Clarity on JCT contracts

There can be confusion around a JCT – what are they, where do they come from and what do I need to do with them?

Insurance Brokers, Contractors and Employers need to understand the implications where a JCT contract is in place – there will be very specific insurance requirements and if the cover is not arranged accordingly, problems will arise.

My advice to all parties that sign up to a JCT is that advice should be requested from your broker at the earliest opportunity; this could be at the stage of a Letter of Intent, Preliminaries or Schedule of Amendments for example.

Who are the JCT?

For many years The Joint Contracts Tribunal (JCT) has produced standards forms of construction contracts and provided the industry with guidance and documentation. JCT recently released a 2024 edition of contracts (formerly 2016). Each type of contract will have it’s own impact on the type of insurances needed and who needs to arrange it.

JCT produces standard forms of contract, guidance notes and other standard documentation for use in these sectors. JCT’s intention is that the contracts developed and published by it represent a balanced allocation of risk between the contracting parties.

What are typical JCT Contracts?

There are many and you find the right one for the job from the family of contracts that are available – from a Home Owner having an extension to an Employer engaging a Contractor on a large new building development that requires a Design and Build Contract.

Being able to navigate the contractual requirements, advise on and find suitable insurances and, in some cases, help with agreeing a bespoke wording that keeps all parties happy is key (and where our expertise really comes into it’s own).

The most commonly used main contracts in the current JCT suite are:

• JCT Design & Build Contract
• JCT Intermediate Building Contract
• JCT Intermediate Building Contract with Contractor’s Design
• JCT Standard Building Contract with Quantities
• JCT Standard Building Contract with Approximate Quantities
• JCT Standard Building Contract without Quantities
• JCT Minor Works Building Contract
• JCT Minor Works Building Contract with Contractor’s Design

There are more and these include construction management and management contracting forms with associated trade/works contractor forms, along with a framework agreement.

In addition, the JCT suite also provides specific sub-contracts tailored for use with its “Design & Build”, “Intermediate” and “Standard” forms – as well as a short form sub-contract and sub-sub-contracts that can be used across the JCT main contract family.

In addition, JCT publishes guidance notes, practice notes and supporting documents to complement the main contract suite.

JCT can also provide template forms of collateral warranties (as well as having the option of third party rights as an alternative)

What should your Insurance Broker do ?

The key factor is that if the insurance cover is not fit for purpose and does not follow the appropriate requirement, it will not be valid.

The individual contract should be reviewed in order that the appropriate cover is in place, whether this is on behalf of an Employer or Contractor or involves working with the construction professionals (architects, designers agents etc.)

It may be that specific covers are required – for example an Employer (homeowner) having responsibility to cover the “existing structures and contract works in joint names” or where 6.5.1 non-negligent joint insurance is applied.  A Contractor may be required to hold a Professional Indemnity insurance (as specified) and maintain the cover for a period of time – usually 6/12 years – after Practical Completion.  Perhaps a Performance Bond is needed or Collateral Warranties need to be checked against the Contractor’s Professional Indemnity policy.  Is Terrorism cover required against the Contract Works cover, does your policy need to recognise each sub-contractor or have a waiver of subrogation rights against the sub-contractor?

One of the most common areas for discussion is where “Option C” is selected where work is being carried out on Existing Structures.  The default position is that of C.1 in the Employer has to arrange joint names cover – however, this is not always possible – please see the JCT’s guidance notes as below:-

Insurance Option C is for use in the case of alterations of or extensions to Existing Structures. Under that option, the Employer is required to take out a Joint Names Policy for All Risks Insurance for the Works and also, if paragraph C.1 applies, a Joint Names Policy to insure the Existing Structures and their contents owned by him or for which he is responsible against loss or damage by the Specified Perils. Some Employers (e.g. tenants and some homeowners) may not be able readily to obtain the Joint Names cover required under paragraph C.1. Where that is the case, alternative arrangements and amendments will be necessary. See the Design and Build Contract Guide.

Where there are Existing Structures, it is vital that any prospective Employer who is not familiar with Insurance Option C – in particular any Employer who is a tenant or domestic homeowner – or an appropriate member of the Employer’s professional team, should consult specialist insurance advisers prior to the tender stage. Any Employer who is a tenant should also consult his insuring landlord prior to that stage.

Why Macbeth?

We have the experience to help – from something as basic as making sure contract works provision includes an uplift for professional fees to advising the Employer and Contractor on an appropriate fix for arranging existing structures and works …. the areas touched by a JCT are wide ranging and having assistance from tender stage onwards is valuable to Contractors (and also keeps their Employer happy!)