established through the Contractor’s Design Submission Procedure under clause 2·8 andSchedule 1. Samples are to be provided where the Employer’s Requirements or Contractor’s Proposals reservethat right, and the Employer also has a right to reasonable proof of conformity.

Possession (clauses 2·3 to 2·6)

66 The next sub-section covers the transfer to the Contractor of possession and, in effect, control of the site. Thiscovers the period up to practical completion, subject to:

• the Employer’s possible option to defer giving possession for a specified period not exceeding 6 weeks (TheContractor is entitled to recover any loss and/or expense arising from a permitted deferral; deferral wherethe option does not apply or for longer than the permitted period is a breach.);

• the Contractor’s obligation not unreasonably to refuse the Employer the right to use or occupy the site orpart of it for storage or other purposes prior to practical completion, if the Works insurers consent; and

• the Contractor’s obligations to allow the Employer or other contractors on the latter’s behalf to carry outother work on site where the requirement has been sufficiently described in the Contract Documents, andnot unreasonably to withhold or delay his consent to such work being carried out even where sufficientinformation has not been given to him in advance.

(Employer’s use or occupation for storage or other purposes under clause 2·5 should be distinguished frompartial possession being retaken by the Employer under clause 2·30; the latter is treated as practical completionof the part repossessed. If there is any part of the Employer’s land adjacent to the Works which the Contractormay require to use on a purely temporary basis and not for the full duration of the Works or a Section, thatshould generally be excluded from the site for these purposes; its use (and any necessary insurancearrangements) should be the subject of a separate arrangement.)

Supply of Documents, Setting Out etc. (clauses 2·7 to 2·9 and Schedule 1 (Contractor’s DesignSubmission Procedure))

67 This sub-section at clause 2·7 covers the Contract Documents, access to them and confidentiality.

68 Clause 2·8 then provides for the supply of the Contractor’s Design Documents, which are to be provided as andwhen necessary and in accordance with the Contractor’s Design Submission Procedure set out in Schedule 1 oras otherwise stated in the Contract Documents. The procedure can be tailored to the particular project but it isextremely important that the Contractor should not undertake work to which particular designs relate until he hascomplied fully with the procedure. If he fails to do so, he risks not being paid for the work in question (seeparagraph 6 of Schedule 1).

69 Clause 2·9 makes the Employer responsible for defining site boundaries: the consequences of a divergence inthat definition are set out in the following sub-section.

Discrepancies and Divergences (clauses 2·10 to 2·16 and Supplemental Provision 3)

70 The sub-section deals in detail with the requirements for notification of errors, discrepancies and divergencesdiscovered in Contract Documents, Contractor’s Design Documents and instructions, either in or betweenthemselves or in relation to the Statutory Requirements, and the cost of remedial action. The Employer isrequired to give instructions. Supplemental Provision 3 (Bills of Quantities), if it applies, also makes provision forerrors in any bills contained in the Employer’s Requirements.

71 Subject to certain exceptions, the general principle on cost is simple; it is borne by the Party responsible for thedocument in question. If there are inadequacies in the Employer’s Requirements (or in designs contained inthem) which are not dealt with in the Contractor’s Proposals or a divergence between those requirements andthe definition of site boundaries, the Employer is responsible for the cost of the necessary Change; theContractor is responsible for errors, discrepancies and divergences in the Contractor’s Proposals, in his ContractSum Analysis and in the Contractor’s Design Documents. Under clause 2·15·2·2, the Contractor may also berequired to allow for amendment to the Contractor’s Proposals necessitated by Development Control decisions.


72 The exceptions arise in relation to divergences from the Statutory Requirements. The first, under clause 2·15, isthat the Contractor is responsible for checking that the Employer’s Requirements and any instructions conform tothe Statutory Requirements in the same way as Contractor’s Design Documents. However, by furtherexceptions, the Employer assumes the risk of any divergences between the Statutory Requirements and theEmployer’s Requirements (including any Change) or the Contractor’s Proposals, if:

• the divergence arises from a change in Statutory Requirements after the Base Date and that changenecessitates an alteration to the Works, or

• if an amendment to the Contractor’s Proposals is necessitated by the terms of any Development Controlpermission or approval issued after the Base Date, or

• if there is any necessary change to any part of the Employer’s Requirements which is expressly stated tocomply with the Statutory Requirements.

Design Work (clause 2·17)

73 The clause follows on from clause 2·2 and deals with the Contractor’s liability in respect of his design work.Under JCT contracts, this is intended to be the same as that of any independent architect or other professionaldesigner employed by the Employer. There is, under clause 2·17·3, an optional provision for an overall cap onliability for loss of use, loss of profits and other consequential loss arising from any inadequacy in theContractor’s design work: this does not limit or affect liability for direct loss, including the cost of remedial workor, where the consequences of that inadequacy are irremediable, the resultant diminution in value of the Works.

Fees, Royalties and Patent Rights (clauses 2·18 to 2·20)

74 Statutory fees, e.g. building regulation notification and inspection fees, are under clause 2·18 to be paid by theContractor and are his liability unless they are stated by way of a Provisional Sum in the Employer’sRequirements, in which case the Contract Sum is adjusted for any difference.

75 In the case of the Works as originally designed or specified, any patent or design-related royalties or otherpayments to third parties are deemed to be included in the Contract Sum; it is only where supply or use ofpatented items is required by a subsequent instruction that the Contractor has right to reimbursement. Suchcases are rare; if there is any question as to whether a requirement may involve use or infringement of thirdparty patent or other intellectual property rights, the matter should be raised with the Employer before entry intothe Contract or implementation of the instruction, as the case may be.

Unfixed Materials and Goods (clauses 2·21 and 2·22)

76 The sub-section concerns the transfer to the Employer of property in Site Materials and Listed Items on paymentto the Contractor and the concomitant restriction on removal from site. This in practice is a matter which in amajority of cases involves sub-contractors, so that the flow-down of these conditions required by clause 3·4·2 isgenerally essential in cases of sub-contracts for work and materials. For Listed Items, the pre-conditions ofpayment are set out in clause 4·15.

Adjustment of Completion Date (clauses 2·23 to 2·26)

77 The sub-section sets out the provisions governing extensions of time in all cases other than those where there isa Pre-agreed Adjustment within clause 2·23·2, i.e. agreement on an extension of time under SupplementalProvision 4 or for acceleration under Supplemental Provision 6.

78 Following the clause 2·23 definitions, clause 2·24·1 sets out the Contractor’s obligation to notify: it will be seenthat the obligation arises not merely when progress is being delayed but when it becomes reasonably apparentthat it is likely to be delayed, and also that it arises in relation to any cause of delay or likely delay. The obligationis not restricted merely to Relevant Events (i.e. those listed in clause 2·26) that entitle the Contractor to anextension nor, where that likelihood exists, is it limited to events that have already occurred.

79 The obligation is to notify all the material circumstances, including the expected effects (clause 2·24·2) andthereafter to update the information given, as well as supplying any further information reasonably required(clause 2·24·3). The Contractor must also use best endeavours both to prevent delay (or further delay) and, ifthat occurs, do everything reasonably required to proceed (clauses 2·25·6·1 and 2·25·6·2). As will be seen fromclause 2·26, the first five Relevant Events listed and that in clause 2·26·12 are matters for which loss and/orexpense may generally be claimed under clause 4·20: the remainder are not.

80 On being duly notified, the Employer has power and, where appropriate, a duty to grant extensions under clause2·25·1, though it is only to grant such extension as he considers fair and reasonable. In other words, he maytake account of concurrent or overlapping causes of delay that are not Relevant Events. The Employer shouldreach a decision as soon as reasonably practicable (clause 2·25·2). Where there has been a Relevant Omission,as defined in clause 2·24·3, he also has power under clause 2·25·4 to fix an earlier Completion Date. However


he can exercise the latter power only where there has already been an extension of the original CompletionDate, either through an earlier decision or by a Pre-agreed Adjustment, and cannot do so in such a way as toaffect the length of any Pre-agreed Adjustment unless the omission is from the work that formed the subject ofthe Pre-agreed Adjustment (clause 2·25·6·4). In no circumstances may the date fixed by such a decision beearlier than the Date for Completion given in the Contract Particulars.

81 Under clause 2·25·5, the Employer in addition has not merely the power (as from the Completion Date) but alsothe duty, immediately following practical completion, to review the overall position with respect to extensions oftime. In that review he may look at all the circumstances, including Relevant Events that may not have beenspecifically notified under clause 2·24·1 and has power to do what he considers fair and reasonable, either byfixing a later or (for Relevant Omissions) an earlier Completion Date or by confirming the date previously fixed.(The same restrictions apply with respect to any earlier date.)

82 The provision for overall review appears frequently to be overlooked. It provides an opportunity for properreflection and assessment and is, in the JCT’s view, essential. Without it, decisions made in the course of theWorks, sometimes in a short space of time and without a full knowledge of the facts and effects of the variouspossible causes of delay, inevitably risk giving rise to precisely the expensive and wasteful disputes that AECprinciples seek to avoid.

