Contract drawings

2.7 The ‘Contract Drawings’ are listed under the third recital (or the second recital in the Without Quantities version). These should all be identified precisely, including revision numbers, etc. The list may be annexed if long, but if so the list must be clearly identified, and the drawings should be ‘signed or initialled by or on behalf of each Party’ (second recital). Note that in SBC16 there is no reference to the party responsible for preparing the drawings.

Contract bills

2.8 The ‘Contract Bills’, unless otherwise stated, must be prepared in accordance with the ‘Measurement Rules’ which are the RICS New Rules of Measurement – Detailed Measurement for Building Works (NRM2) unless otherwise stated (cl 2.13.1). If materials or goods are to be paid for prior to delivery on site, a list of these must be annexed to the bills (cl 1.1, definition of ‘Listed Items’). Bills of quantities are normally prepared by the quantity surveyor, who is named in Article 4 (this is the case even if the contract administrator is to act as quantity surveyor, see footnote [9]). The bills are based on detailed drawings and a specification prepared by the contract administrator. The use of bills does not reduce the responsibility of the contract administrator for the preparation of that information. For good practice in preparation and co-ordination of specification, drawings and bills of quantities see current relevant publications by the Construction Project Information Committee (CPIC). The contract requires that the parties sign both the drawings and the bills (second and third recitals).

2.9 In practice, even where bills of quantities are used, a specification often forms part of the documentation, either bound in as a section of the bills, perhaps as part of the preamble, or as a separate document referred to in the bills. The CPIC publications recommend that the specification becomes the core document in terms of defining quality, and that the drawings and the bills refer to clauses in the specification. If this system is used, the specification will be an essential part of the package and it is suggested that it should be signed with the other ‘Contract Documents’.

2.10 The third recital (Alternative A) of the Without Quantities edition refers to ‘the Specification or Works Schedules’. One of these should be deleted in the contract particulars as appropriate, though there is no reason why both a specification and schedules should not be used in the contract package. The contract does not define what form the schedules should take, but the documents could be arranged by work sections, by trades or, as is frequently used in refurbishment, on a ‘room-by-room’ basis. In all cases it is likely to be clearer if the detailed specification information is kept in a separate document referred to by the schedules. If this is done then it is suggested that, as the contractor would normally be asked to price the schedules, the reference to the priced specification is deleted in the contract particulars. The specification should then be bound into or identified and referred to in the schedules, and signed with the other contract documents.

Employer’s requirements

2.11 The ‘Employer’s Requirements’ are referred to in the tenth recital as ‘documents showing and describing or otherwise stating his requirements for the design and construction of the Contractor’s Designed Portion’, and the form assumes that these have been sent to the contractor at tender stage.

2.12 The contract does not stipulate any format for the employer’s requirements. In broad terms, the documents will set out the employer’s requirements for the contractor’s designed portion of the works. The requirements should be prepared carefully and on the assumption that there will be no changes to the requirements once the contract is let, for although the contract contains provisions whereby a variation can be instructed, such variations may result in additional costs to the employer, and are subject to the consent of the contractor.

2.13 The employer’s requirements could be in a very summary format, for example simply giving a brief description of the relevant part or system, referring to drawings indicating its location and co-ordinating dimensions. It is likely, though, that they will be more detailed than that and include a detailed specification, in either prescriptive or performance terms, or in all probability involving a mixture of the two.² They could also include schematic layouts or outline designs of the relevant part. In essence, the employer’s requirements act as a brief.³ Where descriptive or performance specifications are included, these should be accurate. Use of the phrases ‘to be to the contract administrator’s approval’ or ‘to be approved’ should be avoided at all costs (see paragraph 3.23).

2.14 One of the most important inclusions is to stipulate in exactly what form the contractor’s proposals should be submitted, and what they should include. This is essential in order for the employer to make a clear assessment of the submitted tenders. The amount and level of detail of the information will depend upon the scale of the contractor’s designed portion, and its relationship with the rest of the design. Where the contractor’s designed portion forms a significant element in the project, full information may be needed in order to integrate this element with other elements of the design.

