Episode 93 - JCT Minor Works Contract (Part 1)

This week is Part1 on the JCT Minor Works  Contract covering Contract Documents, Obligations of the Contractor and Commencement & Completion.

Tune in next week for Part 2 covering Control of the Works, Sums Properly Due, Contract & Certification, Indemnity & Insurance, Termination and Dispute Resolution. This episode content meets PC5 - Building Procurement of the Part 3 Criteria.

Resources from today's episode:

JCT Website:
https://www.jctltd.co.uk/category/intermediate-buildinghttps://www.jctltd.co.uk/category/minor-works-building

Book:
Guide to JCT Minor Works Contract 2016 by Sarah Lupton

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Transcript

Episode 93:

Hello and Welcome to the Part3 with me podcast, 

The show that helps part 3 students jump start into their careers as qualified architects and also to provide refresher episodes for practicing architects. I am your host Maria Skoutari and this week we will be talking about the JCT Minor Works Contract. Todays episode meets PC5 of the Part 3 Criteria.

Today is Part 1 of the JCT Minor Works Contract and we will be covering how the contract is formed, the contractors obligations and commencement and completion. Next week under part 2 we will covering control of the works, sums properly due, contract and certification, indemnity and insurance, termination and dispute resolution.

So lets dive into Part 1, the JCT Minor Works Building Contract  was first published in 1968 and tends to be used on small to medium sized building projects due to its relative shortness and simplicity. There are two versions of the Minor Works Building Contract, one includes provisions for the contractor to carry out design known as the Minor Works Building Contract with contractors design and then there is the version without the contractors design portion, which is simply the Minor Works Building Contract. Apart from the references relating to design, the two versions are identical and can be used by private clients and public or local authorities. So most items I will be referring to related to both versions. 

The Minor Works Contract with and without contractor design is intended for projects that are procured under traditional procurement and are appropriate for work that is simple in character where the work is designed by or on behalf of the client and where the CA has been appointed to administer the conditions. 

The Minor Works Building Contract is a traditional lump sum contract, the form allows for the contract sum to be adjusted and requires that the amount of work which is covered by the contract sum should be described in exact terms in the contract documents. The work will be described in drawings and/or a specification and/or schedules of work, and where the contractors design portion is used, the client must state their requirements for the design of that part. The contractor will base their price and tender on the documents provided at tender and should be adequately detailed to enable them to provide an accurate price without a bill of quantities.

Under the terms, the contractor undertakes to carry out the works shown in the contract documents by the completion date entered in the contract particulars. The form does allows for provisions for varying the work and mechanisms for adjusting the contract sum and completion date. The contract assumes that all work is designed by the Contract Administrator. Unless the Minor Works Building Contract with contractors design portion is used whereby design responsibility can be assigned to the contractor for an identified part or parts of the works which should be limited to one or two simple and non-critical elements. Under the standard minor works form, the contractor has no design role. 

The form generally requires the appointment of an Architect/Contract Administrator, who will be responsible for issuing all further information necessary for the carrying out of the works. In terms of the contractors liability, they will take full responsibility for ensuring that the standards set out in the contract documents are achieve, including responsibility for any subcontracted work. The forms provides for domestic sub-contractors chosen by the contractor subject to written consent from the CA and there’s no provision requiring the contractor to use a sub-contractor named or nominated by the CA. If the naming of sub-contractors is crucial, it may be best to use a different form that allows for such provisions. The CA, generally, has the authority to order variations to the works if required and the contractor has a corresponding right to be paid any additional costs that arise from that variation. 

Provisions are also made within the form for the use of a BIM protocol and if used should be included in the employers requirements under the Minor Works Contract with Contractors Design or in the contract documents under the Minor Works Contract. Generally, if descriptions are inaccurate, any resulting addition to cost will be borne by the client. 

Now in terms of payments, interim payments are made to the contractor at monthly intervals following the issue of the CA’s certificates. The certificates will reflect the amount of work that has been properly completed up to the point of valuation in accordance with the terms of the contract, although none of these certificates are conclusive evidence that the contractor has fulfilled their obligations under the contract. Apart from the interim certificates, the CA also has a role to evaluate variations, alongside valuation of work executed and the computation of the final sum due. And it should be noted that the CA and contractor are required to try and agree on the price of a variation before the work is carried out.

