JCT Standard Forms, Design & Build 2016

Presented ByHenry Hathaway, Partner

Project Security

Presented By:Henry Hathaway, Partner

Henry is a qualified Civil & Structural Engineer and haspreviously spent twelve years in the ConstructionIndustry representing both Contractors and Clients inboth Engineering and Project ManagementHe specialises in Pre-Contract Negotiation, ContractFormation, Project Lifecycle, Tender Development,Identification of Delay & Disruption, Establishment ofClaims, Ascertainment of Costs

Tel: 0207 167 6602Email: henryhathaway@silverllp.com

The Articles & RecitalsArticle 1 is fundamental to understanding how the Contract is tooperate and sets out the Contractor’s obligations in the followingterms:

D&B

“The Contractor shall complete the design for the Works and carryout and complete the construction of the Works in accordance withthe Contract Documents”

SBC

“The Contractor shall carry out and complete the Works inaccordance with the Contract Documents”

10th Recital = ER’s11th Recital = CP’s

Articles & Recitals

Contract DocumentsD&B

The Contract Documents are defined (see clause 1.1) as being:

• the Agreement (i.e. the Articles of Agreement)• the Conditions• the Employer’s Requirements• the Contractor’s Proposals• the Contract Sum Analysis

Contract Documents

SBC

The Contract Drawings, the Agreement and these Conditions, together with:

• The ER’s & the CP’s• If Option A - the Pricing Document• If Option B - the Specification• If fluctuations apply – the Schedule

Design

The intention is that the Employer should set out therequirements, in whatever degree of detail is consideredappropriate, within the Employer’s Requirements.

The Contractor should respond to these with theContractor’s Proposals, setting out the manner in which itproposes to design and construct the Works.

Design

Depending upon the Procurement Approach adopted, thelevel of detail within the Employer’s Requirements may varybetween a performance – orientated statement of objectives,and a detailed and prescriptive statement of what theContractor is to provide

Similarly, responding to the degree of detail within theEmployer’s Requirements, the Contractor’s Proposals maycontain the result of substantial design development work ormay simply be a reiteration of the Employer’s Requirements –“design & dump”

ObligationsThe Contractor’s obligations, as initially set out in Article 1, are furtherdeveloped in Clause 2.1. These include the completion of the Works(and/or Design)

Under the D & B the Contractor is prohibited from undertaking any workfor which it is necessary to produce Design Documents until such time ashe has complied with either the Design submission procedure set out inSchedule 1 or such other requirements as are stated in the ContractDocuments (Clause 2.8)

Where Schedule 1 is applicable, if the Contractor fails to comply with theprocedure then he is not entitled to be paid for the work so executed (seeparagraph 6 in Schedule 1)

ObligationsSchedule 1 – Design Submission Procedure

• Contractor submits Design Documents to Employer• Employer returns Design Documents to Contractor marked A, B

or C within 14 days• A = Approved• B = Comments• C = Rejected / Resubmit

NB: Contractor disagrees with Employer’s comments – must submit within 7 days

Design Standard

The Contractor is required to undertake any design workto the standard expected of an appropriate professionalconsultant such as an Architect or Consulting Engineer,appointed directly by the Employer and not undertakingany construction work

Common Amendment

In completing the design for the Works, the Contractor isnot required to take responsibility either for the contentsof the Employer’s Requirements or for verifying theadequacy of any design they contain (Clause 2.11) saveonly to the extent that they conflict with StatutoryRequirements (see below)

Case Law

This provision is intended to counter the possible implicationsof the 2002 case of Co-Operative Insurance Society Ltd vHenry Boot Scotland Ltd [2002] EWHC 1270 TCC

If, however, the Contractor does identify a deficiency in theEmployer’s Requirements, and that deficiency has not beenaddressed by the Contractor’s Proposals, then the Employer’sRequirements are modified accordingly and that modificationis treated as a Change

Case Law

MT Højgaard A/S (Respondent) v E.ON Climate & Renewables UKRobin Rigg East Limited and another (Appellants) [2017] UKSC 59