2.15 It is also very important that the requirements should specify the drawings and other design information (the ‘Design Documents’) to be submitted by the contractor following acceptance of tender, and a programme for their submission. The purpose of this is to control the scope, format and timing of the submission of design documents for review. For example, it should protect the contract administrator from being overwhelmed by design documents at an inconvenient time, or from being presented with design documents to review for key elements in isolation from information on other related aspects of the design. It is likely that the programme will be the subject of negotiation at tender, as it is important that any programme in the requirements will also meet the contractor’s needs in terms of developing the design at a rate which will support its intended construction programme. It would also be wise to set out the information required to be submitted at practical completion, such as ‘As-built Drawings’, otherwise the contractor’s obligation is to provide such information ‘as the employer may reasonably require’ (cl 2.40).

Contractor’s proposals

2.16 The contractor’s proposals should be in the format and contain the information stipulated in the employer’s requirements. These may request that various documents are provided, including drawings, specifications, schedules, programmes, method statements, etc.

2.17 The contractor should raise matters relating to the contract data where decisions are outstanding from the employer, so that these can be resolved. The proposals should indicate clearly any areas of conflict in the requirements, and any instances where the contractor has found it necessary to amend or amplify the brief. The contract does not allow for the inclusion of provisional sums in the proposals, only in the requirements (cl 3.16), so if the contractor wishes to cover any part of the proposals with a provisional sum then it should inform the employer so that the requirements can be amended.

CDP analysis

2.18 The contract does not prescribe a format for the CDP analysis. It would therefore be sensible to set out what format would be acceptable in the employer’s requirements. (It would not be unreasonable, in cases where the contractor’s designed portion forms a significant part of the works, for the contractor to be asked to prepare a full bill of quantities, although this would be unlikely on smaller projects.) The contract requires that the document is used for assessing the value of employer-instructed variations to the contractor’s designed portion (cl 5.8.2). It does not require that the document is used to assess the value of work carried out, etc., to be included in periodic payments, but it would normally be used by the contractor to prepare applications for payment, and by the employer in checking such applications.

BIM and other protocols

2.19 If building information modelling (BIM) is to be used on the project, it will be important that the parties agree many matters to do with how the model will be prepared and managed, such as format, communication methods, timing, the detecting and resolving of problems, copyright, use following completion, etc. The contract allows for the use of a ‘BIM Protocol’, and the parties should adopt a standard form protocol or prepare a bespoke one for the project. At the time of writing, the only standard form available is the Building Information Model (BIM) Protocol published by the Construction Industry Council (CIC, 2013, available free from the CIC website). The protocol to be used should be identified in the contract particulars (cl 1.1). Clause 1.4.6 states that ‘references to documents shall, where there is a BIM Protocol or other protocol relating to the supply of documents or other information, be deemed to include information in a form or medium conforming to that protocol’. (Note that cl 1.1 refers only to a BIM protocol; if some other protocol is needed then this would require minor amendment.)

Activity schedule

2.20 The second recital (third recital in the Without Quantities version, and not in the With Approximate Quantities version) refers to a priced ‘Activity Schedule’, a provision that should be deleted if not required. The schedule is prepared and priced by the contractor and provided prior to the contract being executed. An example of a priced activity schedule is included in the Standard Building Sub-Contract Guide (SBCSub/G), and it is very similar to a schedule of work (see Appendix A to this Guide). Each activity is priced, and the sum of those prices will be the contract sum, with certain exclusions, such as provisional sums and approximate quantities (see footnote [3] to the second recital, or footnote [4] to the third recital in the Without Quantities version). If it is included, it is used to ascertain the value of work properly executed for certification purposes (cl 4.14.1.1).