The Minor Works Contract can also be considered for domestic building work, although certain issues may arise if the client is either a residential occupier for the purposes of the Housing Grants, Construction and Regeneration Act 1996 or a consumer for the purposes of the Consumer Rights Act 2015. If the client is a residential occupier then the provisions regarding payment notices and adjudication are not required by law and attention should be given as to whether the client would wish to include them or if they would prefer a simpler payment regime and an alternative dispute resolution system. Now if the client is a consumer, it should be taken into consideration that the Minor Works contract has not been drafted as a consumer contract. Although the form refers and contains provisions with the Housing Grants, Construction and Regeneration Act 1996, it doesn’t make any reference to the Consumer Contracts Regulations 2013, which give the consumer the right to cancel the contract within 14 days of signing it. It doesn’t mean, however, that this form cant’ be used, but the provisions within the contract should be carefully explained to the consumer client for them to make an informed decision whether to proceed with this form or choose a different one. 

The Minor Works Contract can also be used on public sector projects and has many features for public sector procurement relating to Fair Payment provisions and transparency. These require that the final date for payment should not exceed 30 days from the date at which the value of work done in a particular period is assessed and that similar provisions are included in sub contracts. The form also includes provisions relevant to any employer that is subject to the Freedom of Information Act 2000 meaning that the parties accept that the contract is not confidential, except for material that may be exempt and which the employer has the discretion to determine. So it is considered that the Minor Works Contract is an appropriate choice for smaller local authority project, such as, stripping out or site clearance work in preparation for a larger project to be taken forward on a JCT Standard Building Contract or equivalent. Interesting fact, where projects have been let on a ‘letter of intent’ it may have been better if a JCT Minor Works contract was used in the short terms until the terms of the main works are being finalised.  

Some key provisions that re not included in the Minor Works Contracts include:

• A clerk of works
• Phased possession or completion
• Use or occupation of the site by the employer during the works
• Nominated or named sub-contractors or supplier
• The contractor to notify the CA of discrepancies between the contract documents
• The employer to employ others directly, or the contractor to allow access for directly engaged workers
• The CA to reduce the contract period if work is omitted
• The CA to award an extension of time without a notice from the contractor
• The CA to extent the contract period for delaying events occurring after the date for completion has passed
• The CA to review extensions of time previously given
• The CA to award loss and/or expense, unless resulting from a variation or suspension
• The CA to require work to be opened up, tested or removed
• The CA to visit the contractor’s or sub-contractors workshops
• The contractor to include ‘property vesting’ clauses in all sub-contracts
• Professional indemnity insurance requirements for contractors designed portion
• Design submission procedure for contractors design portion
• Copyright in the contractors design documents
• Provisions for collateral warranties from the contractor or any sub-contractor
• Provisions for advance payment
• Allowance for terrorism insurance cover
• A QS 

So these are all items not allowed for within the Minor Works Contract forms and that gives you a general overview of the Minor Works Contract.

1. Now lets look at the form more closely, starting with its Documents

When the project is sent out to tender, it is essential that the contractor is given full and detailed information regarding the project requirements. If the project is not to be fully designed by the employers consultants, the contractor will required full information about the design that is to be provided, including any performance specifications alongside details of the building contract to be used.

In terms of the tendering process for the Minor Works Contract, one of two methods may be used, the first is competitive tendering with a small number of contractors or secondly through negotiation with a single contractor. An alternative method is two-stage tendering, whereby a small number of contractors are asked to tender on the basis of less than complete information and negotiations will then take place with the one that makes the most attractive submission. This method is typically used where the contractor is expected to have a significant design input and the employer wishes to approve the design before entering into the main contract. The selected contractor can then work with the employers consultants in finalising the design. It is generally unlikely that a two-stage tender would be used for a project based on the Minor Works Contract, but if it is, an agreement will be required to cover the contractors liability to the employer for their contribution to the design process. 

