JCT 2024 suite of contracts — key changes explained

19 August 2024

12 min read

Property, Construction & Regeneration, Building Safety

The JCT’s updated suite of contracts for 2024 introduced significant revisions to the previous forms. These changes are intended to reflect evolving industry practices, legal developments and emerging technologies.

Over 60 property and construction professionals attended our Building Links event to discuss the changes with JCT board and sub-drafting committee member John Riches, as well as relevant case law with Elizabeth Donnelly, Barrister at Keating Chambers.

Here, Partner Jennie Jones from our construction team shares the background and reasoning for the latest changes in the JCT 2024 suite of contracts and asks — does it go far enough?

A previously supplemental provision 8 in the JCT Design and Build 2016 has been amended and included as a contract condition at clause 2.1.5. The aim of this clause is to encourage contractors to suggest economically viable amendments to project works to improve environmental performance and sustainability.

Concerns have been raised in the market as to whether the JCT has gone far enough with these amendments in terms of whether ‘encouraging’ contractors is enough to meet the industry’s net zero commitment.

3. Notification and negotiation of disputes

A previously supplemental provision 10 in the JCT Design and Build 2016 now appears (unchanged) at Clause 9.1. It introduces a requirement for the parties to notify each other of matters that are likely to give rise to a dispute and a requirement for the parties’ senior executives to meet for “direct, good faith negotiations” to resolve the matter.

Whilst the notification and negotiation of disputes is therefore mandatory, the changes are not expressed as a condition precedent because a party to a construction contract may still adjudicate “at any time” under the Housing Grants, Construction and Regeneration Act 1996.

John Riches’s view was:

“While the clause is not expressed as a condition precedent, if we’re in the behaviour modification game, it is a nod in the right direction.”

4. Extension of time and unforeseen conditions

Amendments have been introduced to:

Improve the drafting of notification provisions.
Introduce procedures to streamline and expedite the process including reducing the timing to grant an interim extension of time from 12 to eight weeks (albeit the final extension of time review timetable remains unchanged).

Relevant Events now include a provision for epidemics and has expanded the provisions concerning changes in law after the base date. There is also a revised provision for antiquities.

The list of events that entitle a contractor to extensions of time and loss and/or expense claims will increase to include broader provisions for epidemics (which may limit labour or material availability), changes in law and the publication of guidance by governmental or industry bodies.

Notably, the discovery of asbestos, contaminated material or unexploded ordnance are now also Relevant Events. These changes provide greater clarity on potential delays and cost increases, allowing for better risk management and project planning.

5. Target Cost contract

The JCT plans to introduce a brand-new Target Cost contract later this year. This change was demand driven as many in the industry have requested the JCT to produce a Target Cost contract.

The aim of the Target Cost contract is to share risk between the parties in the hope of overall savings to the project being realised.

John Riches commented: “Our aim was to provide a familiar and therefore simple step into the world of Target Cost.”

6. Building safety

Updates have been provided to accommodate legislative changes including the Building Safety Act 2022 (BSA) and related legislation and in particular Part 2A of the Building Regulations 2010.

A new Article (Article 7) has been inserted to deal with the appointment of the Principal Designer and Principal Contractor under Part 2A of the Building Regulations. Article 6 now deals with both the appointment of the Principal Designer and Principal Contractor for the purposes of the
Construction (Design and Management) Regulations 2015 (CDM Regulations). The client may certify that the CDM Principal Designer and the CDM Principal Contractor should be treated as appointed in these roles for the purposes of the Building Regulations (Part 2A, regulation 11D(2)). The CDM clauses have been extended to provide specific contractual cross-undertakings by the parties to comply with (as applicable) their respective duties under the CDM Regulations and Part 2A of the Building Regulations.

What about higher-risk building (HRB) projects?

Some have commented that the changes in relation to building safety don’t go far enough. For instance, while the new suite includes provisions that align with the BSA concerning new roles and responsibilities for duty holders, these provisions primarily focus on the general duty holder system and don’t fully address the specific requirements for HRBs under the BSA.

As a result, contractors working on HRB projects will need to consider additional bespoke amendments to ensure compliance with the complex requirements of the new regime such as gateway sign-offs and the obligation to compile and update a ‘golden thread’ of building information.

HRB projects are precisely the type of potentially complex projects that require specific treatment in a standard contract model. When asked if an optional supplementary provision could have been included as part of the overhaul to give more clarity and uniformity, John Riches said:

“I can see the benefit of this although the BSA was very complicated to incorporate and so it was minimised. Major parts of the BSA were added and the rest sits within the legislation itself. We have not repeated or commented on the legislation. Instead, the same approach was taken as for CDM to ensure the key players are named.”

7. Electronic communications

There is now specific provision for electronic communications so that critical notices can now be served by email but only to specific email addresses identified in the Contract Particulars.

Recent case law update

Elizabeth Donnelly highlighted three recent judgments where courts had considered provisions under the JCT contract (or the Scottish equivalent):

FES Limited v HFD Construction Group Limited [2024] CSOH 20

Earlier this year, the Outer House of the Court of Session in Scotland found that provisions for the notification of loss and expense claims are conditions precedent to entitlement to being paid. This case will be of interest to the industry as the clauses under consideration are identical to the JCT 2016 equivalent form of contract.

