JCT Minor Works Building Contract 2011 - What's new?

• Revised payment procedures intended to ensure compliance with the Construction Act 2011.
• Notice requirements standardised throughout MW 2011 to be in writing throughout.
• Arbitration subject to JCT 2011 construction industry model arbitration rules.
• Revised definition of insolvent and termination provisions.
• Statutory reference to the Bribery Act 2010 included.

Significant changes

MW 2011 has been amended with the intention that it continues to comply with the requirements of the Housing Grants, Construction and Regeneration Act 1996 as amended by the Construction Act 2011 for contracts entered into on or after 1 October 2011. The most significant change of MW 2011 is to reflect the revised statutory requirements regarding payments procedures.

As before, the Construction Act 2011 continues to provide a statutory right for parties to refer disputes or differences to adjudication.

There is also a revised definition of insolvency within Section 6 Termination.

The Construction Act 2011 continues to require contracts to contain an adequate mechanism for payment. There are four components to this:

• a due date for payment;
• a payment notice;
• a final date for payment; and
• allowing the payer to give notice that he is not going to pay all that is requested.

Under the Construction Act 2011 a construction contract must have a requirement for:

• a notice to be issued within 5 days of the payment due date; and
• the notice to specify the amount due at the due date and the basis on which that amount is calculated.

The construction contract can require any of: i) the payer; ii) a third party; or iii) the payee to give the notice and the notice must be given even if the amount due is zero.

Where the construction contract requires the payer or a third party to issue a notice but notice is not given as required, then a payee may give the notice. If the payee gives a notice then the final date for payment of the sum specified is postponed by the number of days between the payment due date and the date the payee notice was given.

A payer must pay a notified amount by the final date for payment unless they give notice to the payee of their intention to pay less in what is known as a pay less notice. This was previously known as a withholding notice. A pay less notice must state the amount the payer intends to pay and the basis on which that amount is calculated. The wording is potentially looser and the provision easier to comply with than was used. Previously, it required reasons to be specified in respect of each amount that was not going to be paid. The period within which the pay less notice is to be given should be specified in the construction contract, otherwise the period provided by the Scheme for Construction contracts shall apply.

There is a potential benefit to contractors within the new regime. If the construction contract provides for certification of payments by an employer or architect/contract administrator but, for whatever reason, the procedure breaks down and or the certificate is not issued or is issued invalidly, the contractor then has a statutory entitlement to issue his own notice. In this notice, he may specify the amount he believes he is entitled to be paid. So if the employer, again, for whatever reason, fails to provide a pay less notice which is valid, then the amount specified by the contractor becomes due for payment.

A contractor enjoys an improved right to suspend performance under the Construction Act 2011, although the prudent contractor will remain cautious in exercising such a right given the adverse implications if it is ultimately shown to have been incorrectly exercised. Subject to the contractor providing a default notice they may suspend some or all of their obligations. They can recover the reasonable costs and expenses resulting from suspension and will get an extension of time for the period of suspension plus any consequential delays.

Pay when certified clauses have been outlawed. It is no longer permitted to make payment conditional on performance of obligations under another contract.

Implications of not changing

MW 2011 is intended to ensure construction contracts entered into on or after 1 October 2011 comply with the changes brought about by the Construction Act 2011. Use of MWD 2005 Revision 2, 2009 or any earlier edition will not ensure compliance with the requirements of the Construction Act 2011. Insofar as any construction contract within the meaning of the Construction Act 2011 does not comply with its requirements then it will remain the case that the provisions of the Scheme for Construction contracts will apply.