So the Contract Documents consist of:

• Drawings
• Specification
• Work Schedules
• Employer’s requirements  (for the Minor Works Contract with contractors design)

The items not to be used must be deleted out of the contract and alongside theses documents, the agreements, the conditions and a schedule of rates also consist/accompany the Contract Documents. Key item to highlight is that there is provision for a bill of quantities under the Minor Works Contract, therefore, the contractor will price either the specification or the schedules in an itemised format or provide a contract sum backed by a schedule of rates. The contractor should be sent copies of all the intended contract documents at the time of tender together with all the information required under the contract particulars including commencement and completion dates, liquidated damages, the rectification period, the retention percentage, the period for supply of documentation together with information relating to tax, fluctuations, insurance and dispute resolution. Now in terms of inconsistencies, errors or omissions, in the Minor Works Contract with Contractors Design, requires inconsistencies in or between the contract documents to be corrected including inconsistencies in the employers requirements and any correction is to be treated as a variation. And if the contractor find any divergence between the contractor documents, including the employers requirements, or any instruction of the contract administrator and statutory requirements in both contract versions, then the CA must be given immediate written notice. Once a divergence is discovered, the CA should issue an instruction to clarify the situation and it should be treated as a variation. Provided the contractor has complied with their duty to notify, the contractor would not be liable if the works do not comply with statutory requirements. Except in the case of divergences from statutory requirements, the contractor is not under any express obligation to point out any inconsistencies that they finds within or between the contract documents.

In terms of who is responsible and be the safe keeper for the contract documents, the contract doesn’t contain provisions who has custody and control of the documents. The original contract documents would typically remain with the CA with certified copies provided to the client and contractor. 

In terms of sub-contract documents, JCT publishes a generic short form of sub-contract that can be used with the Minor Works Contract although the contract form itself, doesn’t necessarily require it to be used. The only restrictions stated within the Minor Works Contract for terms that may be agreed for any sub-contract is the right to interest on unpaid amounts properly due to the sub-contractor from the contractor and the contract between contractor and sub-contractor shall terminate immediately upon the termination of the contractors employment under the contract. JCT also published a minor works sub-contract with sub-contractors design for use with the Minor Works Contract with Contractors Design. 

Additionally, the Minor Works Contract doesn’t have any requirements in relation to conditions regarding ownership of unfixed goods and material such as those required by the SBC & IC. 

2. So that covers the Contract Documents, now lets look at the Contractors Obligations:

The contractor’s essential obligation is to ‘carry out and complete the Works’. The works to be undertaken by the contractor will be described in the contract documents. 

Under the Minor Works Contract with Contractors Design also makes provision for the contractor to undertake the design of part or parts of the project. And under the contract, the contractor is to use reasonable skill, care and diligence in completing the design for the Contractors Designed Portion including the selection of any specifications for the kinds and standards of the materials, goods and workmanship to be used in the Contractors Designed Portion. This level of design liability means that in order to prove a breach the employer would need to prove that the contractor had been negligent and failed to use the required level of skill and care. The Minor Works Contract also uses slightly different wording to the equivalent clauses in other JCT forms, requiring the contractor to use reasonable sill, care and diligence instead of use the skill and care of ‘an appropriately qualified and competent professional designer’ which is used in the other JCT forms. The Minor Works Contract with Contractors Designed Portion makes it clear that the contractor is not responsible for the adequacy of the information in the employers requirements. So, where the employer’s requirements contain an outline design, which the contractor is required to complete, the contractor is not responsible for checking the adequacy of the design that has been provided. And the contractor is required to comply with directions of the contract administrator with regard to the integration of the design of the CDP with the works as a whole and, although the contract doesn't specifically cover the point, it is generally assumed that the contract administrator is responsible for the overall co-ordination of the design.

In terms of materials, goods and workmanship, these vary slightly between the two versions. Under the Minor Works Contract, work must be carried out in a workmanlike manner and in accordance with the construction phase plan and the contractor is obliged to carry out the works in compliance with the contract documents to the standards specified and to the approval of the CA. Whereas, under the Minor Works Contract with Contractors Design, the contractor is required to carry out the works in compliance with the contract documents, so for the work which is not part of the contractors designed portion, the contract would be obliged to comply with any specification provided and to the approval of the CA. With respect to the CDP, the contractor must provide materials, goods, etc. as specified in the employer’s requirements or, if none are specified, use reasonable skill and care in selecting such material and goods.