2.21 An activity schedule is unlikely to be useful where full ‘Work Schedules’ have been prepared by the design team, unless they have been prepared on a different format to that suggested for the activity schedule, for example on a ‘room-by-room’ basis. It may be useful alongside bills of quantities if it saves time, and therefore reduces consultant’s fees, in relation to interim certificates, but may result in a loss of accuracy of valuations. It is likely to be most helpful where the tender package consists of drawings and specification alone.

Information release schedule

2.22 The ‘Information Release Schedule’, referred to in the fifth recital, is an optional provision (the recital is deleted if it is not required). The schedule should state ‘the information the Architect/Contract Administrator will release and the time of that release’. If used, the schedule should be prepared by the contract administrator and sent out with the tender documents. The schedule does not need to list all the information that will be provided but should, for example, list key drawings.

2.23 The schedule will of course make it clear to the contractor in advance when information will be provided, and will therefore enable the contractor to programme the work more effectively, and possibly reduce the number of potential arguments that may arise regarding delays. A significant implication for the contract administrator is that if any information listed is provided later than the stipulated date then this will be a relevant event in relation to an extension of time. It should also be noted that if there is any adjustment to the completion date then adjustments to the schedule might have to be negotiated between the parties.

Health and safety documents

2.24 The employer and contractor are required to comply with the Construction (Design and Management) (CDM) Regulations 2015 (cl 3.23). A key element of the Regulations is the employer’s duty to appoint a principal designer and a principal contractor (regulation 5). On most projects using SBC16 the contract administrator will be the principal designer, and the contractor the principal contractor.

2.25 The construction phase plan is not a contract document under SBC16, and the recitals make no mention of it having been prepared and given to the contractor at the time of tender. However, the employer (and the principal designer, if not the contract administrator) must provide the contractor with pre-construction information (regulations 4(4) and 12(3)), which should be sent out with the tender documents. Where the contractor is the principal contractor, it must ensure that the construction phase plan is prepared before setting up the construction site (regulation 12(1)); compliance with this is required under clause 3.23.2. To avoid uncertainty, it is advisable to require that this document be submitted by the contractor well in advance of the start of work on site. Following commencement, the contractor must ensure that the plan is reviewed and updated on a regular basis (regulation 12(4)).

2.26 Under the Regulations the health and safety file is principally a matter for the principal designer, who will compile it (regulation 12(5) and (6)), but there is a requirement on the contractor to provide information for the file (regulation 12(7)). Under SBC16, clause 2.30 requires the contractor to have complied with all its CDM duties with respect to the supply of documents and information before a certificate of practical completion is issued.

Bonds

2.27 SBC16 includes three forms of bond: (1) an advance payment bond, (2) a bond in respect of payment for off-site materials and/or goods and (3) a bond in lieu of retention. Where required, the contractor must arrange bonds, and as all of these are optional it must be made clear to the contractor at tender stage if any will be required. An advance payment bond is normally required where an advance payment is to be made to the contractor under clause 4.7 (note that this is not an option where the employer is a local authority). A bond in respect of payment for off-site materials and/or goods is required where it has been agreed that certain materials or goods will be paid for in advance of them being brought on site – the so-termed ‘Listed Items’ (cl 4.16). A retention bond is an alternative form of security to the more traditional use of a retention deduction (cl 4.18). Terms for all of the bonds have been agreed between the British Bankers’ Association and JCT Ltd, and are included in the form under Schedule 6. SBC16 also refers to a performance bond (cl 7.3), but in this case does not include a form. If a performance bond is required, or any other type of bond, then the terms must be available to the contractor before the contract is entered into.

Interpretation, definitions

2.29 Section 1 of the form sets out some rules governing the interpretation of the conditions. Clause 1.1 is a schedule of definitions of terms that are used throughout the contract. Some further and more detailed definitions are embodied in the text of clauses, for example ‘All Risks Insurance’ and ‘Joint Names Policy’ are defined in clause 6.8. Clause 1.4, defines what is meant by any reference to a ‘person’, or to a statute, and also contains a gender bias clause. Section 1 also includes items first introduced by Amendment 18 to JCT80. Those regarding notices and periods of time were required by the HGCRA 1996 Part II and re-state its requirements relating to the calculation of periods of days and the serving of notices (cl 1.5 and 1.7). Clause 1.7 allows the parties to agree that certain communications, to be identified in the contract particulars, may be made electronically. The parties may also agree an exact format for the electronic communications. Otherwise, all communications are to be in writing.