In a unanimous decision, the Supreme Court ruled that MTH wasliable for breach of the fitness for purpose obligations, construedeither as a warranty that the foundations:(1) would have a minimum service life of 20 years, or alternatively(2) be designed to last for 20 years

License To Use Designs

Subject to all monies due under the Contract having beenpaid to the Contractor, the Employer is granted a licenceto use the Contractor’s Design Documents for any purposerelating to the Works, although the copyright in thesedocuments remains with the contractor (Clause 2.38)

Conflicts

Conflicts/Inadequacies in the ER’s

Conflicts

Conflicts/Inadequacies in the ER’sConflicts/Inadequacies in the CP’s

Conflicts

Conflicts/Inadequacies in the ER’sConflicts/Inadequacies in the CP’sConflicts between the ER’s and the CP’s

Statutory Obligations

As regards Statutory Requirements (a term which includesDevelopment Control Requirements), the Contractor isrequired to carry out and complete the Works inaccordance with them, including giving all necessarynotices, except to the extent that the Employer’sRequirements specifically state that any part of thoserequirements comply with the Statutory Requirements

Conflict

Where there is a discrepancy between the Employer’sRequirements or the Contractor’s Proposals and aStatutory Requirement then the Contractor is required topropose for the Employer’s agreement an amendmentand then complete the design and construction of theWorks in accordance with that amendment and entirelyat his own cost, except where:

Changes • The Statutory Requirements change after the Base Date, such as to

require an alteration to the Works

• The Contractor’s Proposals require modification to comply withDevelopment Control Requirements (i.e. statutory provisionswhich control the right to develop the site), unless the Employer’sRequirements say that such matters are at the Contractor’s risk.(This provision is intended to recognise the fact that if theContractor is appointed before full planning permission isobtained, there may be unforeseen conditions applied by theplanning consent)

• It is necessary to alter any part of the Employer’s Requirementswhich the Employer has expressly stated to be compliant withStatutory Requirements

The Inclusive Price Principle

It frequently occurs in practice, particularly in engineeringcontracts, that unexpected difficulties are encounteredduring construction which may not only necessitate achange from the expected method of working but, inextreme cases, may mean that completion of the work, atleast in strict accordance with the original design, isimpossible

The Inclusive Price Principle

Many contracts contain express provisions making suchrisks or contingencies the responsibility of the contractor

These can take the form of, for example, expressdisclaimers as to the state of the site and physicalconditions or dangers generally, and also of provisions forthe protection of the work during construction

The Inclusive Price PrincipleIn the absence of an express disclaimer, an Owner who uses aprofessional advisor does not warrant that completion accordingto his adviser’s plans or design is practicable and that, even in theabsence of express provisions for the protection of the works, therisk in regard to the safety of the works remain with theContractor until they have been reoccupied by the Owner

Nor does the Owner warrant that he is competent in any way, e.g.in making decisions as to the Contractor’s method of working; seethe case of Neodox Ltd v Swinton & Pendlebury Borough Council(1958) 5 BLR 38

The Inclusive Price Principle

Effectively, therefore, a Contractor who (as is almost invariably thecase) expressly or impliedly undertakes to complete the work orproject according to the contract drawings and design, therebyimpliedly warrants his ability to do so, and if he cannot, will beliable in damages

In consequence, any additional work necessary to achievecompletion must be carried out by him at his own expense if heis to discharge his liability under the Contract, and will not qualifyfor additional payment as a variation even if he has been formallyinstructed to do the work in question

The Inclusive Price PrincipleIt follows that every invitation to tender a price for theconstruction of a project to a design provided for, or on behalfof, the owner is in essence, therefore, a double question byowners to contractors:

‘Can you build to this design, and if so, at what price?’

Lord Blackburn in Tharsis Sulphur & Copper Company v McElroy & Sons (1878) 3 App Case

Failure to do so, even if impossible, would place the Contractor in breach of Contract

CONCLUSION

QUESTIONS?henryhathaway@silverllp.com

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