So, the contractor’s responsibility for work and materials in the two forms is:

• if specified or described in the contract documents, to provide materials, etc. as specified;
• if the contract requires them to be approved by the contract administrator, to be to the contract administrator’s reasonable satisfaction;
• if not specified at all, with respect to the CDP, to be of a standard appropriate to the CDP (with some ambiguity over the level of liability);
• if not specified at all, with respect to non-CPD items, in the case of MWD16, to be of a standard appropriate to the works (with some ambiguity over the level of liability);
• if not specified at all, in the case of MW16, the obligations of the contractor will depend on the particular provisions agreed and whether a term may be implied regarding design liability.

In terms of subcontracted work, the Minor Works Contract provides for domestic sub-contractors only and there are no provisions for naming or nominating firms selected by the employer or CA. And the contractor remains fully responsible for the standards and quality of all subcontracted works including any CDP which has been sub-contracted. 

The contractor is also under a statutory duty to comply with all legislation that is relevant to the carrying out of the work. Both Contract form versions introduce a contractual duty in addition to the statutory duty, which provides protection to the employer. The Minor Works Contract with Contractors Design requires the contractor to comply with and give all notices required by the ‘Statutory Requirements’. And both parties under both contracts are to comply with all their obligations under the CDM Regulations 2015. 

So the key obligations of the contractor under the contract include:

• Carrying out and completing the works
• Completing the design of the CDP under MWD only
• Comply with regulations 8–10 of the CDM Regulations and with the contract administrator’s directions regarding integration of the CDP under MWD only
• Provide drawings and information to explain the CDP
• Take all reasonable steps to encourage employees, etc. to be registered under the Construction Skills Certification Scheme
• Complete the works by the date for completion 
• Correct inconsistencies between CDP documents under MWD only 
• Notify the contract administrator of any divergence found between statutory requirements and the contract documents and any instruction of the contract administrator
• Pay statutory fees and charges
• Notify the contract administrator when it appears the works will not be completed by the date for completion for reasons beyond the contractor’s control
• Pay or allow to the employer liquidated damages for failure to complete by the date for completion
• Make good defects which appear within the rectification period
• Keep a person in charge on the site at all reasonable times
• Ensure that any sub-contract includes specified conditions
• Forthwith carry out all instructions issued by the contract administrator
• Endeavour to agree the value of variations with the contract administrator
• Comply with the CDM Regulations
• Give the employer a pay less notice, if intending to pay less than the sum certified in the final certificate
• Pay simple interest to the payee on any amount not properly paid
• Provide the contract administrator with all documentation reasonably required for calculating the final account
• Indemnify the employer for any expense, liability, loss, claim or proceedings in respect of injury to or death of any person
• Indemnify the employer for any damage to property
• Take out effective insurance against its liability
• Take out insurance against loss or damage to the works as required
• Take out insurance as required in the contract particulars
• Produce evidence of insurance
• Prepare an account following termination 
• Work collaboratively with other team members
• Establish a working environment where health and safety is of paramount concert; comply with all HSE codes; ensure personnel receive site-specific training and have access to health and safety advice; ensure there is a proper consultation with all personnel
• Provide details of a proposed cost saving or value improvement; negotiate to agree its value
• Provide the employer with information on the environmental impact of materials selected by the contractor
• Provide the employer with information necessary to monitor the contractor’s performance against indicators; submit proposals for improvement
• Notify the employer of matters that may give rise to a dispute, meet and engage in good faith negotiations to resolve disputes
• Consent to the employer publishing any amendments to the standard form
• Include specific terms in sub-contracts

And the contractors key powers include:

• Sub-contract the works, with the contract administrator’s permission
• Make an application for payment
• Issue a payment notice
• Suspend performance of contractual obligations
• Terminate the contractor’s employment
• Propose changes to designs and specifications
• Suggest amendments that may improve environmental performance

3. Now lets move to the next section, Commencement and completion 

The most important dates in a building contract is the date for possession or commencement and the date for completion of the works. These should preferably be given at tender stage, if work starts without proper agreement over dates, the contract will be subject to the Supply of Goods and Services Act or the Consumer Rights Act which state for the completion to be within a reasonable time. 