Priority of contract documents

2.30 Clause 1.3 states ‘The Agreement and these Conditions are to be read as a whole. Nothing contained in any other Contract Document or any Framework Agreement, irrespective of their terms, shall override or modify the Agreement or these Conditions’. If this clause were not included, the position under common law would be the reverse; in other words, anything that had been specifically agreed and included in a document would normally override any standard provisions in a printed form.

2.31 If the parties wish to agree to any special terms that differ in any way from the printed conditions, then the amendments will need to be made to the actual form, which usually involves the insertion of one or more additional articles. If necessary, due to lack of space, these amendments could refer to the special terms, which could be appended to the form or included in the bills of quantities. Amending standard forms is unwise without expert advice as the consequential effects are difficult to predict. Deleting clause 1.3 could be particularly unwise as it might have unintended effects on other parts of the contract. (If significant changes are needed, consider the use of another form, perhaps the Major Project Construction Contract, which embraces individual tailoring and has no equivalent clause.)

Inconsistencies, errors or omissions

2.32 The contractor is under an obligation to point out any discrepancy or divergence within or between the contract documents, including the CDP documents, and/or any further instructions, documents or drawings issued by the contract administrator (cl 2.15). The obligation appears to be limited to those discrepancies that the contractor has discovered. There is no obligation for the contractor to search for discrepancies, although the general obligation to use reasonable skill and care would suggest some degree of observance could be expected. Any notice should be issued immediately upon discovery and should include ‘appropriate details’ of the error or discrepancy. If the contractor fails to point out any discrepancies that it notices, or should have noticed, and work has to be re-done as a result, then the contractor may lose any right to extra payment, extension of time, and loss and/or expense. The contract administrator’s obligation to issue an instruction under clause 2.15 appears to be limited to instances where the contractor has found a discrepancy. However, the contract administrator’s general obligation to provide necessary information would extend to correcting any errors and discrepancies.

Errors in the contract bills

2.33 The contract requires that any error in the contract bills shall be corrected (cl 2.14.1). It does not say by whom but this would be the responsibility of the employer and normally carried out by the quantity surveyor. The correction is treated as if it were a variation required by a contract administrator’s instruction (cl 2.14.3), and though there is no express requirement to issue such instruction, the correction should be confirmed in writing.

The contract bills and contract drawings

2.34 The contract does not specifically deal with the situation where there is a divergence between the information shown in the contract bills and that set out on the contract drawings. However, as clause 4.1 states that ‘The quality and quantity of the work included in the Contract Sum shall be that set out in the Contract Bills’, in the case of conflict the contract bills will normally take precedence. If some other result is preferred then the contract administrator will need to issue an instruction, which will constitute a variation.

Employer’s requirements and contractor’s proposals

2.35 Where there is an error in the contractor’s proposals or the CDP analysis, this is corrected, but is not to result in any addition to the contract sum (cl 2.14.4). The contractor must inform the contract administrator of its proposed amendment to deal with any discrepancy within or between the contractor’s proposals and/or any other contractor design document. The contractor is obliged to accept the contract administrator’s decision and comply at no cost to the employer (cl 2.16.1). If the contract administrator failed to reach a decision within a reasonable time, this could be grounds for an extension of time and loss and/or expense.

2.36 Where there is a discrepancy within the employer’s requirements, or a discrepancy between the requirements and any variation, the contract states that if the contractor’s proposals deal with the discrepancy then they will prevail (cl 2.16.2). The discrepancy between the requirements and any variation refers to inadvertent problems resulting from the effect of a variation, rather than intended alterations to the particular part of the requirements at which the variation was aimed. If the employer decides it does not like the solution in the contractor’s proposals and would prefer some other solution, this would have to be instructed as a variation.

