JCT and NEC Contracts
If you need commercial contracts advice concerning JCT and NEC contracts, we can help.
Both JCT and NEC contracts are extremely useful in facilitating and regulating building and construction projects as small as a domestic outbuilding or as large as a prison or new infrastructure. Which form of document is right for you will depend on the specifics of your project and in any case may not be your choice to make.
Whichever form of template is used the devil presents himself in two particular aspects – first the balance of power between the parties (and this has been a particular consideration for us when acting for sub-contractors/ junior members) and second the nitty-gritty detail which on scrutiny can be extremely onerous. Altmore Business Law can help you with construction contracts and provide cost-effective commercial law advice and assistance with your project.
Both document schemes represent generic legal wording designed to facilitate an expedited formation of contract. However, such wording only has true importance when juxtaposed with the schedules of work stating clearly what is to be done, by who, and by when. Only then can we pin down the perimeter of your duties versus those of other parties and your liability (none, apportioned and or capped) if things go wrong. To get best value for money from Altmore Business Law the ideal is to provide the document as nearly as complete as is possible.
The forms of documents do not represent a law unto themselves but reside within the wider laws of contract and negligence, so using commercial lawyers with a sound background in these more extensive contextual fields, as is provided by Altmore Business Law, is essential. To discuss your specific needs with us, get in touch today. You can call us on 0845 094 9000 or one of the other phone numbers appearing on the website or email firstname.lastname@example.org, and we will get back to you right away.
JCT contracts explained
Joint Contract Tribunal (JCT) contracts are designed to facilitate the delivery of a building project, and in very simple terms, set out the responsibilities and obligations of the parties involved in the process. While this is true of contracts of all kinds on which we advise, the JCT shapes the rights and obligations around the on the ground activities of preparing for, undertaking and completing building and construction projects. It could not be used for manufacturing bespoke or standard car tyres because although the mix of legal concepts and devices required to support the relationship of customer and manufacturer will be similar, the on the ground activities of the two enterprises are entirely different.
The JCT makes clear the work to be done, which party is carrying out the work, the dates the work will be carried out and the prices to be paid. JCTs use a standard form to minimise the costs of drafting a specific contract, as well as to ensure that standard provisions are included in the contract.
Under a JCT contract, the property owner is defined as 'the employer', and the JCT contract apportions risk between the employer and the contractor.
NEC contracts explained
New Engineering Contract (NEC) is a group of contracts that implement sound project management practices as well as defining legal relationships in construction and engineering projects. NEC contracts are used for a diverse range of projects and can be used in minor work or supply and purchase transactions as well as major long-term projects.
“Standard” means unalterable?
No. While both forms of documents are described as standard this does not preclude the making of amendments of a legal character. The party drawing up the contract may have already made changes before submitting it either inconspicuously within the text or itemised in schedule.
The counterparty receiving the draft should not be put off discussing concerns and making changes to the legal obligations. The scope for this will depend on the balance of power and the character of parties up the chain and alongside. Take for example the liability if things don’t go to plan. The consequences on a large project may far exceed in value a specialist contractor’s own capitalisation or fee. The shaping or protection by lawyers and the availability of insurance through brokers is key.
Obligations may be required not only toward the counter-party but by way of collateral deed directly towards another (third) party higher up the contractual chain. This document too should not be seen to be inadmissible of alteration. The obligor must ensure that the collateral document does not enlarge its exposure for the same work or problem over that which has been negotiated and shaped in the main contract.
What are the key differences between JCT and NEC contracts?
The JCT is regarded as the more traditional form of contract, with the original standard form dating back to 1931. The NEC was first developed in 1993 and is designed for both UK and international use. The NEC claims to take into account modern requirements of flexibility, clarity and collaboration as well as apportioning risk in a way that is fair. Like its JCT counterpart however it is not easy to read and in truth is also apportioning liability so must be scrutinised and amended to get what the particular parties think to be “fair” for them.
Contract administration and project management
In JCT contracts, the administration of the contract is overseen by the Contract Administrator (CA) on behalf of the employer. The CA must act impartially between the parties and must guide the parties through the process, procedures and timelines set out in the contract.
Under NEC contracts, the Project Manager (PM) takes care of the contract administration. The PM generally takes a more proactive role in the administration of the project, with a duty to co-operate and collaborate with both the developer and the contractor. There is a shared responsibility for project delivery, and NEC contract administration is geared towards efficiency and teamwork.
Programme and progress
Timings and the programme set out under NEC contracts is very important, requiring regular updates with the approval of the Project Manager. This can be a significant administrative burden.
Conversely, the JCT focuses on the submission of a master programme which is rarely revised throughout the process.
It can be argued that the pro-active approach under NEC contracts improves efficiency and flexibility, assessing delays to the project as it moves forward.
Which contract should I use?
Generally, JCT contracts are better suited to projects where the employer is seeking greater control over the delivery. JCT contracts are normally preferred by the commercial development community as a result of the balance of risk between employer and contractor.
On the other hand, NEC contracts tend to be favoured by those carrying out major projects, including national and government bodies. While NEC projects are more flexible and collaborative, they do require greater investment in good project management systems, resources and training systems to work properly.
We can advise you on both types of contracts, including which set of contracts is right for you. To ensure your project runs smoothly, get in touch today.
As always, time is money. Clients with extensive in house resources may require us mainly for technical questions. Other clients may not be so well resourced or be disposed to carry out the close legal scrutiny of legal clauses and the connection between them and the schedules of works - in such cases we will be best used to look more extensively at what’s being presented. We will shape what we do to address each client’s perceived risks and requirements using a combination of oral and written advice, marking-up amendments, the drafting of clauses, attending meetings and negotiation as necessary.
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