Practical Completion, Lateness and Liquidated Damages (clauses 2·27 to 2·29)

83 The sub-section requires issue by the Employer of a Practical Completion Statement or Section CompletionStatement when the Works or a Section achieves practical completion and the Contractor has fulfilled hisobligations with respect both to as-built drawings and to health and safety file matters (clause 2·27). Where thereare Sections, good practice dictates issue of the Practical Completion Statement for the Works at the same timeas the last Section Completion Statement; there is no reason why these should not form a single document.

84 The sub-section also requires the issue of a Non-Completion Notice if the Contractor fails to achieve practicalcompletion by the relevant Completion Date (clause 2·28). In the event of such failure, liquidated damages willbecome payable or deductible on notice from the Employer in accordance with clause 2·29·2 provided both thata subsisting Non-Completion Notice has been issued and that the Employer himself has notified the Contractorin advance that he may require payment or make a withholding or deduction of such damages (clause 2·29·1).

85 Grant of an extension of time requires cancellation of a Non-Completion Notice and the appropriate repaymentwithin a reasonable time of liquidated damages relating to the period of extension that have by then been paid orwithheld; it also requires the issue of a further notice in respect of any residual period of default. Users shouldnote the time limits for service both of the warning notification (clause 2·29·1·2) and the notice of withholdingand/or deduction (clause 2·29·1, hanging paragraph); they should also note the requirement for compliance withsection 111 of the HGCR Act 1996 (Withholding Notices) reflected in clauses 4·10·4 and 4·12·6.

Partial Possession by Employer (clauses 2·30 to 2·34)

86 As indicated above, there is provision at clauses 2·5 and 2·6 whereby the Contractor may during the progress ofthe Works be obliged to accommodate use and occupation of parts of the site by the Employer for storage orother purposes and work by others that falls outside the Contract. Clause 2·5 contains a pre-condition as toinsurance, but the clauses otherwise have no effect on the operation of other terms of the Contract.

87 Clause 2·30, on the other hand, is concerned with outright repossession of part(s) of the site in advance ofpractical completion, which has the consequences set out in clauses 2·31 to 2·34, i.e. deemed practicalcompletion of the relevant parts, commencement of the Rectification Period in respect of them, followed by aseparate Notice of Completion of Making Good, responsibility for insurance of the part(s) in question immediatelypassing to the Employer and a reduction (pro rata to value) in the rate of liquidated damages.

88 Clause 2·30 is a provision which can be of benefit to Employers in relation to discrete areas of the site, whereuse and occupation will not impede the Contractor in managing the site and his completion of the Works as awhole, but it should not be invoked without proper liaison and due consideration of its possible effects.

Defects (clauses 2·35 and 2·36)

89 Clauses 3·12 to 3·14 set out the Architect/Contract Administrator’s powers with regard to actual and suspecteddefects and faults arising during the progress of the Works: this sub-section gives him power to specify andrequire remedial action in respect of defects and faults arising in the Rectification Period. This power isexercisable both through an overall schedule of defects (clause 2·35·1) and by instructions in respect ofindividual defects (clause 2·35·2). The notice or schedule in each case must be given or delivered not later than14 days after the expiry of the Rectification Period. It should be noted that, when given, the schedule of defectsshould be comprehensive: in the interests of a properly managed rectification programme, the clause 2·35·2power in respect of individual defects ceases when that schedule is served.


90 Clause 2·36 then sets out the Employer’s obligation to issue the Notice of Completion of Making Good. Underclause 4·9, unless the Parties are in the happy position of there having been no defects requiring the issue ofinstructions or a schedule of defects, it is the issue of this notice that permits the final Application for InterimPayment and final release of Retention (see clause 4·18·3).

Contractor’s Design Documents (clauses 2·37 and 2·38)

91 The sub-section deals first with the supply of as-built drawings. This, as noted in the context of clause 2·27, is apre-condition to issuance of the Practical Completion Statement or a Section Completion Statement and the sub-section then sets out the terms and conditions relating to the Employer’s licence to use Contractor’s DesignDocuments generally. The licence is in substantially the same terms as the licence granted to Purchasers,Tenants and a Funder under section 7, either as third party rights or by collateral warranty; it is conditional uponthe Contractor having been paid in full.

Section 3 – Control of the Works

92 This section deals with most of the principal control issues other than performance and payment-related matters,which are dealt with in section 2, in the case of performance, and in section 4 as respects payment. It consists offour sub-sections, namely Access and Representatives; Sub-Contracting; Employer’s instructions; and CDMRegulations.

Access and Representatives (clauses 3·1 and 3·2 and Supplemental Provision 1)

93 For the purpose of inspecting work and the conditions under which it is being undertaken, clause 3·1 requiresreasonable access to the Works and the Contractor’s premises for the Employer’s Agent and his nominees and,so far as practicable, similar access to sub-contractors’ premises (a point reflected in clause 3·4·2).

94 Under clause 3·2, the Contractor is obliged to maintain a competent person-in-charge on site, who is alsorequired to act as his agent there for receiving instructions and directions.

95 Where Supplemental Provision 1 (Site Manager) applies, it takes the place of clause 3·2. The Site Manager isintended to have a similar but wider representative function on behalf of the Contractor. His removal orreplacement requires the Employer’s consent and there are express provisions for his attendance at Sitemeetings and for record keeping.

Sub-Contracting (clauses 3·3 and 3·4 and Supplemental Provision 2)

96 Sub-contracting by the Contractor requires Employer’s consent whether it concerns the whole or part of theWorks or their design, though it is not to be unreasonably delayed or withheld (clause 3·3). The giving of consentby the Employer does not in any way affect the Contractor’s responsibilities under the Contract.

97 Supplemental Provision 2 (Named Sub-Contractors) is an optional provision which allows the Employer torequire that work be carried only by a sub-contractor named in the Employer’s Requirements but does not givehim power to nominate a replacement in any Change necessitated by termination of the resultant sub-contract.That can only be done by an instruction excluding the relevant work from the Contract. If he wishes theContractor to be responsible for completing that work, the Contractor’s choice of sub-contractor is subject to hisapproval, but that is not to be unreasonably delayed or withheld.

98 Unlike SBC 2005, there is in DB 2005 no provision for a list of sub-contractors from whom the Contractor mayselect his sub-contractor but even where the Employer’s pre-named specialist is acceptable to the Contractor, itis desirable that there should also be the measure of agreement between the Parties as to possible alternativesof the type that the SBC 2005 list of three procedure inherently involves. There is always the possibility(particularly in the case of work later in the programme) that, by the time that the sub-contract is due to beentered into, the pre-named specialist may have other priorities, may have undergone an unwelcome change ofcontrol, may have lost key personnel or capabilities and/or be materially less secure in financial terms. (The JCTcontinues to keep the question of pre-selection under review.)

99 Clause 3·4 sets out the minimum conditions that are required of any sub-contract, namely automatic terminationof the sub-contractor’s employment upon termination of the Contractor’s employment and sub-contractprovisions that are compatible with the main contract with respect to vesting and control of Site Materials, accessto workshops, CDM Regulations, interest on late payments and execution of sub-contractors’ collateralwarranties.

Employer’s instructions (clause 3·5 to 3·15 and Schedule 4)

100 The sub-section commences with the general requirement (clause 3·5) that the Contractor should forthwithcomply with all instructions. In clause 3·6 it outlines the consequences of failure to do so in terms of liability forthe Employer’s additional costs. It then sets out in clauses 3·7 and 3·8 the procedures to be followed if the


Employer gives oral instructions or if there is in the Contractor’s view doubt as to the Employer’s power to issuethe instruction in question.

101 The only express exceptions to the requirement for immediate compliance are clauses 3·5, 3·9·1 and 3·9·4. Thefirst of those applies where the instructions relate to a Variation within clause 5·1·2 (i.e. one that relates to siteaccess, imposes any limitation on working space or hours or affects the order of working) and operates if theContractor makes reasonable written objection to compliance; the second relates to instructions that alter ormodify the design of the Works (instructions which under this Contract require the Contractor’s consent, albeitnot to be unreasonably delayed or withheld). The third relates to CDM aspects of instructions for Changes andfor Provisional Sum expenditure where notice of objection is given.

102 The sub-section then lists the Employer’s powers and duties in relation to specific types of instruction. Provisionfor instructions to resolve discrepancies and divergences and those relating to defects have already been madein section 2 (see clause 2·13).

103 Those contained in section 3 relate to the other key instructions, i.e. the power to instruct Changes andpostponement, the duty to give instructions on Provisional Sums, the powers in relation to opening up andtesting, non-compliant work or workmanship, and also in relation to finds of antiquities. Where work, materials orgoods are not in accordance with the Contract, the Employer, if he wishes to issue instructions under clause3·12 for opening up and testing to establish whether there is more extensive non-compliance, is required byclause 3·13·4 to have regard to the Code of Practice set out in Schedule 4.

104 As respects antiquities, Revision 2 provides for loss and expense arising from necessary steps or instructionsnow to be covered as a Relevant Matter under clause 4·21·3.