2.37 If the contractor’s proposals do not deal with the discrepancy, the contractor is required to inform the employer of its proposed amendment for dealing with it, and the contract administrator must either agree or decide on alternative measures and, in either case, notify the contractor in writing (cl 2.16.2). The acceptance or notification is to be ‘treated as a Variation’, which would result in it being valued under clause 5.2, and in it constituting grounds for an extension of time under clause 2.29.1, for loss and/or expense under clause 4.22.1, and for termination under 8.9.2.1, in the unlikely event that it causes a suspension (see paragraph 5.43). If there was undue delay by the contract administrator in reaching a decision, then this would also be grounds for a claim.

2.38 A footnote to the twelfth recital gives advice on how to deal with a divergence between the employer’s requirements and the contractor’s proposals that is identified before the contract is executed; in that case the issue should be resolved and the documents amended to reflect this prior to execution. The contract does not deal with the situation where such a divergence is discovered after the contract is formed.

2.39 This recital is somewhat problematic from the point of view of the employer. Although not a condition of the contract it nevertheless, in the absence of any contrary provision, appears to give precedence to the contractor’s proposals. The guidance notes to an earlier edition of the design and build form state that the intention of this recital is that it should be without prejudice to the contractor’s liability in respect of design, and that, for example, if the employer’s requirements included a performance specification for a heating system, and the employer subsequently accepted the contractor’s design proposals for the system, the employer would not be precluded from alleging breach of contract. This may have been the intention of the drafters but the position is far from clear.

2.40 If there were a discrepancy between the CDP documents, a court would endeavour to determine, from an objective standpoint, what were the true intentions of the parties, and might well decide that the employer should be deemed to have accepted the version set out in the contractor’s proposals, at least in so far as the divergence would have been revealed by a reasonably thorough examination. As the employer may prefer its own requirements to take precedence, this recital is frequently altered to that effect in practice.

Divergences from statutory requirements

2.41 The contractor and the contract administrator are both required to notify each other of any discrepancy or divergence between any of the clause 2.15 documents, or any instruction requiring a variation, and any statutory requirement as defined under clause 1.1 (cl 2.17.1). Where the discrepancy relates to the employer’s requirements, the contractor’s proposals or other contractor design documents, the contractor must inform the contract administrator of its proposed amendment to deal with the discrepancy. In all cases the contract administrator must issue instructions to deal with the problem. Where the divergence relates to the employer’s requirements, the contractor’s proposals or other contractor design documents, the contract states that the contractor must comply at no extra cost to the employer, unless the divergence results from a change in statutory requirements since the base date (cl 2.17.2.1). In all other cases the instruction is treated as a variation (cl 2.17.2). The effect of this clause is that the costs will be borne by the contractor in situations where the divergence is between the employer’s requirements and statute, as well as between the contractor’s proposals and statute.

Custody and control of documents

2.42 The contract drawings and contract bills remain in the custody of the employer, and must be available for inspection at all reasonable times (cl 2.8.1). The contract administrator should retain a copy for reference throughout the life of the contract. The contractor must be provided with one certified copy and two further copies, unless a BIM protocol is used which requires otherwise (cl 2.8.2).

2.43 The documents provided must not be used for any purpose other than the works, and the details of the rates or prices are not to be divulged (cl 2.8.4). The contractor must keep on site at all reasonable times one copy of all the contract documents, the contractor’s design documents and all other documents listed in clauses 2.9 to 2.12, which includes unpriced bills of quantities, the master programme and further schedules and information issued by the contract administrator (cl 2.8.3). At practical completion the contractor must provide copies of drawings and information relating to the contractor’s designed portion as stipulated in the contract documents, or as the employer may reasonably require (cl 2.40).

