Other issues with JCT Design and Build

Under clause 7.1 neither party can assign the benefit of the contract without the consent of the other party.

Third-party rights

The Contracts (Rights of Third Parties) Act 1999 (CRTPA) provides for third parties to have rights under a contract to which it was not an original party, thus obviating the rule of privity of contract.

While clause 1.6 of the JCT Design and Build Contracts out of the act there is an exception. This exception applies where Part 2 of the contract particulars is completed to vest the rights set out in Schedule 5 in an identified purchaser, tenant and/or funder. For the rights to be available, Part 2 of the contract particulars must state that clause 7A or 7B is to apply.

This exception is intended to give third parties rights without the need for drafting, negotiating and executing collateral warranties. The intention is to reduce the level of administration which arises where numerous third parties require rights against the contractor and/or subcontractors. In reality, however, this process may not necessarily be any cheaper or more efficient than using collateral warranties.

Collateral warranties

A collateral warranty is a binding agreement which gives third parties contractual rights which are collateral to an underlying contract to which it is was not an original party.

An employer will only be able to require the contractor to provide such collateral warranties and/or procure subcontractor warranties in favour of third parties where Part 2 of the contract particulars is completed to state that either clause 7C or 7D apply.

Dispute resolution

The JCT Design and Build provides for disputes which arise under the contract to be resolved using mediation (clause 9.1), adjudication (clause 9.2), arbitration (clause 9.3-9.8) or by initiating legal proceedings.

Adjudication is a dispute resolution procedure which is intended to provide quick solutions to disputes during the construction process.

Arbitration may only be used if article 8 and clauses 9.3-9.8 are selected as applicable in the contract particulars. Arbitration allows for the resolution of disputes outside of court. The parties will refer the dispute to an independent person (the arbitrator) who will make a final and binding decision (clause 9.6). Arbitration is often slow and as expensive as litigation in court despite the intention that it is to be cheaper and more flexible. Selecting arbitration means that the parties may waive their rights to issue court proceedings if the outcome is not as they desired. It is not, therefore, usually favoured as the means for resolving disputes.