CDM Regulations (clauses 3·16 and 3·17 and Supplemental Provision 8)

105 The sub-section provides contractual cross-undertakings by the Parties to comply with their respective dutiesunder the regulations. They highlight certain of those duties, e.g. the Principal Contractor’s obligations withregard to welfare facilities and the obligation to inform him of sub-contracting arrangements; they also provide forthe supply of necessary information to the CDM Co-ordinator and Principal Contractor at no cost to theEmployer.

106 Further details of the 2007 Regulations and consequent Revision 1 amendments are contained in Appendix A tothis Guide. As previously mentioned, general Health and Safety considerations are now further amplified bySupplemental Provision 8, if it applies.

Section 4 – Payment (and Schedule 6 – Forms of Bonds)

107 The section remains divided into six sub-sections – Contract Sum and Adjustments; Payments; Gross Valuation;Retention; Fluctuations; and Loss and Expense.

108 Revision 2 simplifies the text in certain areas, notably in clauses 4·12 to 4·15; the optional provision for aRetention Bond has been added as clause 4·17 and loss and expense relating to Antiquities added as aRelevant Matter at clause 4·21·3. The form of the Retention Bond is set out in Schedule 6, along with thoserelating to Advance Payment and Listed Items. Employer’s approval of the proposed surety for each bondrequired should wherever practicable be obtained before the Contract is executed.

Contract Sum and Adjustments (clauses 4·1 to 4·3)

109 This sub-section deals with the basic principles of adjustments to the Contract Sum. Clause 4·1 limitsadjustments to those expressly provided for by the Conditions; clause 4·2 continues for convenience to list thevarious adjustments that are provided for and clause 4·3 provides for the amount of each adjustment, whenascertained, to be reflected in the next Interim Payment. This is intended to apply both to monthly payments andto stage payments.

Payments (clauses 4·4 to 4·12)

110 Following the standard JCT provisions with regard to VAT and the CIS and the optional provisions for anadvance payment and bond, clause 4·7 provides for Interim Payments to be calculated in accordance withwhichever method of Gross Valuation applies – Alternative A, set out in clause 4·13, which relates to stagepayments or Alternative B (clause 4·14) which relates to monthly payments and clause 4·8 sets out thedeductions to arrive at the net amount in each case. Clause 4·9 provides for the Contractor’s Applications forInterim Payment; Revision 2 now provides for post-practical completion applications to be made at intervals of 2months (or other agreed intervals) rather than simply as and when further amounts are ascertained. (This is alsoreflected in the DB Sub-Contract.)


111 Clause 4·10 provides that the final date for an Interim Payment is 14 days from receipt of the application andthen makes express provision for the issue of payment notices and withholding notices that mirrors sections 110and 111 of the HGCR Act 1996. Clause 4·11 sets out the Contractor’s right of suspension under section 112 ofthe Act, exercisable after a warning notice.

112 In terms of final accounting, clause 4·12 provides that the Contractor should submit the Final Statement to theEmployer within 3 months of practical completion of the Works. If he fails to do so either within that period orwithin 2 months of a reminder notice from the Employer, the Employer may issue the statement. Either way,except to the extent that the final balance shown is disputed by notice from the other Party within one month ofreceipt of the statement (or if later, from the end of the Rectification Period or Notice of Completion of MakingGood), the Statement then becomes conclusive as to the final balance. Subject to the provisions of clause 1·8, italso then has the further conclusive effects mentioned in the latter clause.

Gross Valuation (clauses 4·13 to 4·15)

113 Clause 4·13 or 4·14, dependent upon whether stage or periodical payments apply, provides a straightforwardbasis for calculating amounts that have fallen due under the Contract. Each makes a simple division for thepurposes of clauses 4·8 and 4·16 as between items that are subject to Retention, i.e. work materials and goods(excluding insurance repair items), and those additional amounts that are not subject to Retention; each thennets off any applicable deductions provided for in the Conditions that have been ascertained or fixed, excludingany that arise under clause 6·15.

114 Clause 4·15 sets out the pre-conditions for the inclusion of Listed Items in the valuation.

Retention (clauses 4·16 to 4·18)

115 Clause 4·16 sets out the fiduciary basis of retentions, coupled with the accounting requirements and theContractor’s option (other than in Local Authority cases) of requiring a separate bank account for any retention.

116 Clause 4·17 then sets out the terms governing the alternative option of a Retention Bond, for which there is anappropriate entry in the Contract Particulars.

117 Clause 4·18 sets out the default percentage rates of retention and the periods applicable to them. UnderRevision 2 there is a minor addition to the Contract Particular for alternative rates that allows also for thosecases where it is agreed there should be no retention.

118 Application of the rules in clauses 4·18·2 and 4·18·3 in conjunction with clauses 4·8 and 4·13 or 4·14 shouldresult in the release of one half of the Retention in the interim payment made on or immediately followingpractical completion and of the remaining half in the payment made upon issue of the Notice of Completion ofMaking Good.

Fluctuations (clause 4·19 and Schedule 7)

119 All three Fluctuations Options have been retained, without material amendment.

Loss and Expense (clauses 4·20 to 4·23)

120 Clause 4·20 expressly entitles the Contractor by written application to claim loss and expense that he incurseither as a result of any deferment of possession under clause 2·5 or (subject to express exclusions in theConditions) because the regular progress of the Works or any part of them has been or is likely to be materiallyaffected by any of the Relevant Matters.

121 The Relevant Matters are listed in clause 4·21. They include Changes, other than those where the value isagreed under Supplemental Provision 4 (since loss and expense is to be included in the value). They alsoinclude instructions for postponement, expenditure of provisional sums, opening up or testing (except whererequired to be provided for or in cases of non-compliant work, etc.), or in relation to discrepancies ordivergences; actions and instructions relating to antiquities; suspension under clause 4·11; unavoidableDevelopment Contract delays; and impediment, prevention or default on the part of the Employer or those forwhom he is contractually responsible.

122 Loss and expense ascertained under clause 4·20 is added to the Contract Sum. The provisions do not affect anyother rights or remedies of the Contractor but in relation to claims under clause 4·20 he is obliged, in similarfashion to extension of time claims, to make his application as soon as the likelihood of an effect on progresshas become (or should have become) apparent and on request to supply such further information as isreasonably required.


Section 5 – Variations

123 The section is divided into two sub-sections, the first a General sub-section which includes at clause 5·1 thedefinition of Changes, and the second comprising the Valuation Rules.

General (clauses 5·1 to 5·3 and Schedule 2)

124 The clause 5·1 definition of Changes divides into two parts: the first, in clause 5·1·1, consists in alteration ormodification of the design, quality or quantity of the work; the second, the imposition or alteration of obligationsor restrictions affecting either access or time, method or order of working. (The Contractor’s clause 3·5 right ofreasonable objection, excusing immediate compliance with instructions, arises only in relation to the secondcategory.)

125 Clause 5·2, in addition to Changes, covers work which is to be treated as a Change and work under instructionsas to the expenditure of Provisional Sums. In each case the value may be pre-agreed by the Employer and theContractor, for which purpose they may use the estimates procedure under Supplemental Provision 4. If they donot agree the value, then, unless they agree on some other method of valuing the work, it is a matter for aValuation, i.e. a valuation by or on behalf of the Employer in accordance with the Valuation Rules. This appliesequally if the Contractor makes reasonable objection to producing estimates under Supplemental Provision 4 orif those estimates are not accepted, but the instruction stands.

The Valuation Rules (clauses 5·4 to 5·7)

126 Clause 5·4 (Measurable Work) requires the valuation of additional or substituted work to be on a basis consistentwith the Contract Sum Analysis (and of any omissions to be in accordance with that analysis), with appropriateallowance for adjustments in the amount of design work and site costs involved. (There are minor modificationsto the rules where Supplemental Provision 3 (Bills of Quantities) applies.

127 Clause 5·5 makes provision for valuing Daywork: the document setting out the Percentage Additions and any All-Inclusive Rates applicable should be identified in the new Contract Particular provided for that purpose.

128 Clause 5·6 makes consequential provision for any resultant changes in conditions under which other work,outside the direct scope of the instruction, is executed, with a ‘safety-net’ provision at clause 5·7·1.

Section 6 – Injury, Damage and Insurance (and Schedule 3 – InsuranceOptions)

129 The section takes the form of five sub-sections: Injury to Persons and Property; Insurance against PersonalInjury and Property Damage; Insurance of the Works; Professional Indemnity Insurance; and Joint Fire Code –compliance.

130 In terms of the Works insurance, the three Insurance Options (A, B and C) are set out in Schedule 3.

Injury and property damage – indemnity and insurance (clauses 6·1 to 6·6)

131 Clauses 6·1 and 6·2 set out the Contractor’s liability for personal injury and for injury or damage to property,coupled with his indemnity to the Employer, subject to the clause 6·2 and clause 6·3 exclusions. As part of theoverall insurance scheme, clauses 6·2 and 6·3 exclude liability for loss or damage to the Works, executed workand Site Materials and, where Option C applies, liability for damage by any of the Specified Perils to theEmployer’s existing structures/contents prior to practical completion. (It will be noted that clause 6·3·2 deals withSectional completion.) Those exclusions are followed in the next sub-section by the Contractor’s clause 6·4obligation to effect insurance against liability under clauses 6·1 and 6·2 (i.e. Public Liability cover) with the levelof cover (other than in respect of employer’s liability insurance) specified in the Contract Particulars.