So under the Minor Works Contract, a ‘Works commencement date’ and a ‘Date for Completion’ are require, staged commencement or completion are not allowed for under the contract. Unlike other JCT forms, the Minor Works Contract does not refer to the contractor being given possession of the site but it does state that ‘the works may be commenced’ on the date stated in the contract. 

If for any reason the works are substantially suspended for a period of a month or more, due to failure to allow necessary access, then this would be grounds for termination, so any restrictions on access to working methods should be clearly stated in the contract documents. The parties, of course, under the Minor Works Contract are free to renegotiate the terms of any contract , meaning if there is indeed a delay in allowing access, then the parties may have to agree new dates for commencement and completion, but with financial compensation to the contractor. 

Now if the employer wishes to use or occupy part of the works during the time that the contractor is on site, this should be made clear in the tender documents and agreement should be reached with the contractor, this may occur if the project is a domestic building, in such instances the work should be phased so that the contractor has exclusive access to certain parts for pre-agreed periods. This should ideally be discussed between the CA and client prior to the tender documents being sent out. 

In terms of progress, the contractor is free to organise their own working methods and sequences of operations given it complies with the construction phase plan. Although the contract does not require the contractor to produce a programme it may be useful if one is put together to assist the CA when monitoring progress and assessing extensions of time, although the CA should carefully it dose’t become a contractually binding document against which their own performance will be tided to.

Now when it comes to the completion date, as mentioned previously, the Minor Works Contract requires an entry in the contract particulars which gives the date for completion and the contract gives the CA the power to extend time but makes no provision for the CA to reduce the contract period, even if substantial work is omitted. If Supplemental Provision 3 is used, however, from the contract, then a new date, either later or earlier, might be agreed as part of cost-savings proposals. And then the contractor will be obliged to complete the works by the date for completion. If the contractor fails to complete by this date, then liquidated damages will become payable. Once completion is achieved, the practical completion certificate will then be issued and the employer is obliged to accept the works. 

If delays occur, however, then the Minor Works Contract has provisions for extensions of time to be granted whereby the contractor must give written notice to the CA ‘if it becomes apparent that the Works will not be completed by the Date for Completion’ and the notice must be given regardless of the reason for the delay, if its anticipated that notification of any delay is essential, then this should be made clear in the tender documents and a suitable amendment made to the form. The contract doesn’t require the contractor to explain the reasons for the delay in the notice, but of course, it is best for them to do so, in order for the CA to assess what extension might be appropriate. So once notice of delay has been given, the CA is required to make ‘such extension of time for completion as may be reasonable’. For guidance on what might be considered to be beyond the contractors control, the CA may refer to the ‘relevant events’ listed under the Standard Building Contract, such as exceptionally adverse weather, specified perils, strikes, failure to supply information, site access and any difficulty in movement on or around the site. In terms of default of sub-contractors, the Minor Works Contract clearly states that such an occurrence is something within the contractors control and will therefore not constitute for an extension of time request. In terms of the CA’s response to the contractors delay notice, the contract does not state a time limit when the CA is to respond but it is suggested this is done as soon as possible in order to preserve the clients right to liquidated damages. So the CA should either fix a new completion date or notify the contractor that no extension of time is due. 

The CA’s right to award an extension of time is dependent on the contractor having given notice and this should ideally be given before the date for completion because if the contractor fails to submit a notice where the employer has caused a delay or if they submit the notice late, then the right to deduct liquidated damages may be jeopardised if the CA is unable to extend the contract period. In such an occasion, it may be best for the CA to award an extension of time allowing the contractor to take the matter to adjudication if they choose to do so. So in terms of the CA awarding extensions of time for events that have occurred after the date for completion, the contract doesn’t make any explicit provisions for what happens in such instances. The most appropriate approach will probably be for the client to agree on a revised completion date with the contractor. 

