11 July 2022
Construction basics in Guernsey: Deconstructing JCT contracts
The use of Joint Contracts Tribunal (JCT) building contracts has become commonplace in Guernsey with most building contractors on island now using JCT standard forms, particularly for high value construction and infrastructure projects. Here, Carey Olsen property specialist Kieran Ogilvie explains what a JCT contract is and why obtaining legal advice is important when entering such a contract.
What is a JCT contract?
A JCT contract is a standard form of building contract produced by a UK body known as the Joint Contracts Tribunal. The JCT is comprised of seven members who represent a wide range of interests in the building sector from contractors, architects, and surveyors.
The documents produced by the JCT are intended to standardise construction contracts with a view to reducing the time taken to negotiate the documentation. There is no equivalent body in Guernsey to the JCT and so the construction industry on the island will commonly look to the JCT suite of documentation to document the terms of a construction project.
Which form of JCT contract to use?
The form of JCT contract to use will depend on the structure (procurement) of the construction project. The decision of the 'employer' – that is the party who wants the work carried out – as to the most appropriate procurement route will be based on a number of factors such as quality control and time. The route chosen will determine responsibility for design and which party will engage certain consultants. The two most common procurement routes are:
- Traditional. Where the procurement route is 'traditional' a JCT 'standard building contract' form is used and the employer engages the contractor and all of the design consultants. The contractor constructs the works according to the designs prepared by the design consultants as engaged by the employer.
- Design and build. Where the employer chooses the 'design and build' (D&B) route, the contractor is responsible for the design of the project as well as the conduct of the works. A JCT D&B contract would more commonly be used for a large complex construction project.
Early legal advice
Obtaining early legal advice is recommended whenever a JCT contract is contemplated, in conjunction with the advice from other professionals, such as architects, project managers and engineers. The following are just some of the important reasons why:
- Schedule of amendments. The forms of JCT contract will need to be amended for use under Guernsey law, so that, for example, references to UK construction laws and regulations are replaced with those relevant in Guernsey. The use of a schedule of amendments is also important where the employer wishes to alter the balance of risk on key areas, for example, construction delays or claims by third parties – where the risk falls, will usually be a commercial negotiation informed by the nature of the project and value of the work.
- Construction documents. There are a number of construction documents that will typically accompany a JCT contract and advice should be obtained on what documentation is necessary and most appropriate based on the circumstances of the project. Other documents can include collateral warranties, parent company guarantees, and performance bonds, among many others. Typically, for example, where a third party (such as a tenant, purchaser, funder) has an interest in the project, a collateral warranty from the contractor to that third party will be sought to create a contractual link between those parties.
- Disputes. It is common for complications to arise in the conduct of a construction project. It is when things go wrong in a project that a properly documented contract is crucial, so that the obligations and liabilities of the parties are clearly understood. Many problems (and potentially disputes) can be avoided by ensuring that the JCT contract, schedule of amendments and all ancillary documentation have been carefully drafted and reviewed by legal advisers at the outset, to reflect the intended terms of the project.
For many in the trade locally, the use of JCT contracts has become second nature, but for the above reasons and particularly to avoid the potential for disputes arising, obtaining advice on the legal aspects of a construction project and the drafting of documentation generally, could save the parties time and money in the long-run.
An original version of this article was first published by Business Brief, July 2022.