132 If the Employer’s Requirements state that insurance under clause 6·5·1 is required, the Contractor is obliged totake out insurance in the joint names of the Employer and the Contractor in respect of claims against theEmployer as a result of damage to property due to subsidence, weakening or removal of support, vibration or thelike arising out of the carrying out of the Works. Cover is to be the amount stated in the Contract Particulars andis subject to the list of exclusions set out in that clause. This type of insurance is sometimes referred to as “non-negligent loss insurance”, reflecting the Employer’s strict liability in respect of damage to other properties,irrespective of whether or not there has been negligence or breach of duty on the part of either the Employer orthe Contractor. Under this Contract, the cost of such insurance, if stated as required, is taken to be included inthe Contract Sum.

133 The sole Revision 2 amendment in these sub-sections is the insertion at the end of clause 6·1, for the sake ofconsistency, of the reference to Statutory Undertakers.


Works insurance (clauses 6·7 to 6·10 and Schedule 3)

134 For the purposes of Works insurance, it is envisaged that the Parties will effect a Joint Names Policy in the termsof Insurance Option A, B or C, as appropriate, a choice effected by the relevant entry in the Contract Particularsfor clause 6·7:

• Insurance Option A applies to new buildings and requires the Contractor to take out a Joint Names Policyfor All Risks Insurance for the full reinstatement value of the Works, including Site Materials, plusprofessional fees;

• Insurance Option B applies to new buildings and requires the Employer to take out a Joint Names Policy forAll Risks Insurance for the full reinstatement value of the Works, including Site Materials, plus professionalfees;

• Insurance Option C applies where existing structures are involved and requires the Employer to take out aJoint Names Policy for the full reinstatement cost in respect of damage to the existing structures and theircontents by Specified Perils, and, in respect of the Works, a Joint Names Policy for All Risks Insurance onthe same basis as under Option B. (In the case of existing structures and contents, the Employer himself willin fact normally have, and will himself wish to retain, All Risks cover.)

135 To ensure that suitable arrangements are made, the Parties and their advisers are strongly advised to consulteach other and to seek professional insurance market advice prior to entering into the contract.

Relevant Definitions

136 The term ‘Joint Names Policy’, and other relevant insurance terms, are defined in clause 6·8. The policy (orpolicies) are required to include the Employer and the Contractor as composite insured and to provide that theinsurer has no right of recourse against either of them, irrespective of which Party claims under the policy or mayotherwise have been liable for the loss or damage. By clause 6·9, the Joint Names Policy for the Works is alsorequired either to recognise each sub-contractor as an insured or to include a waiver of rights of subrogationagainst him in respect of loss or damage caused by the Specified Perils.

137 ‘All Risks Insurance’ as a defined term has a meaning somewhat narrower than the phrase “all risks” mightotherwise imply. Briefly, the policy is to cover physical loss or damage to work executed or Site Materials (but notthe Contractor’s plant and equipment), and it will usually exclude loss or damage caused by wear andtear/deterioration, defects in design or workmanship, war or Excepted Risks and also inventory losses that arenot traceable to an identified event. However, as mentioned in the first footnote to the clause 6·8 definition(which has been expanded in Revision 2), it is not entirely straightforward and requires the “buy back” ofTerrorism Cover, which is discussed in greater detail below.

138 Difficulty can also arise in relation to joint names insurance of existing structures in cases that involve residentialowner-occupiers or leaseholders whose insurance is effected by their landlord. In such cases, the practicalsolution may be to use Option A (or possibly Option B) in respect of the Works and Site Materials, with theEmployer continuing separately to cover his own particular risk in respect of loss or damage to the existingstructures and contents and with the Contractor covering his risk in respect of such loss and damage under hisPublic Liability policy, referred to above in the context of clause 6·4. In either case, however, prior to entering intothe contract, the Employer must inform his existing structure and contents insurers of the intention to carry outthe work, and appropriate professional advice should be sought, not least because of the consequentialamendments that may be needed in clause 6·2 and elsewhere.

Terrorism and Terrorism Cover

139 A point of concern for both the Employer and the Contractor is the general exclusion from All Risks policies forthe Works (and, where relevant, from Existing Structures policies) of cover for damage by terrorism. In eachcase, DB 2005, in line with JCT contracts generally, assumes that the Party effecting the policy will “buy back”that terrorism cover. However, risks reinsured by Pool Re, the Government-linked reinsurer of terrorism risks,remain limited to acts of terrorism within the Reinsurance (Acts of Terrorism) Act 1993, i.e. “any act of anyperson acting on behalf of or in connection with any organisation with activities directed towards theoverthrowing or influencing of any government de jure or de facto by force or violence”, not the wider definitionunder the Terrorism Act 2000 which insurers generally use for the purposes of their exclusion from the policy.

140 If there is any likely difficulty in buying back terrorism cover, or if insurers propose a limitation on the cover to bebought back that reflects the Pool Re limitation referred to in the previous paragraph, the Parties and theirinsurance advisers should prior to entry into the contract consult and agree what they wish to do in that regard.

141 Where Insurance Option A applies, paragraph A·5 in Schedule 3 provides Local Authority Employers with theoption of themselves assuming the terrorism risk if during the progress of the Works there is a premium increasefor the Contractor’s terrorism cover. In the event of non-availability of cover under the Works policy during that


period, whichever Insurance Option applies, or under the existing structures policy where Insurance Option Capplies, clause 6·10 provides the Employer (Private or Local Authority) with the option of assuming the risk orterminating.

142 The JCT continues to keep the matter under review.

Reinstatement and other costs

143 The three Works Insurance Options are designed solely to meet the cost of restoring lost and damaged workand materials, but in calculating reinstatement cost there are several factors to be borne in mind; other potentialcosts and losses may also need to be considered.

144 The costs of reinstatement generally include those of removing debris. They are often covered automatically byinsurers’ policy terms but appear on occasion to require to be dealt with by a separate item under the All Riskspolicy: the Parties and their advisers should ensure that there is an appropriate level of cover for them.

145 If the Employer is exempt from VAT registration or if supplies made by him in the course of the business arewholly or partially exempt, the Employer should include in his calculation of the reinstatement cost not only thenormal VAT-exclusive cost of reinstatement (adjusted for interim increases in those costs) and the percentage tocover professional fees, but also the amount of the VAT chargeable on the work of reinstatement, to the extentthat he would not be able to recover it.

146 Other costs that are not generally covered automatically by the Works insurance and may require an extensionof cover or separate cover include increases in costs of working as a result of the damage or reinstatement work,together with increases in the cost of the unbuilt portion through inflation.

147 In addition there are financial or consequential losses of the Employer’s Delay in Completion/Advance Loss ofProfits (ALOP)-type for which Employers may require their own separate cover.

Professional Indemnity insurance (clauses 6·11 and 6·12)

148 The Employer may require the Contractor to effect and thereafter, provided it is available at commerciallyreasonable rates, maintain PI insurance of the type(s), with limit(s) of indemnity and for a period not less thanthat stated in the Contract Particulars.

149 The provisions are in substantially the same terms as those in the JCT Collateral Warranties. Under Revision 2,the Contract Particulars now make separate provision for cover against pollution and contamination, asbestosand fungal mould claims, all within the general cover; there are only minor changes in the sub-section itself.

150 A realistic approach needs to be taken both to the type(s) of cover required and to the cover level(s) required.Unless otherwise specifically agreed, the terms and period agreed for the purposes of clause 6·11 will apply inrelation to the Third Party Rights and each Collateral Warranty that the Contractor is required to give.

Joint Fire Code (clauses 6·13 to 6·16)

151 The Joint Fire Code is generally required by insurers to apply and the Parties should comply both with itsrequirements and the other provisions of clauses 6·14 and 6·15. Under clause 6·15 the Contractor is to ensurethat any remedial measures required by the insurers to achieve compliance are carried out and, if he fails to doso, the Employer may employ others for the purpose, with an appropriate deduction being made from theContract Sum. Minor amendments have been made here and in the clause 1·1 definition to underline theobligation to comply with any amendments which may from time to time be made to the code. In respect ofamendments made after the Base Date there is an option as to which Party bears the cost.

Financial Services and Markets Act 2000

152 The regulatory requirements imposed by the Insurance Mediation Directive were implemented through theFinancial Services and Markets Act 2000. With effect from 15 January 2005, a person who is carrying on by wayof business and in the United Kingdom any insurance mediation activity for remuneration is required either tohave obtained authorisation from the Financial Services Authority (FSA) or to be exempt as the appointedrepresentative of an authorised firm. The JCT understands that each of its member bodies has issued guidanceto their members; users of JCT contracts should ensure that they are familiar with the requirements and takeprofessional advice where necessary.


Section 7 – Assignment, Third Party Rights and Collateral Warranties (andSchedule 5 – Third Party Rights)

153 This section comprises the restrictions on, and the Employer’s limited optional right of, assignment, together withthe enabling provisions for Third Party Rights/Collateral Warranties. The Third Party Rights which the Contractormay be called upon to give are set out in Schedule 5; the relevant forms of JCT Collateral Warranty are availableas separate published documents.

