Carrying out the works

Under clause 2.1.1, the contractor has an obligation to undertake the work in a ' ... proper and workman like  manner and in compliance with the Contract Documents ... '. This provision is an overarching obligation that requires that the works are undertaken properly. This term is often relied on in claims where a party is reluctant to demonstrate that the contract documentation was at fault or was the cause of the defect. The significance of this provision is that it appears in the agreement and the provisions of the agreement cannot be overridden by any provisions in the contract drawings, schedules or specification. This is set out in clause 1.2.

Further, the contractor is required to comply with statutory requirements and give notice. Most contractors are familiar with Building Regulation issues, however, most contracts are silent on the planning issues and/or (where applicable) listed building consents. These are statutory requirements and the definition can be wide. A contractor needs to make enquires as to any requirement and or compliance issues that could be silent in the contract documents. However, where work is built correctly in accordance with the contract but fails to meet Building Regulations, the architect or contract administrator would be required to issue instructions accordingly.

Under clause 2.1.2, there is a general obligation on the contractor to work to the ‘opinion’ and ‘reasonable satisfaction’ of the architect or contract administrator. This may differ from the prescribed requirements and contractors need to recognise that there may be differences in this and that it is not rigorously prescribed.

Correction of inconsistencies

By contrast, the agreement at clause 2.4 is clear on the matter of inconsistencies between documents; however, where inconsistencies do arise it is good practice for the parties to be made aware of these and an instruction sought so that no party is prejudiced by an act of the other.

Divergences from statutory requirements

The Contract provides for the contractor to give notice to the architect/contract administrator if he or she becomes aware of any divergence (clause 2.5.1).

Clause 2.5.2 states that as long as the contractor has given notice under clause 2.5.1 of the divergence the contractor shall not be liable. This provision assumes that the contractor is well versed in statutory requirements and this could cause the contractor some difficulty.

Fees or charges legally demandable

Clause 2.6 makes it a requirement for the contractor to pay any fees or charges (including any rates or taxes). The contract goes on to state that ‘such fees and charges shall not be reimbursable to the contractor by the employer unless otherwise agreed’. This clause could impact negatively on the contractor where the specifications are silent on fees for building control, planning, etc. and rates.

Extension of time

The provisions of clause 2.7 now require the contractor to notify the architect or contract administrator of all delay.

The purpose of this is to enable the architect/contract administrator to consider all delays and facilitate better reporting of progress to the employer. It also provides a mechanism for recording all delay and identifying concurrent delay. Concurrent delay is where there is a delay which is cause by both an event for which the employer is responsible for and one which the contractor is responsible for.

The provisions of clause 2.7 provide for the date for completion to be extended by the architect or contract administrator. This provision is very simple in that it uses a single criterion that reads, ‘... beyond the control of the Contractor ...’ The clause defines ‘control of the Contractor’ as ‘... any default of the Contractor or others employed or engaged by or under him for or in connection with the Works and of any supplier of goods or materials for the Works.’ A contractor needs to be aware of any specified suppliers that are likely to delay the works and further any specified suppliers that he/she is subsequently instructed to employ. It is noteworthy that the clause does not set a time for extending the works and does not specify the level of detail to be provided save that it has to be in writing. While on the one hand the contract is intended to be short and simple, these characteristics could be the failing of the contract.

There are 2 issues that frequently cause disagreement between the parties and the first is the ‘float’. This is a period of time built in to the programme or shown on the programme that is a contingency period to allow the contractor time before completion in the event that other activities run over. Where such a period of float exists and is unused but an instruction is issued that requires the architect or contract administrator to extend time then the question arises as to whether or not the architect or contract administrator has the right to use up the float. The case governing this scenario is the Royal Brompton Hospital NHS Trust v Frederick Alexander Hammond and others [2002]. In this case it was found that the architect had the right to consider the float and use it in his calculation, however, it was the case that should the contractor be delayed later he could apply for the float and would be entitled to an extension of time no greater than the float for any delays he suffered as a result. The rationale for this was that the architect or contract administrator has to determine the completion date for purposes of completion and liquidated and ascertained damages.