Assignment

2.44 The right of a subsequent purchaser to bring an action against the builder of their property, with whom they have had no contractual relationship, could be of considerable value. The employer in a construction contract might therefore wish to assign this right to such other person who may acquire an interest in the property.

2.45 A contractual right can be regarded as a personal right of property, and in property law it is classified as a ‘chose in action’. Choses in action can be assigned under the Law of Property Act 1925, provided the requirements of section 136 of the Act are followed. It is important to note that it is only contractual rights that can be assigned, termed ‘the benefit’ of a contract, and not obligations. So if, for example, A enters into a contract with B whereby A agrees to carry out some building work and B agrees to pay A £100 for the work, A can assign the right to claim the £100 to C but not the obligation to carry out the work. The right to pursue a debt or claim is assignable to C without B’s consent, provided B is notified as required by section 136. The obligation to carry out the work, however, could only be transferred to C with the agreement of all three parties (often termed ‘novation’).

2.46 SBC16 contains express provisions which limit the scope for assigning contractual rights. Clause 7.1 states that neither the employer nor the contractor may ‘assign this Contract or any rights thereunder’ without the written consent of the other. Assignment without consent of the other party is grounds for termination (cl 8.4.1.4 and 8.9.1.3). There is one exception, however, to the prohibition on assignment: if clause 7.2 is stated to apply in the contract particulars then the employer may assign some limited rights to a party to whom it has transferred a freehold or leasehold interest in the premises comprising the works. Among other limitations the rights can only be assigned after practical completion. The clause does not provide a general right to assign the benefit, but the right to bring proceedings in the name of the employer to enforce terms of the contract made for the benefit of the employer. It is thought that this would limit the assignee to claiming at most losses suffered by the employer as a result of any breach by the contractor, and would not extend to further losses suffered by itself.

Third party rights/warranties

2.47 SBC16 offers two options for the granting of rights to bring a claim to persons who are not a party to the contract, either through the use of the ‘third party rights’ provisions included in the form, or through the use of separately published standard form warranties.

2.48 The ‘third party rights’ provisions make use of the facility introduced by the Contracts (Rights of Third Parties) Act 1999. Until this Act came into force, it was a rule of English law that only the two parties to a contract had the right to bring an action to enforce its terms (termed ‘privity of contract’). However, it is often the case in construction projects that other parties may wish to be in a position to be able to take action, should one or other of the parties default on their obligations. A future owner of the property may, for example, wish to be able to claim against the contractor should it later transpire that the project was not built according to the contract. Under the rule of privity, the future owner would be a third party, and would not be able to bring a claim. In response to this, ‘collateral warranties’ were developed which allowed for third parties to pursue claims for breaches of a contract. Examples of such warranties would be between contractor and owner, contractor and funder, and also between consultants and owners/funders.

2.49 The Contracts (Rights of Third Parties) Act has changed the fundamental rules of law relating to privity, in that it entitles third parties to enforce a right under a contract, where the term in question was to provide a benefit to that third party. The third party could be specifically named, or could be of an identified class of people. The effect of this Act is therefore to open the door to the possibility of claims being brought by a range of persons, in some cases persons that the parties to the contract may never have considered.

2.50 The Act, however, allows for parties to agree that their contract will not be subject to its provisions, and many standard forms adopt this course in order to limit the parties’ liability. SBC16 takes this approach and under clause 1.6 states:

2.51 The contract therefore by this clause ‘contracts out’ of any effects of the Act. (In the light of the above, it is important to note that the effects of deleting or amending this clause would be significant.) It then allows the parties to define exactly which third parties will have rights with respect to the contract (in a separate document called the ‘Rights Particulars’, clauses 7A.1 and 7B.1) and what those rights will be (Schedule 5).

2.52 Schedule 5 sets out ‘Third Party Rights for Purchasers or Tenants’ (Part 1) and ‘Third Party Rights for a Funder’ (Part 2). The contractor warrants (in relation to the tenant) that it has carried out the works in accordance with the contract (with effect from practical completion), and (in relation to the funder) that it has complied with and will continue to comply with the contract. This allows both the purchaser/tenant and the funder to bring an action in respect of breaches of contract by the contractor.