154 The assignment provisions are set out in clauses 7·1 and 7·2. After the ancillary provisions of clauses 7·3 and7·4, they are followed by five clauses (7A to 7E) which perform essentially the same functions as the enablingclauses formerly included with the JCT Collateral Warranty forms. These provisions relate:

• in the case of clauses 7A and 7B, to the grant by the Contractor of third party rights for Purchasers/Tenantsand a Funder respectively;

• in the case of clauses 7C and 7D, to the alternative of collateral warranties by the Contractor;

• in the case of clause 7E, to Sub-Contractors’ obligations to grant collateral warranties in favour ofPurchasers/Tenants, a Funder or the Employer.

155 In relation to each form of grant the required details are those set out or referred to in Part 2 of the ContractParticulars. The terms of any third party rights from the Contractor are substantially identical to those in thecorresponding Collateral Warranty; to facilitate that correspondence in terms of the particulars, the clausenumbering of the relevant Collateral Warranties is the same as that of the paragraphs in the relevant Part ofSchedule 5. Under Revision 2, in addition to minor consequential changes in each case, the period for exerciseof step-in rights is extended from 7 to 14 days.

156 Clause 7·4 provides for the mode of execution of collateral warranties.

Part 2 of the Contract Particulars

157 As indicated in the Contract Particulars section of this Guide, Part 2 of the particulars requires carefulcompletion. In terms of completing it, the point to be emphasised for the Parties and beneficiaries is thatobtaining the rights and/or warranties is in legal terms dependent upon certainty, i.e. upon the necessaryparticulars being given.

158 The first requirement is the identification of the Purchaser/Tenant beneficiaries and the Funder. Section 1 of theContracts (Rights of Third Parties) Act 1999 provides that a third party may enforce a term of a contract if thecontract expressly so provides but (by section 1(3)) that the third party must be expressly identified in thecontract by name, or as a member of a class or as answering a particular description. As a matter of general law,the requirement for certainty applies equally for collateral warranties.

159 The class or description can of course be quite simple and general, e.g. “all first purchasers” and/or “alloriginal/first lessees” of the building or of particular units or parts of the Works. Section 1(3) of the Act goes on toprovide that the third party need not be in existence when the contract is entered into. Where known, the Funderwill no doubt be named, but there should be no problem describing an as-yet unascertained Funder as, forexample, the lead bank providing finance for the project or as the special purpose vehicle to be incorporated orestablished under a specified agreement.

160 Unless already selected, the same principle may need to be applied to identify relevant sub-contractors for thepurposes of the Table at (E), where reference may have to be made to those selected for identified workpackages.

161 There is then the question as to whether rights to be granted by the Contractor are third party rights under the1999 Act or to be granted by collateral warranty. Unless collateral warranties are stipulated by entries in the thirdcolumn in the Table at (A), rights under the Act will apply.

162 In completing the Sub-Contractor particulars at (E) in Part 2, regard should be had to the default positions inparagraphs (i) to (iii) and the footnotes following the Table. In completing the third column, the Employer and theContractor should recognise that not all Sub-Contractors carry or are able to obtain PI insurance cover, either ona per event basis or at all: some will at best carry only Product Liability insurance and any specified cover levelsshould be realistic, as should the selection of Sub-Contractors from whom collateral warranties may be required.As previously indicated different forms of warranty may be needed for sub-contracted consultants; where aconsultant’s appointment is intended to be novated to the Contractor by the Employer, however, the matter maybe better dealt with as part of the original arrangement.


Section 8 – Termination

163 The section contains provisions for termination of the Contractor’s employment under the Contract.

164 It comprises five sub-sections: General (defining insolvency and setting out certain ancillary provisions that applyto the section generally); Termination by Employer; Termination by Contractor; Termination by either Party (incases of extended no-fault suspension); and Consequences of Termination (in cases of termination by theContractor or extended no-fault suspension).

165 The basis of the section is that each Party may terminate the Contractor’s employment either for a specifieddefault or insolvency on the part of the other or where substantially the whole of the Works is suspended for theperiod stated in the Contract Particulars through a range of events outside the control of either Party. The defaultentry in the Contract Particulars is a period of 2 months. In addition the Employer may terminate for corruption.

166 It is only the Contractor’s employment under the Contract that is terminated, not the Contract itself, whichremains in force to deal with the consequences of termination. These differ, dependent on the grounds fortermination.

167 In the case of default by either Party, there is a requirement for a warning notice of the default to be given priorto termination, giving an opportunity for the default to be remedied. If it is not remedied within 14 days of thatnotice, there is, under Revision 2, a 21 day period for giving notice of termination. The extension of the period to21 days mirrors the extension to the period for a Funder’s election to exercise step-in rights. Where, after anotice of default, a notice of termination is not given within the 21 day period but the default is repeated, theParty not in default again becomes entitled to give notice of termination within a reasonable time.

168 Where either Party is insolvent or the Contractor commits a corrupt act, the other Party may terminate without awarning notice but, where termination is due to prolonged no-fault suspension of the Works, a warning notice isrequired.

General (clauses 8·1 to 8·3)

169 The clause 8·1 definition of insolvency introduced by DB 2005 was framed with the assistance of the Associationof Business Recovery Professionals (R3) and was intended to provide greater consistency. However, in asubstantial proportion of insolvency cases, the insolvency will also be preceded and/or accompanied bycontractual default.

170 Clause 8·2 makes provision with respect to notices, commencing with the long-standing requirement that noticeof termination is not to be given unreasonably or vexatiously. Notice of termination takes effect on receipt; clause8·2·3, albeit now by reference to clause 1·7·4, is aimed at ensuring that there is no scope for argument on thequestion of receipt.

171 Clause 8·3·1 then provides that the provisions of the section are without prejudice to the rights of the Employeror, as relevant, the Contractor; there may for example be occasions where there is repudiatory breach by a Partythat is not within the specified grounds for termination but upon which the innocent Party wishes to treat theContract as being at an end.

Termination by the Employer (clauses 8·4 to 8·8)

172 Clause 8·4 sets out the Employer’s right to terminate for default, clause 8·5 his right to terminate for insolvencyand clause 8·6 the right to terminate for corruption; it will be noted that the grounds of termination for default arespecific and that both the warning notice and any notice of termination also therefore need to be specific.

173 In relation to the consequences of insolvency and termination on those grounds or for Contractor’s default,clauses 8·5·3 and 8·7·3 respectively provide that, pending the final account under clause 8·7·4 or 8·8, theprovisions of the Contract which require any further payment cease to apply. (There is a similar provision inclause 8·12·1 and also in clause 6·10·3.) That provision appears entirely valid in respect of sums that have notthen become due under the Contract and also in the case of sums that have become due where a validwithholding notice is given under section 111(1) of the HGCR Act and clause 4·10·4 within the appropriateperiod. In the case of sums that are due but unpaid where no withholding notice has been given and the lastdate for giving such notice has passed, it appears on the basis of the House of Lords decision in Melville DundasLtd v. George Wimpey UK Ltd [2007] UKHL 18 that the sum may be validly withheld if termination is on thegrounds of insolvency and the insolvency has occurred after the period for giving a withholding notice hasexpired, but not if the insolvency occurred before that expiry and not if the termination was on grounds otherthan insolvency. If there is any doubt as to the position in relation to any actual or prospective termination,professional advice should be taken; a withholding notice should of course be given where that is stillpracticable.


174 The provisions of clause 8·7 as to the Employer’s rights, Contractor’s obligations and the basis of the finalaccount (clause 8·7·4) are reasonably straightforward, the final account being based on cost to complete anddirect loss or damage caused to the Employer. That is however predicated upon completion of the Works by acompletion contractor. If the Employer decides not to complete the Works or fails within 6 months of thetermination to make arrangements to that end, clause 8·8 provides for the final account to be prepared on thealternative basis of the value of work properly executed less direct loss or damage.

Termination by the Contractor (clauses 8·9 and 8·10)

175 Over and above breach of the prohibition on assignment and breach of CDM Regulations (which are alsogrounds under clause 8·4), clause 8·9 gives the Contractor the right to terminate if the Employer fails to payamounts properly due and for continuous extended suspension caused by any impediment, prevention or defaulton the part of the Employer or others for whom the Employer is contractually responsible. (Here also the defaultperiod for the suspension is 2 months, plus 14 days for a warning notice.) Clause 8·10 relates to Employerinsolvency. The consequences of termination are not dissimilar to those of termination under clause 8·11 andthose are dealt with together in the final sub-section (clause 8·12).

176 Where he has given Third Party Rights or a Collateral Warranty to a Funder, the Contractor’s right to terminatewill, as indicated above, be subject to either paragraph 6 in Part 2 of Schedule 5 or clause 6 of CollateralWarranty CWa/F, providing for notice to the Funder to enable the Funder to decide whether to exercise its ‘step-in’ rights.