Why the JCT 2024 drafting committee didn’t take the opportunity to provide clarification on this point by amending the wording so as to adopt the court ruling in Scotland was heavily debated.

John Riches explained that the new JCT suite had already been sent to print at the time of the release of the FES case and therefore the judgment couldn’t be incorporated into the 2024 update. However, he was reticent to say that the Scottish courts came to the right decision on this occasion. He expressed doubt that the wording of the provision was clear enough to render it a condition precedent.

Elizabeth Donnelly said that, in her view, the wording of the parties’ contract in the FES case (as cited in the Outer House’s judgment) created a condition precedent situation so that entitlement to loss and expense would be subject to the provision of the notice being provided in the manner and timeframe prescribed. Elizabeth was asked if she predicted that the courts of England and Wales would follow the Scottish courts if the situation arose for consideration.

She said:

“The judgment in the FES case does not bind the courts of England and Wales, because Scotland has a separate legal jurisdiction. And every case turns on its own facts and contractual language. However, I think that the JCT provisions under consideration — when unamended by the parties — likely give rise to a condition precedent. Sometimes during a construction project there may be some nervousness about reminding a party of their contractual rights and obligations, but there is nothing inherently aggressive about reminding a party that they have signed a contract and agreed to its terms and therefore — in order to be entitled to loss and expense — they need to provide timely notices.”

Despite the JCT having not elected to adopt this ruling in the JCT 2024 suite, the ruling is likely to be persuasive in any event when interpreting the provisions. Indeed, the Outer House of the Court of Session cited case law from England and Wales and considered how the law was developing around condition precedents. We all agreed that the key practical takeaway from this case is to properly read the contract and adhere to the provisions regarding notification of claims.

CLS Civil Engineering Limited v WJG Evans & Sons (A Partnership) [2024] EWHC 194 (TCC)

This concerned letters of intent entered into between a contractor and an employer setting out the agreement on how the works would be carried out prior to the JCT contract being finalised.

In this case, the relationship between the parties broke down before the JCT contract was entered into when the employer said that it no longer wanted to engage the contractor on the project.

The contractor issued a final valuation of £1.4m which the employer refused to pay on the basis that there was a cap of £1.1m agreed within the latest letter of intent. The court held that the parties were bound by this £1.1m cap meaning that the contractor was not entitled to claim additional sums in excess of this.

Elizabeth commented:

“This case demonstrates the pitfalls of letters of intent. While they are a good tool and may allow work on a project to start quickly, they do create a separate stand-alone agreement. It will always be a risk if you are a contractor and an employer wants to impose a cap under a letter of intent whilst the main contract negotiations are ongoing. You should ideally ensure that you carefully consider any imposed caps and ensure that you do not exceed any cap without having a documented agreement in place to do so.”

Providence Building Services Limited v Hexagon Housing Association Limited [2023] EWHC 2965 (TCC)

This was an interesting case which highlights the consequences of failing to follow termination provisions correctly.

Here, the Court was required to determine whether the contractor was entitled to terminate its employment under an amended JCT DB 2016 contract for repeated late payment.

The contractor submitted an interim payment application which the employer failed to pay by the final date for payment on 15 December 2022. As a result, the contractor issued a ’Notice of Specified Default’ in line with clause 8.9.1.1 of the contract.

The employer rectified the default and made full payment within the amended 28-day period under clause 8.9.3 of the contract. However, the employer subsequently failed to pay another interim application before the final date for payment on 17 May 2023.

This time, the contractor immediately delivered its ‘termination notice’ purportedly under clause 8.9.4. The employer disputed the contractor’s entitlement to terminate and went on to ‘accept’ the contractor’s repudiatory breach of contract.

The task for the Court was to ascertain the natural and ordinary meaning of clauses 8.9.3 and 8.9.4 of the amended JCT.

The Court determined that the contractor didn’t have a right to terminate the contract for repeated late payment. This was because the employer remedied the late payment within the relevant period after a notice of specified default. The contractor’s termination notice was therefore held to be invalid — and it was held to have committed a repudiatory breach of contract by terminating and leaving the site in circumstances where it had no right to do so.

Since our Building Links event, this case was overturned on 15 August 2024 by the Court of Appeal — deciding in favour of the contractor.

The Judge noted that although the drafting of the clauses could have been of better quality, the natural and probable meaning of clause 8.9.4 is that it applies to a case where no right accrued to give further notice under clause 8.9.3.

Further, the Judge noted that the intention of these clauses is to encourage and cause the party concerned to comply with their contractual obligations (to pay by the final date in this case) and a repetition of a previous specified default is the trigger entitling the wronged party to terminate.

Employers should therefore be aware of the risk of making a late payment for a second time which will entitle a contractor to terminate even when the first default has been rectified.

Parties should review their termination provisions to determine whether the standard clauses used in this case are incorporated into their contracts.

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