Can a blog handle a 3000-word article? It seems a tall order. Can a blog handle a 3000-word article about building contracts? That must be stretching the bounds of credibility. But this is what follows: a peep into the whacky world of the JCT Minor Works Contract. Does it really offer protection? Or is it a giant con perpetuated on the general public and the building trade by a bunch of bow-tied dandies?
I’ve never built under a formal contract and in all the years I have been writing and talking about building I have warned people off them, saying broadly that a contract is not a substitute for a well-designed job. But various architects I have come across over the years have been appalled at my slack stand and one or two have even suggested that I might be putting myself into sticky legal position for not defending the use of contracts. Late in 2004, I was emailed by an architect who wrote “it occurs to me that you might just be on very exposed ground if you advise people not to bother with a formal contract like the JCT. If things went wrong and they had no recourse because there was no clarity in a dispute, lawyers could very well direct the blame it on you. Ruinously.”
The architect went on to recommend that I took a look at the main contract used by architects to administer jobs up to £1 million, the JCT Agreement for Minor Building Works. He continued “The contract is a 32 page A4 document; it doesn’t‚t look that daunting and is very user friendly. It has footnotes and side notes to explain each clause; and the clauses are in no nonsense English.”
Now, I thought, it’s time for me to roll over and at least take a look at this contract business. So a few weeks later I actually got around to buying the aforesaid JCT Minor Works Contract. It is cheap(ish): it cost me £15 to buy mail order from the Building Bookshop in London; would have been £11.75 if I had picked it up in person. But I suppose cheap is relative seeing as it has so few pages, esp. as pages 2, 8, 10, 30 and 31 are utterly blank save for a helpful footnote which says “This page blank.” Immediately I am impressed by the user friendliness. I suppose on a price per page basis it actually works out very expensive compared to a book or a magazine, but what I am getting at is that this contract is not a bank breaker. You can’t argue that you haven’t used a contract because it’s too expensive.
But what of the rest of the contract outside the blank pages. Well the most important point about this contract hits you in the eye on page 3, a little box that says “This agreement is only intended for use where the Client has engaged a professional consultant to advise on and to administer its terms.” Immediately I understand just why I have never built using this contract. Whenever you see the word “Client” in something to do with building, you know there just has to be an architect involved because no one else in the building game ever refers to anyone as “clients.” It is such a strange word, isn’t it? In a shop you are a customer, on a train you are a passenger, in a hospital you are a patient, in a class you are a student, in the economy at large you’d be a consumer. But client? The only people who have clients are lawyers, architects and prostitutes, all of whom have to live with the reputation that they are simply out to screw you. Only the prostitute is honest about it.
It’s not a bad joke, if a little tired, but is it fair? I have it on good advice that an architect in practice on their own is likely to earn between £25,000 and £35,000 per annum, considerably less than either a lawyer or a prostitute, so it’s perhaps a little unfair to suggest that architects are feathering their nests at their clients expense. But it doesn’t stop them going through the motions. For tellingly, the professional’s fees are not covered by the JCT Minor Building Works Contract. No, the contract is between the Client, a.k.a. the Employer, and the Contractor. In fact, page 3 is taken up with writing in the names and addresses of the Employer and the Contractor, plus that little box which has so exercised me.
Turn the page and you are faced with the word “Whereas” in bold, in large print, a sort of floating headline. Whereas what? Suddenly we have left the realms of everyday English and gone to some Dickensian legal office where grey suited, bespectacled clerks write with quill pens. I fully understand what whereas means, though it’s not a word that falls into the vocabulary of my children (whereas mingin’, canin’ and fukin’ frequently do). But what does it mean as a headline? And why is a legal document more correct because it has “whereas” as the page title rather than “furthermore” or “mingin?” I have this strange feeling that this architect has been leading me up the garden path. Page 4 doesn’t get any better for it turns out that Whereas is the heading for five recitals. Or should that be The Five Recitals. Suddenly we are cast adrift into the world of chamber music? I fear not. In JCT terms a recital is a sort of declaration of intent. I think. The 1st recital appoints the architect or the contract administrator. Well which is it to be? Well there is a helpful footnote on this one and I have to quote it in full because it’s so much fun.
“Where the person named is entitled to the use of the name ‘Architect’ under and in accordance with the Architects Act 1997 delete ‘the Contract Administrator’: in all other cases delete ‘the Architect’. Where ‘the Architect’ is deleted the expression ‘the Architect’ shall be deemed to have been deleted throughout this Agreement: where ‘the Contract Administrator’ is deleted the expression ‘the Contract Administrator’ shall be deemed to have been deleted throughout this Agreement.”