Termination by either Party (clause 8·11)

177 The bilateral right of termination under clause 8·11 is not entirely dissimilar to termination by the Contractor forcontinuous extended suspension under clause 8·9; it has the same default period and, entitlement to direct lossand damage apart, the consequences are the same. It is based on events beyond the reasonable control ofeither party – force majeure, negligence or default of Statutory Undertakers, Specified Perils damage, civilcommotion and UK Government action. (In relation to Specified Perils damage, clause 8·11·2 contains theappropriate exclusion for Contractor’s negligence.)

Consequences of Termination under clauses 8·9 to 8·11, etc. (clause 8·12)

178 This sub-section covers the consequences of termination under clauses 8·9 to 8·11 and also where terminationarises under clause 6·10·2·2 (withdrawal of Terrorism Cover) or paragraph C·4·4 of Schedule 3 (material loss ofor damage to existing structures). As under clause 8·8, the final account is based on value of work properlyexecuted and other amounts due to the Contractor under the Conditions. In addition the Contractor is entitled todirect loss and damage arising from the termination where he has terminated for Employer’s default orinsolvency or where Specified Perils damage giving rise to an extended suspension and then to terminationunder clause 8·11 has been caused by negligence or default on the part of the Employer or those for whom thelatter is responsible.

Section 9 – Settlement of Disputes

179 The Contract contains provisions in relation to four external means of settling disputes:

• the Parties may agree to attempt to resolve disputes through mediation, using a third party to assist thenegotiation process;

• the Parties have a contractual as well as a statutory right to refer disputes to adjudication (Article 7 andclause 9·2); DB 2005 provides for adjudication to be conducted in accordance with the Scheme forConstruction Contracts, subject only to the clause 9·2 provisions regarding the nomination of adjudicatorsand for cases of opening up and testing;

• the Parties may agree to refer disputes to arbitration, either through the appropriate entry in the ContractParticulars, or by subsequent agreement; the arbitration agreement in DB 2005 is subject to the threeexceptions mentioned in Article 8 and provides that an arbitration under it is to be conducted in accordancewith the JCT 2005 edition of the Construction Industry Model Arbitration Rules (CIMAR);

• the Parties may litigate except insofar as they have specifically agreed to refer disputes to arbitration.

Mediation (clause 9·1) and ADR

180 The JCT supports the use of mediation and ADR in appropriate cases, but considers that it would not beappropriate to endorse specific techniques or bodies. The variety of techniques and bodies that have developedover recent years would appear to suggest that such choices are frequently better made by the Parties when thedispute has actually arisen and its nature is clear: in cases where mediation is likely to assist, possible exposure


to litigation costs under the Civil Procedure Rules may be sufficient incentive for the Parties to agree suchmatters.

Adjudication (clause 9·2)

181 In the case of adjudication, the adjudicator may be named and the nominating body identified in the ContractParticulars. Where the Employer is a residential occupier (as defined by section 106 of the Act) there is nostatutory requirement for the contract to contain an adjudication provision, and the Employer’s advisers shouldconsider with their client whether the adjudication provision is desirable or whether it should be deleted.

Arbitration (clauses 9·3 to 9·8) and litigation (Article 9)

182 A range of factors, which are outside the scope of this Guide, will determine the choice between arbitration andlitigation. Litigation is the default position and will apply unless the Parties specifically make arbitration operative.

183 Where arbitration is agreed under the Contract and CIMAR Rules apply, Rule 2.3 in effect provides that anarbitrator cannot be named by the appointor identified in the Contract Particulars until at least 14 days after thearbitration notice is served and it is only after that period, if no agreement is reached as to who is to act asarbitrator, that either Party has the right to apply to the appointor, requesting him to name the arbitrator. Theaward of the arbitrator is final and binding on the Parties except in respect of any question of law arising in thecourse of the reference or arising out of an award, which (by clause 9·7) the Parties agree may be referred to thecourts.


CDM Regulations

Clause number andheading

Action

Article 5 heading Delete ‘Planning Supervisor’ and insert ‘CDM Co-ordinator’

Article 5 Delete ‘Planning Supervisor’ and insert ‘CDM Co-ordinator’ (twice);Delete ‘6(5)’ and insert ‘14(1)’

Article 6 Delete ‘6(5)’ and insert ‘14(2)’

Footnote [6] Delete existing text and insert:‘Insert the name of the CDM Co-ordinator only where the Contractor is not to fulfil that role, and that of thePrincipal Contractor only if that is to be a person other than the Contractor. If the project is not notifiableunder the CDM Regulations 2007 (i.e. a project which is not likely to involve more than 30 days, or 500person days, of construction work or which is being carried out for a homeowner as a purely domesticproject), delete Articles 5 and 6 in their entirety.’

Contract Particulars,1·1

Insert new entry:

‘CDM Planning Period[ ]

**

shall mean the period of

______________________ * days/weeks

ending on the Date of Possession/beginning/ending on

_________________________ 20 _____’

Insert new footnote text for [ ]:‘Under the CDM Regulations 2007 every client is expressly required to allocate sufficient time (the CDMPlanning Period) prior to the commencement of construction to enable contractors and others to carry outnecessary CDM planning and preparation. There may be cases where that planning and preparation needsto be completed earlier than the Date of Possession and adaptation of the entries may be needed wherethere are Sections.’

Clause 1·1 ‘CDM Regulations’: Delete ‘1994’ and insert ‘2007’;Delete the definitions of ‘Health and Safety Plan’ and ‘Planning Supervisor’;Insert the following new definitions:

‘CDM Co-ordinator: the Contractor or other person named in Article 5 or anysuccessor appointed by the Employer.

CDM Planning Period: the minimum amount of time referred to in regulation 10(2)(c) ofthe CDM Regulations, as specified in the Contract Particulars(against the reference to clause 1·1).

Construction Phase Plan: the plan prepared by the Principal Contractor, where the projectis notifiable under the CDM Regulations and in order to complywith regulation 23, including any updates and revisions.’

Clause 2·1 Delete ‘Health and Safety’ and insert ‘Construction Phase’;After ‘Plan and’ delete ‘the’ and insert ‘other’

Appendix A – Amendment 1 (DB)



Action

Clause 2·7·2 After ‘of the Contract Documents’ insert ‘, together with any pre-construction informationrequired for the purposes of regulation 10 of the CDM Regulations’

Clause 2·27 Delete ‘3·18·4’ and insert ‘3·18·5’

Clause 3·4·2 Insert new sub-clause as 3·4·2·3:‘that each party undertakes to the other in relation to the Works and the site duly to comply withthe CDM Regulations;’;Renumber existing sub-clauses ·3,·4 and ·5 as ·4,·5 and ·6 respectively

Clause 3·9·4 Delete ‘Where the Contractor is and while he remains the Planning Supervisor, he’ and insert‘The Contractor’;Delete ‘regulation 14’ and insert ‘regulation 20 (if he is the CDM Co-ordinator) or regulation 22’;Delete ‘If he has such objection’ and insert ‘If the Contractor has any reasonable objection’

Clause 3·14 Delete ‘Health and Safety’ and insert ‘Construction Phase’

Clause 3·18 Delete existing text and insert:

‘Each Party acknowledges that he is aware of and undertakes to the other that in relation to theWorks and site he will duly comply with the CDM Regulations. Without limitation, where theproject that comprises or includes the Works is notifiable:

·1 where the Contractor is not the CDM Co-ordinator, the Employer shall ensure both that theCDM Co-ordinator carries out all his duties and, where the Contractor is not the PrincipalContractor, that the Principal Contractor carries out all his duties under those regulations;

·2 where the Contractor is and while he remains the CDM Co-ordinator, he shall comply withall the duties of a CDM Co-ordinator and shall without charge prepare, and deliver to theEmployer, the health and safety file;

·3 where the Contractor is and while he remains the Principal Contractor, he shall ensure that:

·1 the Construction Phase Plan is prepared and received by the Employer beforeconstruction work under this Contract is commenced, and that any subsequentamendment to it by the Contractor is notified to the Employer and the CDM Co-ordinator; and

·2 welfare facilities complying with Schedule 2 of the CDM Regulations are providedfrom the commencement of construction work until the end of the construction phase[ ];

·4 where the Contractor is not the Principal Contractor, he shall promptly inform the PrincipalContractor of the identity of each sub-contractor that he appoints and each sub-subcontractor appointment notified to him;

·5 where the Contractor is not or ceases to be the CDM Co-ordinator, promptly upon thewritten request of the CDM Co-ordinator, the Contractor shall provide, and shall ensure thatany sub-contractor, through the Contractor, provides, to the CDM Co-ordinator (or, if theContractor is not the Principal Contractor, to the Principal Contractor) such information asthe CDM Co-ordinator reasonably requires for the preparation of the health and safety file.’

Insert new footnote text for [ ]:‘There is a duty on contractors to ensure compliance with Schedule 2 of the CDM Regulations so far as isreasonably practicable, whether or not the project is notifiable and whether or not the contractor is thePrincipal Contractor.’

Clause 3·19 Delete ‘Planning Supervisor’ and insert ‘CDM Co-ordinator’


Assignment, Third Party Rights and Collateral Warranties


Action

Contract Particulars,7·2

Delete ‘(where Sections do not apply)’ and insert ‘(If neither entry is deleted, clause 7·2 willapply.)’Delete existing bracketed text under Sections and insert:‘(If clause 7·2 applies, amend the entry if rights under that clause are to apply to certainSections only.)’

