Chris Holt.

FRICS, Cert Ed, MCIOB

CONTRACT LAW ~ NEC v JCT
COMPARISON OF FORMS

The two most appropriate forms of contract to own
and compare are


JCT Standard Building Contract 2005(2011) With
Quantities


NEC Engineering and Construction Contract 2005
Option B: Priced Contract With Bill of Quantities
CONTRACT LAW ~ NEC v JCT
JCT vs NEC ~ Contracts


JCT ~ There are 18 individual, self contained
JCT contracts between Employer and
Principal Contractors

NEC ~ There are 6 'Main Option' contracts
between the Employer and Principal
Contractor



CONTRACT LAW ~ NEC v JCT
JCT vs NEC ~ Pages

JCT ~ There are 113 pages in the JCT
Standard Building Contracts 2005 with
Quantities


NEC ~ There are 63 pages in the NEC 3
Engineering and Construction Contract 2005
Option B: Priced contract with bill of quantities
CONTRACT LAW ~ NEC v JCT




CLARITY , SIMPLICTY, FLEXIBILITY
CONTRACT LAW ~ NEC v JCT
AIM : CLARITY, SIMPLICITY, FLEXIBILITY
Three aims of NEC drafting committee was to achieve
higher levels of contract style and layout, through

clarity
simplicity
flexibility

The NEC provides
nine core clauses dealing with most of the same matters

compared to

forty principles clause within the JCT SFBC 1998.

CONTRACT LAW ~ NEC v JCT
CLARITY, SIMPLICITY, FLEXIBILITY (continued)

The JCT suite requires the procurement team to

select the correct form of contract, from a broad range of
prepared standard contracts.

In the 2005 range of JCT contracts, there are approximately
forty
Framework Agreements;
Appointment Agreement,
Main Contracts,
Specialist Package Contracts,
Trade Contracts,
Subcontracts
Home Owners Contracts



CONTRACT LAW ~ NEC v JCT
AIM : CLARITY, SIMPLICITY, FLEXIBILITY
The NEC start from the reverse position, the team has to
build a bespoke contract form from a

single common form of main contract

flexibility is obtained by selecting one of the main 'Pricing
Options'
Option A ~ Activity Schedule Option B ~ Bill of Quantities

selection from range of second stage selections are made
from an extensive range of 'Secondary' clauses, such as
delay damages
sectional completion
key performance indicators






COLLABORATION AND PRO-ACTIVENESS

CONTRACT LAW ~ NEC v JCT
COLLABORATION AND PRO-ACTIVENESS
The NEC form encourages a more
collaborative approach between the main participants

It acts as a
stimulus to encourage good project management

At the beginning of the NEC documentation it states
' the key to the successful use of the NEC is the users adopting
the desired cultural change

moving away from a reactive and hindsight-based decision
making and management approach to.

one that is foresight based, encouraging a creative environment
with pro-active and collaborative relationships'


CONTRACT LAW ~ NEC v JCT
COLLABORATION AND PRO-ACTIVENESS (continued)

Integral to this approach are the

number of provisions requiring early and decisive problem
solving actions taken by all parties.

For example, when NEC 'Compensation Events' occur,
which might cause delay and additional cost, there is a
common duty to
warn the other parties of the impending risk.

compile/amend the 'Risk Register'

hold a Risk Reduction Meeting to manage the consequences



NEC v JCT

NEC ~ COLLABORATION AND PRO-ACTIVENESS (cont)
There is a strict eight week cut-off period for
the Contractor to notify of a compensation event.

If eight weeks are exceeded
then the Contractor loses the right to compensation.

Even shorter timescales are fixed for
the Contractor to submit quotations to deal with the event.

A failure by the Project Manager to respond to a notification
or quotation, within a similar period of time,

will lead to a 'deemed acceptance', binding the employer

NEC v JCT
COLLABORATION AND PRO-ACTIVENESS (continued)

The JCT forms, pre 2005, allowed claims to 'fester'

by putting the claim to one side before completion.

Putting a claim on a 'back-burner' could lead to a souring
of relationships between parties

The down side with the NEC pro-active approach

is that it requires a heavy resource commitment from all
sides to administer the project



SPECIFIC KEY ISSUES

DESIGN RESPONSIBILITY

CONTRACT LAW ~ NEC v JCT
SPECIFIC KEY ISSUES ~ DESIGN RESPONSIBILITY

The JCT provides for 'Partial Design' by the Contractor
through the use of

'Design Portion Supplement'

and the 'Employer's Requirements' performance specification and
the ' Contractor's Proposal' technical design/cost response

The JCT also provides for full design

via a range of 'Design and Build' forms
CONTRACT LAW ~ NEC v JCT
SPECIFIC KEY ISSUES ~ DESIGN RESPONSIBILITY

The NEC 3 approaches design responsibility more
flexibly

The amount of any design is set out as part of the 'works
information',

a schedule to the contract containing technical information
relating to the scope of the works

CONTRACT LAW ~ NEC v JCT
SPECIFIC KEY ISSUES ~ DESIGN RESPONSIBILITY

Under the JCT design and build forms

The standard design warranty expressly restricts the
level of duty owed by the Contractor, to one of


'reasonable skill and care' which has to be proven by
the Contractor




CONTRACT LAW ~ NEC v JCT
SPECIFIC KEY ISSUES ~ DESIGN RESPONSIBILITY

In contrast:

Under the NEC 3 the parties must expressly agree to a

secondary option clause X15 'Limitations of the Contractor's
liability for his design to reasonable skill and care' to have the
same effect as the JCT.

Without such an agreement, a

'fitness for purpose' obligation would normally be implied by law
as part of the design and build Contractor's responsibilities


CONTRACT LAW ~ NEC v JCT



SPECIFIC KEY ISSUES

INSURANCES

NEC v JCT
SPECIFIC KEY ISSUES ~ INSURANCE ARRANGEMENTS

The JCT forms, the Contractor is required to insure the
works

to be maintained until 'practical completion' has been
certified.

Under the NEC 3, the Contractor's Obligation section, the
Contractor is to

arrange insurances, and that they extend to the issue of the
'defects certificate'


CONTRACT LAW ~ NEC v JCT
SPECIFIC KEY ISSUES ~ INSURANCE ARRANGEMENTS

With reference to the 2012 Olympic games,

there is a commitment to ensure that the appropriate
insurances are maintained, using the NEC as a standard

Project insurance is one of the key commitments

Project insurance is a financial loss policy

not a liability policy

underwriting the entire delivery team


CONTRACT LAW ~ NEC v JCT



SPECIFIC KEY ISSUES

DISPUTE RESOLUTION

NEC v JCT
SPECIFIC KEY ISSUES ~ DISPUTE RESOLUTION

All JCT and NEC 3 forms provide

an automatic right to adjudication as provided for by the
Construction Act.

In the case of the NEC 3, this resolves a problem with
earlier versions, which attempts to build a

four week 'cooling-off' period into the process, before
either part could go to adjudication.

Under the Construction Act, a party has the right to adjudicate at
'any time'






SPECIFIC KEY ISSUES ~ DISPUTE RESOLUTION

SPECIFIC KEY ISSUES ~ DISPUTE RESOLUTION

Also, under the NEC 3 ,
to challenge the decision of an adjudicator / arbitrator

or through the courts,

the dissatisfied party must give notice to the other side
within four weeks of the decision.

After which,
the decision becomes final and binding on both parties

CONTRACT LAW ~ NEC v JCT
REFERENCE

'Let the Games Commence: NEC v JCT

Reynolds Porter Chamberlain LLP

Construction Update Magazine