The second issue concerns the scenario where there are 2 causes of delay and both are concurrent, however, 1 cause of delay is the responsibility of the contractor and 1 is the responsibility of the employer. The scenario arose in the case of Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd [2000]. In such instances it was found that the contractor should be granted an extension of time where the events would cause completion to be after the date for completion.

While both the above cases do not specifically deal with extensions of time under the JCT Minor Works Contract, they do represent the current legal position.

The site has not been made available on the contract commencement date in the contract

The contract provides for the contractor to apply for an extension of time and given that the contractor would not be able to determine the amount of time required the wording would need to state that the period of delay is equal to the period that the site is not available.

An alternative course of action would be to give notice under clause 6.8.2 (where the delay is over a month) and seek to suspend the contract; thereafter seek to terminate the contract and recover ‘any direct loss and/or damaged caused’ under clause 6.11.2.3.

Commercial circumstances and events surrounding the matter will dictate the correct course of action however where a contractor has substantial financial exposure prior to a start on site then the alternative course of action would assist in recovery if the employer was to default on the contract.

The architect or contract administrator has not responded to a notification for an extension of time and the employer has deducted liquidated damages

Firstly, the contract has no time limit/scale for the issue of an extension of time. Secondly, the contract anticipates that any contractor ought to anticipate that it may find itself in a position where it has exceeded the completion date and the extension of time has not been dealt with. This, while difficult on cash flow, is anticipated by the contract

The architect or contract administrator can issue an extension of time after the completion date and within a reasonable period thereafter. Where this happens the employer shall repay the liquidated damages in subsequent payments. However, if the architect or contract administrator has continued to ignore the request for an extension of time or has declined to issue one according to the issues then it would be necessary to refer the matter to the employer and, failing any satisfactory outcome, refer the matter to adjudication.

Damages for non-completion

Clause 2.8 provides for the employer to make deduction. Many architects/contract administrators often wrongly apply the deduction. Further there is an express requirement for the employer to give notice under clause 4.5.4 or not later than the date of issue of the final certificate (clause 2.8.3).

Liquidated damages

Liquidated damages are often viewed as a penalty. This is incorrect.

The law governing the issue of liquidated damages is that the damages are to be a genuine pre-estimate of loss. The law states that the employer should estimate its likely losses in the event that the contractor fails to complete on time and this figure should be used. It is accepted that the figure may not be precise and that there may be a view that it was set too high.

The case of Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd [1914] provides the test that determines whether the level of damages is a genuine pre-estimate of loss or a penalty. It is accepted that a penalty cannot be enforced. The question of whether the liquidated damages are too high and indeed a penalty are subjective. The test is to examine the facts at the time of making the contract and assess the greatest loss that could possibly be proved to have flowed from the breach. Where the level of damages is substantially higher, the liquidated damages could be deemed a penalty clause.

The party who asserts that the level of damages is in fact a penalty is required to prove this and this will no doubt fall to the contractor. Also note that the amount needs to be ‘extravagant and unconscionable in amount’ in the words of the test in the case report. It would be futile to argue for a small margin.

The Supreme Court in Cavendish Square Holding BV v Talal El Makdessi [2015] and Parkingeye Ltd v Beavis [2015] revisited the principles in Dunlop and the court said the correct test was;

'the true test is whether the provision is a secondary provision which imposes a detriment on the Contractor out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation'.

Practical completion

The provisions of clause 2.9 remain as per the 2011 Contract except that the contractor is required to have sufficiently complied with clause 3.9 in respect of the supply of documents and information. Contractors need to take note that the provisions of the supply of documents and information could delay practical completion.

Defects

Clause 2.10 refers to ‘... materials, goods or workmanship not in accordance with this Contract ...’ and it is significant that this is not all encompassing as commonly thought. There are possibilities where materials are in accordance with the contract but shrinkages and/or cracks or defects do appear. It appears that in such instances the contractor could be excused from attending to such defects; however, the reality in differentiating these is or can be considerably difficult.

The key revision from the 2011 agreement is the express provision to make an appropriate deduction from the contract sum.

Certificate of making good

Clause 2.11 requires a certificate of making good and an obligation to state the date.