Part 2 (E), middlecolumn heading

Delete ‘State whether clause 7E and/or clause 7F applies’ and insert ‘Type(s) of warrantyrequired’ and after ‘[31]’ insert ‘(SCWa/P&T, SCWa/F, SCWa/E) limited to’

Part 2 (E) Notes,item (i)

Delete ‘where clause 7E is stated to apply[31],’;After ‘(A) above’ delete ‘and’ and insert comma;After ‘(C) above’ insert ‘and the Employer’;After ‘clause 7E’ delete ‘[33]’;After ‘identified sub-contractor’ insert ‘[31]’

Part 2 (E) Notes,item (ii)

Delete item number and text;Renumber existing items (iii), (iv) and (v) as (ii), (iii) and (iv) respectively

Part 2 (E) Notes,item (v)

After ‘Collateral Warranty’ delete ‘–’ and insert ‘SCWa/E and’

Footnote [31] Delete existing text and insert:‘Where a sub-contractor is required to grant only a particular type or types of the Collateral Warrantiesreferred to in clause 7E (i.e. the Sub-Contractor Collateral Warranty for a Purchaser or Tenant (SCWa/P&T),for a Funder (SCWa/F) and for the Employer (SCWa/E)), state the particular type(s). All three CollateralWarranties are documents prepared by JCT.’

Footnote [32] Delete ‘and sub-contractors who maintain Product Guarantee cover only’

Footnote [33] Delete footnote number and text

Clause 7E heading Delete ‘– Purchasers and Tenants/Funder’

Clause 7E After ‘to a Purchaser, Tenant or Funder’ insert ‘or to the Employer’;After ‘SCWa/P&T’ delete ‘or’ and insert comma;After ‘SCWa/F’ insert ‘or SCWa/E’

Clause 7F Delete clause heading, number and text

Guidance Notes to Amendment 1

CDM Regulations

General

The Construction (Design and Management) Regulations 2007 replace the 1994 Regulations with effect from 6 April 2007.They also incorporate the provisions of the Construction (Health, Safety and Welfare) Regulations 1996 not incorporated inthe Work at Height Regulations 2005, i.e. health and safety duties on site, welfare facilities and inspection reportparticulars. The latter provisions are contained in Part 4 and Schedules 2 and 3 respectively.

As a result, the 2007 Regulations impose on clients, designers, contractors (including sub-contractors at all levels), and onothers controlling the way in which any construction work is carried out (e.g. construction or project managers and contractadministrators), a wider and more coherent set of health, safety and welfare duties.

As part of the greater emphasis placed on the need to plan and on communication and co-ordination, the functions of thePlanning Supervisor are replaced by those of a CDM co-ordinator, and a ‘construction phase plan’ replaces the Health andSafety Plan; the Health and Safety file provisions remain. Amendment 1 incorporates the changed terms. The 2007Regulations also eliminate the distinction in the 1994 Regulations between the notification requirements and applicability


provisions for particular regulations. While the Regulations maintain the basic 1994 criteria as to notifiability, i.e. 30 days or500 person days of construction work, there are now only two types of project – notifiable and non-notifiable. The ‘five ormore workers’ requirements of the 1994 Regulations have been omitted.

Domestic clients, i.e. those not acting in the course or furtherance of a business, are exempt from duties under the 2007Regulations in relation to purely domestic projects, which in turn are treated as non-notifiable.

Part 2 – General duties

Part 2 of the 2007 Regulations (regulations 4 to 13) sets out the duties that apply to all projects, whether or not notifiable,commencing with duties that apply to clients, designers and contractors alike. These include the requirement ofcompetence and the duty to check appointees, a general duty to co-operate and seek co-operation with others concerned(now expressly extended to adjoining construction sites) and duties for all, so far as reasonably practicable, both to co-ordinate their activities with others and to ensure the application of general principles of prevention (specified in theManagement of Health and Safety at Work Regulations 1998).

Part 2 then sets out specific duties for clients, designers and contractors respectively. In the case of clients, these include aduty to ensure that suitable arrangements are in place for the management of health, safety and welfare aspects of theproject, including the allocation of sufficient time for construction phase planning and preparation for health and safetypurposes. This is coupled with obligations to supply information on the site and its proposed use and to specify theminimum period to be allowed to contractors for planning and preparation before construction starts (referred to in theAmendment as the ‘CDM Planning Period’).

Main contractors are under similar obligations with respect to their sub-contractors and so on down the chain; provisionsare being inserted in the JCT sub-contracts and sub-subcontract. Part 2 also sets out in detail contractors’ information andtraining obligations with respect to their workers and an obligation, so far as is practicable, to make Schedule 2 welfareprovision. The commencement of work by any contractor is conditional (inter alia) upon reasonable steps having beentaken to prevent unauthorised site access.

Part 3 – Notifiable Project duties

Part 3 (regulations 14 to 24) relates to notifiable projects. The client is required to appoint the CDM co-ordinator as soon asis practicable after initial design work or other preparation has begun – further design work is conditional on thatappointment, as is construction, which (in addition to access restrictions) is also conditional on the appointment of theprincipal contractor, production of the construction phase plan and notification to the Health and Safety Executive.

The duties of the CDM co-ordinator and principal contractor are slightly more widely drawn than in the 1994 Regulationsand the principal contractor’s responsibilities now include ensuring the provision of Schedule 2 welfare facilities. Part 3imposes certain additional duties on each participant both with respect to these appointees and generally. These in generalfollow naturally from the Part 2 obligations and the functions and duties of the two appointees but there is now a duty on allcontractors promptly to supply to the principal contractor any information relevant to health and safety, as well as thatidentified for inclusion in the Health and Safety file.

Assignment, Third Party Rights and Collateral Warranties

The Contract Particulars associated with clause 7·2 have been revised to make clear that clause 7·2 applies unlessotherwise stated. They have also been revised so that where clause 7·2 applies it will apply to each Section of the Worksunless the relevant entry is amended.

Clause 7E now additionally provides for a warranty for Employer (previously clause 7F) and incorporates specific referenceto the recently published Sub-Contractor Collateral Warranty for Employer (SCWa/E). Consequential changes have beenmade to Part 2(E) of the Contract Particulars and clause 7F deleted.


The following provisions in Revision 2 2009 contain textual changes. The provisions with substantive textualchanges have been identified with *. For an explanation of those changes, please refer to the main body of theGuide.

Revision 2 2009 numbering

RecitalsSixth*Seventh*

ArticlesArticle 3Article 8*

Contract Particulars (entries)Part 1: Sixth Recital*

Seventh Recital and Part 1 ofSchedule 2*Seventh Recital and Part 2 ofSchedule 2*Article 8Clause 1·7*Clause 4·7 Alternative B*Clause 4·15·4Clause 4·15·5Clause 4·17*Clause 4·18·1*Clause 4·19 and Schedule 7Clause 5·5*Clause 6·11*Clause 7·2Clause 9·2·1

Part 2*

Conditions (clauses)1·1: Acceleration Quotation*

Confirmed Acceptance*Employer’s Final StatementEmployer’s PersonsFinal StatementFluctuations Options A, B and CJoint Fire Code*Relevant MatterRetentionRetention Percentage

1·3*1·7*1·8*1·91·102·1·42·2·12·5·12·6·22·102·12·12·13 hanging paragraph2·142·15·1 hanging paragraph2·16·22·17·3


2·202·212·222·23·2*2·24·1, 2·24·32·25·2, 2·25·4, 2·25·5 introduction, 2·25·6·42·26·2*2·27 introduction2·282·29·1·2, 2·29·1 hanging paragraph, 2·29·2·2,2·29·42·302·312·362·372·38·23·3·1, 3·3·23·4*3·53·63·7*3·83·9·1, 3·9·43·153·16·1, 3·16·4, 3·16·53·17Section 4* (except 4·1, 4·4)5·1·1·35·25·5*6·1*6·4·36·5·1·5, 6·5·36·66·10·1, 6·10·2 introduction, 6·10·4·2*6·11·1*, 6·11·2*6·126·14*6·16*7·17·3*7·48·2·3*8·3·28·4·1·3, 8·4·1·5, 8·4·2*8·5·28·7·2·28·8·1 introduction8·9·1·3, 8·9·3*8·10·28·11·1 hanging paragraph8·12·2·2, 8·12·3 introduction, 8·12·3·2, 8·12·59·1*9·4·19·5

Appendix B – Revision 2 changes



SchedulesSchedule 1 paragraph 1*

paragraph 7Schedule 2*Schedule 3:Option A paragraph A·2

paragraphs A·4·1, A·4·4*,A·4·6

Option B paragraph B·2·2paragraph B·3·1

Option C paragraph C·1paragraphs C·4·1*, C·4·2*,C·4·3*, C·4·4 introduction*

Schedule 5:Part 1 paragraph 2

paragraph 4paragraph 6paragraph 7*

Part 2 paragraph 2paragraph 5paragraphs 6·1·1, 6·2, 6·3*,6·4paragraph 8paragraph 9*paragraph 10paragraph 11*

Schedule 6 Part 3*Schedule 7:Option A paragraph A·3·1

paragraph A·4paragraphs A·9·1, A·9·2·2

Option B paragraph B·4·1paragraph B·5paragraphs B·10·1, B·10·2·2

Option C paragraphs C·5·1, C·5·2paragraph C·6·2·2


This is a checklist of the key information that will help you to complete the Articles of Agreement.