2.53 There are some things to note about this system. In the case of purchasers and tenants, the contractor’s liability extends to the reasonable costs of repair, renewal or reinstatement, but does not include other losses unless so stated in the contract particulars (Schedule 5, Part 1:1.1), in which case the liability will be limited to a stated maximum amount. The contractor’s liability is also limited by a net contribution clause (Schedule 5, Part 1:1.3). Under the arrangement the contractor is entitled to rely on any term in the contract should any action be brought against it by a third party (Schedule 5, Part 1:1.4). Where there is a contractor’s designed portion, the contractor is required to provide evidence of its professional indemnity insurance, if requested, to any person possessing rights under the Third Party Rights Schedule (Schedule 5, Part 1:5). The rights may be assigned by the purchaser or tenant without the contractor’s consent to another person, and by that person to a further person, but beyond this no further assignment is permitted (Schedule 5, Part 1:6).

2.54 In the case of the funder, except for the inclusion of a net contribution clause (Schedule 5, Part 2:1.1), no limit is placed upon the extent of the contractor’s liability. As above, the contractor is entitled to rely on any term in the contract should any action be brought by the funder (Schedule 5, Part 2:1.2), and the rights may be assigned by the funder without the contractor’s consent to another person, and by that person to a further person, but beyond this no further assignment is permitted (Schedule 5, Part 2:10). The Schedule also sets out various ‘stepping in’ rights which may be exercised by the funder in the event that it terminates its finance agreement with the employer.

2.55 Under the alternative system of ‘collateral warranties’ the contractor has actually to enter into a warranty separately with each beneficiary. The beneficiaries are identified in the ‘Rights Particulars’, and the warranties are identified in clauses 7C and 7D as the JCT standard forms of warranty to purchaser/tenant and funder (CWa/P&T and CWa/F). The warranty forms comprise identical terms to the third party rights set out in Schedule 5.

Procedure with respect to third party rights and warranties

2.56 Where third party rights are to be used, the relevant details must be set out carefully in the ‘Rights Particulars’ section, which is identified in the contract particulars. It is important to identify the funder/purchaser/tenant because if none is identified the rights/warranties shall not be required. It is not necessary, however, to identify a specific organisation; the description could simply be of a class of persons, e.g. ‘all first purchasers’ or ‘the lead bank providing finance for the project’.

2.57 The third party rights take effect from the date of receipt by the contractor of the employer’s notice to that effect; in the case of a purchaser or tenant the notice must state their name and their interest in the works, and in the case of a funder it can simply identify the party concerned. Where collateral warranties are required, the contractor is required to execute the stipulated warranties within 14 days of the equivalent notice from the employer.

2.58 From the point of view of the purchaser, tenant or funder, they will not be aware of the existence of the third party rights unless the employer lets them have a copy of the relevant part of the contract. In some cases the third party may prefer to have a separate collateral warranty direct with the contractor, and it would be sensible of the employer to establish whether this may be a possibility before executing the main contract. After the contract is executed, this could only be arranged with the consent of the contractor.

2.59 With respect to warranties from sub-contractors, the details should also be set out in the Rights Particulars. Clause 7E states that:

2.60 It should be noted that this is not, of itself, an absolute requirement for the contractor to obtain the warranties, nor is it even (as with GC/Works1) a requirement to use reasonable endeavours to obtain the warranties – it is simply a requirement to comply with the contract conditions. The contractor is, however, required to include provisions as necessary in sub-contracts in respect of the execution of required warranties (cl 3.9.2.5), and to take ‘such steps as are required to obtain each warranty’ (cl 7E.1.2). The JCT publishes three standard forms of sub-contract warranty (SCWa/P&T, SCWa/F and SCWa/E) to cover this situation.