The JCT 2011 Building Sub-contracts

Peter Barnes, Matthew Davies

• Publisher: Wiley-Blackwell
• Year: 2015
• ISBN:
  9781118655603
• Edition: 1
• Topic: Diritto
• Subtopic: Diritto edilizio

The majority of construction work is carried out by subcontractors. As building projects become more complex, subcontractors need to understand the implications of the agreements they sign. The JCT 2011 Building Subcontracts has been written to help the busy subcontractor deal effectively with the range of JCT 2011 subcontracts they will encounter. It covers the most commonly use 2011 subcontracts, looking at the key contract conditions, the rights and obligations of the parties and how risk is allocated. A key element of the book is the discussion of the main practical problems that arise. Accessible and practical, this book will ensure building and construction subcontractors understand these contracts and have an easy to consult reference if any questions arise. It will also be of interest to main contractors, architects, contract administrators, project managers, quantity surveyors, contracts consultants and construction lawyers.

1
Background and Introduction

1.1 The Joint Contracts Tribunal (JCT)

The Joint Contracts Tribunal (JCT) was established in 1931 and for over 80 years has produced standard forms of contracts, guidance notes and other standard documentation for use in the construction industry. In 1998, the JCT became incorporated as a company limited by guarantee and commenced operation as such in May 1998.

Currently, JCT forms require the agreement of seven constituent bodies before they are issued by the JCT. Those bodies are:

• The British Property Federation
• The Contractors Legal Group
• The Local Government Association
• The National Specialist Contractors Council
• The Royal Institute of British Architects
• The Royal Institution of Chartered Surveyors
• The Scottish Building Contract Committee

The above listed bodies are intended to be reasonably representative of the interests across the construction industry, namely, the employers, the consultants, the contractors and the sub-contractors, and the JCT sub-contract forms are naturally a reflection of these competing interests.

1.2 Sub-contracting

The regular position is that an employer contracts with a contractor, and the contractor contracts separately and independently with each of his sub-contractors.

The key point in respect of the above relationships is that, although the term ‘sub-contract' is used in respect of the contract between the contractor and the sub-contractor, in all of the above cases, a contract is formed between two parties only (i.e. a contract is formed between an employer and a main contractor; a contract is formed between a sub-contractor and a main contractor).

With that in mind, it would be useful, therefore, to understand some basic principles of contract law.

Most aspects of the law of contract are set down in case law; however, there are some notable exceptions where provision is made in statute (e.g. the Sale of Goods Act 1979, the Unfair Contract Terms Act 1977 and the Supply of Goods and Services Act 1982).

Because of the nature of this book, the basic principles of contract law, as provided at section 1.3 can naturally be dealt with in outline only.

1.3 The formation of contracts and sub-contracts

There are many definitions of a contract, but in simple terms, it can be considered as being: ‘an agreement which gives rise to obligations which are enforced or recognised by law'. Under English law, only the actual parties to a contract can acquire rights and liabilities under the contract. This is known as ‘privity of contract'.

In respect of a main contract situation, the practical consequences of the doctrine of privity of contract are twofold:

• the main contractor carries responsibility for a sub-contractor's work, etc., so far as the employer is concerned; and
• the employer cannot take direct action in contract against the sub-contractor, unless there is a separate contract between the employer and the sub-contractor.

The effect that the Contracts (Rights of Third Parties) Act 1999 has upon this position in respect of the JCT sub-contracts considered in this book is dealt with later within this book.

The essence of any contract is agreement. In deciding whether there has been an agreement, and what its terms are, the court looks for an offer to do or to forbear from doing something by one party and an unconditional acceptance of that offer by the other party, turning the offer into a promise.

In addition, the law requires that a party suing on a promise must show that he or she has given consideration for the promise, unless the promise was given by deed.

Further, it must be the intention of both parties to be legally bound by the agreement, and the parties must have the capacity to make a contract, and any formalities required by law must be complied with. Finally, there must be sufficient certainty of terms.

1.3.1 Offer

An offer is a statement by one party of a willingness to contract on definite stated terms and intended to be binding, provided that these terms are, in turn, unequivocally¹ accepted by the party or parties to whom the offer is addressed.

There is generally no requirement that the offer be made in any particular form; it may be made orally, in writing or by conduct. Of course, if a dispute arose in the future, then it would be beneficial for the offer to be in writing.

In whichever form an offer is made, it must be sufficiently definite to be capable of resulting in a contract if accepted. Its terms and conditions must be clear and unequivocal, and it must be made with the intention that it is to become binding as soon as it is accepted by the person to whom it is addressed. In this context, a person includes a corporation because, in law, a corporation is a legal person; that is to say, a corporation is regarded by the law as a legal entity quite distinct from the person or persons who may, for the time being, be the member or members of the corporation.

Putting the above into context, it is generally the case that when the sub-contractor submits his estimate (i.e. his tender), this is an offer which the contractor can either accept or reject.

With the above in mind, it must be noted by sub-contractors that the submission of a tender does not (normally) conclude a contract. Therefore, the preparation of a tender in response to a tender enquiry (which would, in the normal course of events, become an offer when submitted) may involve the sub-contractor in (sometimes considerable) expense, but the cost of tender preparation is not normally recoverable as a discrete cost. Obviously, the cost of tender preparations is included within the head office overhead percentage that is added by sub-contractors onto their tenders, and the tender preparation costs so incorporated are therefore recovered by sub-contractors when their tenders are successful.

1.3.2 Acceptance

For agreement to be reached, there must be a clear and unequivocal acceptance of a clear and unequivocal offer. The acceptance must be unqualified;that is, as noted earlier, it must ‘mirror' the offer.

Therefore, if in a tender enquiry, a sub-contractor was required to use Welsh slates but submitted his tender on the basis of using Spanish slates, and the contractor, upon receiving the sub-contractor's tender, accepted the sub-contractor's tender without qualification, then the contract, when formed, would be on the basis of the terms and conditions which formed part of the tender (i.e. based on using Spanish slates rather than Welsh slates).

In such a situation, if a future dispute arose, the contractor would not be able to rely on the terms and conditions forming part of the tender enquiry (i.e. that Welsh slates were required) because those terms and conditions would not form part of the contract between the parties.

As a general rule, silence does not constitute acceptance²; neither does inactivity.

Given this, the general rule is that an acceptance has no effect until it is communicated (either in writing or orally) to the party making the offer. The main reason for this being that it could cause hardship to the party making the offer if he or she were bound without knowing that his...