Parties’ details□ Employer’s name and address

□ Contractor’s name and address

Works (First Recital)□ nature

□ location

Construction Industry Scheme (Fourth Recital and clause 4·5)□ Is the Employer a ‘contractor’?

Sections (Fifth Recital)□ applicable?

□ description

Framework Agreement (Sixth Recital)□ Is the Contract supplemented by a Framework Agreement?

□ details (date, title, parties)

Supplemental Provisions (Seventh Recital and Schedule 2)

Site Manager (Schedule 2, paragraph 1)

□ applicable?

Named Sub-Contractors (Schedule 2, paragraph 2)

□ applicable?

Bills of Quantities (Schedule 2, paragraph 3)

□ applicable?

Valuation of Changes – Contractor’s estimates (Schedule 2, paragraph 4)

□ applicable?

Loss and expense – Contractor’s estimates (Schedule 2, paragraph 5)

□ applicable?

Acceleration Quotation (Schedule 2, paragraph 6)

□ applicable?

Collaborative working (Schedule 2, paragraph 7)

□ applicable?

Appendix C – DB User Checklist


Health and safety (Schedule 2, paragraph 8)

□ applicable?

Cost savings and value improvements (Schedule 2, paragraph 9)

□ applicable?

Sustainable development and environmental considerations (Schedule 2, paragraph 10)

□ applicable?

Performance Indicators and monitoring (Schedule 2, paragraph 11)

□ applicable?

Notification and negotiation of disputes (Schedule 2, paragraph 12)

□ applicable?

□ name of the Employer’s nominee

□ name of the Contractor’s nominee

Contract Sum (Article 2)□ amount

Employer’s Agent (Article 3)□ name and address

Employer’s Requirements (Article 4)□ identification

Contractor’s Proposals (Article 4)□ identification

Contract Sum Analysis (Article 4)□ identification

CDM Regulations (Article 5)□ applicable?

CDM Co-ordinator (Article 5)

□ name and address

Principal Contractor (Article 6)

□ name and address

CDM Planning Period (clause 1·1)

□ period (days/weeks)

□ commencement/end date

Adjudication (Article 7)□ applicable?

□ Adjudicator’s name


□ Adjudicator nominating body?

Arbitration (Article 8)□ applicable?

□ appointor of Arbitrator?

Base Date (clause 1·1)□ date

Date for Completion (clause 1·1)□ Works: date

□ Sections: date for each Section

Address for service of notices (clause 1·7)□ Employer

□ Contractor

Date of Possession (clause 2·3)□ Site: date

□ Sections: date for each Section

Deferment of possession (clause 2·4)□ applicable?

□ Site: period

□ Sections: period for each Section

Limit of Contractor’s liability for loss or use etc. (clause 2·17·3)□ amount

Liquidated damages (clause 2·29·2)□ Works: rate and period

□ Sections: rate and period for each Section

Section Sums (clause 2·34)□ amount for each Section (These must add up to the Contract Sum.)

Rectification Period (clause 2·35)□ Works: period

□ Sections: period for each Section

Advance payment (clause 4·6)□ applicable? (Not applicable for Local Authority employer)

□ amount or percentage


□ payment date

□ reimbursement: amount(s) and time(s)

□ Advance Payment Bond: applicable?

Method of payment (clause 4·7)□ Stage Payments (Alternative A) or Periodic Payments (Alternative B)

Alternative A: Stage Payments (clauses 4·9·1 and 4·13)

□ description of each stage

□ cumulative value for the stage (Cumulative value of final stage must be equal to the Contract Sum.)

Alternative B: Periodic Payments (clauses 4·9·2 and 4·14)

□ first date for the Application for Interim Payment

Bond for Listed Items uniquely identified (clause 4·15·4)□ applicable?

□ amount

Bond for Listed Items not uniquely identified (clause 4·15·5)□ applicable?

□ amount

Contractor’s Retention Bond (clause 4·17)□ applicable? (Not applicable for Local Authority employer)

□ amount

□ expiry date

Retention Percentage (clause 4·18·1)□ percentage

Fluctuations Options A, B and C (clause 4·19·1 and Schedule 7)□ applicable option: A, B or C?

Option A

□ percentage addition (paragraph A·12)

Option B

□ percentage addition (paragraph B·13)

Option C

□ Base Month (rule 3)

□ Non-Adjustable Element (percentage) (rule 3) (For Local Authority employer only)

□ Method of formula adjustment (Section 2 of the Formula Rules: Part I or Part II?) (rules 10 and 30(i))

Daywork (clause 5·5)□ identification of document for Percentage Additions and All-Inclusive Rates


Insurance: Contractor’s liability – injury to persons or property (clause 6·4·1·2)□ amount

Insurance: Employer’s liability (clause 6·5·1)□ applicable?

□ amount

Works Insurance Options A, B and C (clause 6·7 and Schedule 3)□ applicable option: A, B or C?

Option A

□ percentage to cover professional fees

□ renewal date of annual policy

Option B


Option C


Professional Indemnity insurance (clause 6·11)□ type, amount, expiry

PI insurance sub-limit: Cover for pollution and contamination claims (clause 6·11)

□ applicable?

□ amount

PI insurance sub-limit: Cover for asbestos claims (clause 6·11)

□ applicable?

□ amount

PI insurance: Cover for fungal mould claims (clause 6·11)

□ applicable?

Joint Fire Code (clauses 6·13 and 6·16)□ applicable?

□ Has the insurer specified the Works are a ‘Large Project’?

□ Who is to bear the cost for amendments?

Assignment of rights (clause 7·2)□ applicable?

□ applicable to each Section?

Period of suspension (clause 8·9·2)□ period


Period of suspension (clauses 8·11·1·1 to 8·11·1·6)□ period

P&T Rights (clauses 7A, 7C and 7E)□ applicable?

□ identification of Purchasers/Tenants

□ the part of the Works to be purchased or let

□ Third Party Rights (clause 7A) or Collateral Warranty (clause 7C)?

Contractor’s liability for costs (paragraph/clause 1·1·2 of Schedule 5, Part 1 or CWa/P&T)

□ applicable?

□ amount and type

Funder Rights (clauses 7B, 7D and 7E)□ applicable?

□ identity of Funder

□ Third Party Rights (7B) or Collateral Warranty (7D)?

Collateral warranties from Sub-Contractors (clauses 3·3 and 3·4)□ applicable?

□ identification of sub-contractors

□ type(s) of warranty (SCWa/P&T, SCWa/F, SCWa/E) required

□ levels of Professional Indemnity insurance required for each sub-contractor

Attestation□ Execution under hand

□ Execution as a Deed

□ Other forms of Attestation


The 2005 editions of the following documents have been issued by the JCT for use with DB 2005, whererequired:

• Design and Build Sub-Contract Agreement comprising:

• Agreement (DBSub/A) and

• Conditions (DBSub/C)

• Design and Build Sub-Contract Guide (DBSub/G)

• Short Form of Sub-Contract (ShortSub)

• Sub-subcontract (SubSub)

• Partnering Charter (Non-binding)

• Framework Agreement (FA 07) andFramework Agreement Guide (FA/G 07)

• Pre-Construction Services Agreement (General Contractor) (PCSA)Pre-Construction Services Agreement (Specialist) (PCSA/SP)

• Consultancy Agreement (Public Sector) (CA)

• Collateral Warranties

• Contractor Collateral Warranty for a Purchaser or Tenant (CWa/P&T)

• Contractor Collateral Warranty for a Funder (CWa/F)

• Sub-Contractor Collateral Warranty for a Purchaser or Tenant (SCWa/P&T)

• Sub-Contractor Collateral Warranty for a Funder (SCWa/F)

• Sub-Contractor Collateral Warranty for Employer (SCWa/E)

• Adjudication Agreement (Adj) andAdjudication Agreement (Named Adjudicator) (Adj/N)

• JCT 2005 edition of the Construction Industry Model Arbitration Rules (CIMAR)

Appendix D – Related Publications

Design and Build ContractGuide

DB/G

Design and Build Contract

Design

andBuild

Contract

Guide

Revision

2009

MembersBritish Property Federation LimitedConstruction ConfederationLocal Government AssociationNational Specialist Contractors Council LimitedRoyal Institute of British ArchitectsThe Royal Institution of Chartered SurveyorsScottish Building Contract Committee Limited

All parties must rely exclusively upon their own skill and judgment or upon those of theiradvisers when using this document and neither Sweet & Maxwell, Thomson Reuters(Legal) Limited nor its associated companies assume any liability to any user or any thirdparty in connection with such use.

2005

Revision 2009

DB_G_rev 2:S&M 432 JCT Design&Build(Sp) 22/04/2009 14:57 Page 1