So there you have it. It’s all about soothing the egos of the architect. All that training — seven years, wasn’t it? — just so that you could delete the words “Contract Administrator” from the JCT Minor Works Contract.
What might be more useful would be to tie the aforesaid Architect/Contract Administrator (henceforth A/CA) into this contract, not to simply appoint him or her. But that’s not what the 1st recital seeks to do. It does however require the A/CA to have prepared drawings and a specification before the contract is signed. Now that is useful. The 2nd recital requires the contractor to carry out the works for a fixed fee, or at least for a schedule of rates. The 3rd recital requests that the contract is signed on page 9. The 4th recital appoints a Quantity Surveyor, although there is an option to delete this if no Quantity Surveyor can be found and the 5th recital requires that the works be carried out in accordance with the latest CDM regs, the health and safety legislation.
Jobs for individuals are not covered by the CDM regs, but it doesn’t do any harm to fill them in and administrate them as if it was required. I could write at length about the CDM regs, but here is not the place otherwise we will never reach page 5, let alone page 32. On pages 5, 6 and 7 the recitals are replaced by a series of Articles, numbering 1 through 7. Article 2 is left mostly blank for the price of the job to be filled in. Article 3 names the A/CA (but no price). Article 4 names the Planning Supervisor, a role required by the CDM regs. Articles 6 and 7 name or at least provide a series of names of bodies that can be requested to be referees, in case of dispute. Page 9 is for the parties to sign up, page 10 is one of the blank ones and then, at last, on page 11 we are into the small print, the very meat of the contract.
From here to page 29 we are faced with dense type, two columns of 9pt Helvetica without a picture to break the monotony. Being a legal document it is naturally split up into numbered paragraphs. I have a feeling they will be known as clauses. The main conditions are in clauses numbered 1 to 8; these take up 8 pages. They are followed by Supplemental Conditions, also 8 pages but these are lettered clauses starting at A1 and working through to E7. And it’s all finished off with three pages of guidance notes.
This doesn’t really strike me as being at all user friendly. I can’t ever imagine sitting down to read this through for pleasure. I can just about see myself referring to some of its clauses when things have started to go wrong, but surely that’s not the point of a contract.
So just what are the main conditions of this JCT Minor Works Contract?
1. Intentions of the parties - defines the rules under which the contract shall be administered. It is governed by the law of England, so tough luck you Celts who hoped to learn about contractual matters from this article. It states that the job will be run under the CDM regulations, involving the appointment of a Planning Supervisor and a Principal Contractor, and that the contractor will use suitable materials and, wherever possible, subbies who hold CSCS cards.
2. Commencement and completion:
leaves blanks to determine a start date and a completion date and then immediately qualifies this by putting in place a routine for determining an extension of the contract period. It’s adversarial: if the blame is due to the contractor, inc subbies or suppliers going bust, then the contractor is liable. If it is down to the A/CA, then an extension of time will be granted. 2.3 is a “liquidated damages” clause with a blank space to fill in the rate that money should be deducted per week overrun. Completion, or practical completion as it is known in these circles is defined by the A/CA. Cl 2.5 seeks the contractor to correct any defects at his own expense within three months of practical completion.
3. Control of Works: the work can’t be assigned to another builder, without the permission of the A/CA. Indeed, the main contractor can’t even employ subcontractors without written consent of the A/CA. In fact Cl 3.2.2 seeks to control the payments between contractor and subcontractor, and states that the sub contractor can charge interest on late payment from the main contractor. No mention is made of what might happen if the subcontractor’s work is in dispute. Cl 3.3 requires that the main contractor shall always have someone representing him on site. In contrast, the A/CA has the right to throw anyone off site that they don’t like the look of. The A/CA can also demand that instructions are carried out within seven days, or someone else can be employed to undertake the work at the contractor’s expense. On the other hand, Cl 3.6 states that mistakes made by the A/CA should be treated as “variations.” Variations and provisional sums are anticipated in Cl 3.7 and 3.8 but the gist of it is that the A/CA is the one who sets the price, based on a pre-agreed schedule of rates. This is a pretty dubious way of going about things and there is a let out where it states “instead of the valuation referred to above, the price may be agreed between the A/CA and the Contractor prior to the Contractor carrying out any instructions.”
4. Payment. The A/CA shall certify progress payments every four weeks, based on 95% of the value of work done. The employer should pay within 14 days of the issuing of the certificate and late payments attract interest at 5% over base. Upon practical completion, the A/CA issues a “penultimate certificate” for 97.5% of the work done. The final certificate should be issued within three months of practical completion and again late payment attracts interest. The contractor has to shoulder any changes in materials or labour costs which come into effect after the contract is signed.
5. Statutory obligations. The contractor has an obligation to meet all statutory requirements – cf building regs, etc. If the instructions from the A/CA conflict with the requirements, the contractor must notify the A/CA and then the ball is in the A/CA’s court: the contractor ceases to be liable for making good.
The sums in the contract are net of VAT. The employer is obliged to pay the contractor VAT on top of his regular payments. Interestingly, no mention is made of who is responsible for working out just which VAT rate is applicable to the contract.
There is an anti-corruption clause (Cl 5.5). The employer can cancel the agreement “if the Contractor shall have offered or given or agreed to give to any person any gift or consideration of any kind.” Bang goes Xmas, down at builder Joe’s house.
Cl 5.6, 5.7, 5.8 and 5.9 deal with the administration of the CDM regs and ensure that the planning supervisor role, the principal contractor role and the health and safety files are in order.
6. Injury, damage and insurance. Basically, unless the employer has been frightfully negligent, the Contractor has to take the rap for accidents on site. And needs to have adequate insurance cover in place – i.e. Employers’ Liability and Public Liability. Also requirements for the Contractor to have Contract Works Insurance to cover damage by fire, storms, whatever. Interestingly, the insurance of existing structures falls on the employer, which is logical. Both employer and contractor have the right to see documentary evidence that the correct insurances are in place.
7. Determination. How to end the contract if it goes wrong. The employer can end it if the contractor fails to proceed diligently or safely (the CDM regs again), or goes bust. The contractor can end it if the employer fails to pay, or becomes obstructive and difficult, or suspends the works for a month or more, or fails to comply with those CDM regs, or of course, goes bust.
8. Settlement of disputes: three routes outlined, being adjudication, arbitration and legal proceedings. What is the difference? Another article altogether, me thinks.
Then it’s into the Supplemental Conditions. Here the print really does get small and it’s very hard to take any of this in. I think the gist of it is that if taxes or levies change during the course of the contract, then the employer has to bear the difference. So if VAT is suddenly slapped on the job, or the rate goes up, then the change is passed on. There’s also a long section on adjudication and a shorter one on arbitration. They are slightly different: adjudication is cheap, fast track conflict resolution, arbitration is the middling option and going to court or issuing legal proceedings is cripplingly expensive.
The JCT contract ends up with three pages of guidance notes where it all, at last, becomes a decent, easy read. If you ever sign this JCT contract, I would recommend you start here.
But would I recommend that you use such a contract? Only if you are using an architect to administer your project. The contract is written specifically for this situation and, in reality, most small building jobs do not use architects or contract administrators. If you are an architect, you will be more or less obliged to use this contract, or one similar, if you are supervising construction, so you will foist it onto both the client and the contractor. It allows you to play God. Fine, if you are up to it, but feedback reaching me suggests that many architects are not up to playing God, and their attempts to merely create problems. A simple working partnership between customer and builder becomes much more complex when there is an architect in between and the builder becomes a contractor and the customer a client.
The architect often knows far less about the building process than the builder and designs impractical or unbuildable details that often have to be sorted out on site by the builder. Instead of the builder working directly with the customer in order to sort out teething problems, the process requires that everything has to go through the architect for both approval and pricing. Frequently, the architect has no idea what the problems are, let alone realise that they have been directly responsible for creating them. The contract is therefore, to coin a phrase, adversarial in that it is quite likley to set one party against another.
Worse than that, it’s a pain to administer and it more or less let’s the architect off the hook so that incompetent design is easily passed off as incompetent building. It also encourages the architect to ‘design’ without having to worry about how that design should be built. The architect’s fee is usually set as a percentage of the contract price. What sort of inducement is that to keep costs under control?
In a perfect world, the architect would be the builder and vice-versa. But that, of course, is never going to happen. So if you plan to use an architect to design and administer your project, then the selection of the right architect is the most crucial decision you will make. A formal contract like the JCT Minor Works will simply bind you into the working relationship you forge with your architect. This contract will afford some measure of protection if the builder doesn’t perform but if the architect isn’t up to it, then it’s probably more of a liability than anything else.