So reverting back to the CA’s duties with regards to extensions of time, the CA has an obligation to issue extensions of time when properly due and any failure to do so is a breach on the clients part. In each respective instance, the CA should assess the effect of the delay on the contract completion date. Now in a case where two or more delaying events occur at the same time, it would be most appropriate to grant the extension of time in respect of the dominant reason. If the delaying events are caused by either party, so one is due to the client and the other due to the contractor, the most sensible approach would be to split the difference given both parties have contributed to the delay. Although the more logical approach would be to grant the contractor the full length of the delay caused by the client. 

So once the project has reached completion, although the contract sets out no specific procedure for dealing with practical completion, the CA is obliged to certify the date at which, in the CA’s opinion, the works have reached practical completion and the contractor has complied with the contract. The contract documents may set out a procedure, but the CA should carefully check at tender stage to ensure the procedure is satisfactory. Then the date certified for practical completion is the date when the last condition is fulfilled: meaning, if there is a delay before receiving the health and safety information for example, the date of its receipt should be the date on the certificate, irrespective of the fact that practical completion of the works was achieved days or even weeks earlier. In terms of quality control and ‘snagging’, this is entirely with the contractor. 

So as mentioned, in order for the CA to confirm practical completion has been reached, the CA should be satisfied that there are no patent defects, that all construction work as defined in the contract has been completed and that if the CDM Regulations apply in full, the contractor has sufficiently complied with their obligations. So with Practical Completion:

• half of the retention is released leaving only 2.5% in hand, the money may be used to remedy work which the contractor refuses to correct but is only intended to cover the risk of latent defects and may not be enough to cover defects which are apparent at practical completion. 
• The rectification period begins 
• The employer takes over responsibility for the site and the contractor will no longer cover the insurance of the works 
• The contractors liability for liquidated damages ends 
• And the employer will be the ‘occupier’ for the purposes of the Occupiers Liability Act 1957  

Some contracts mention that the contractor arranges a handover meeting at the end of the project, this term, however, is not used in the Minor Works Contract and although handover meetings can be of use, particularly in introducing the finished project to the employer, it is better to avoid complex or inflexible procedures in the contract documents. Now if the CA feels the works are not complete, there is no obligation in the contract for them to justify their opinion with schedules of outstanding items. So in the event of failure to achieve practical completion and completing the works by the completion date, the employer may deduct damages from the amount due under the next certificate or reclaim the sum as a debt. Under the Minor Works Contract, the CA is not required to certify non-completion but it is probably wise for them to record it in a letter to the client and contractor. Once the date for completion has passed, the contractor is known to be in ‘culpable delay’ and the employer can claim for liquidated damages which will be at the rate entered into the contract particulars typically a sum per week of delay. The liquidated damages may either be recover from the contractor as a debt or deducted from monies due, for this to occur it must be proven that the contractor has failed to completed the works by the completion date and the CA must have fulfilled all duties with respect to the award of extensions of time. If the employer wishes to deduct liquidated damages from an amount payable on a certificate, they must give a ‘pay less notice’ stating the reason and amount the employer considers to be due and the basis on which it was calculated. If the employer wishes to deduct damages from the final certificate it must be made clear in writing before the date of the final certificate. If an extension of time, however, is given following the date for completion, the employer must then immediately repay any liquidated damages recovered for the period up to the new completion date. 

So to sum up what I discussed today:

• JCT Minor Works Building Contract tends to be used on small to medium sized building projects due to its relative shortness and simplicity, the value of the projects tend to be for up to £500,000 so its typically used on renovation projects and non-complex projects 
• It is published in two versions the Minor Works Building Contract and the Minor Works Building Contract with contractors design which allows for contractors design portion
• It tends to be for projects procured under traditional procurement and are appropriate for work that is simple in character where the work is designed by or on behalf of the client and where the CA has been appointed to administer the conditions.
• The Minor Works Building Contract is a traditional lump sum contract
• The form requires the appointment of an Architect/Contract Administrator, who will be responsible for issuing all further information necessary for the carrying out of the works 
• In terms of the contractors liability, they will take full responsibility for ensuring that the standards set out in the contract documents are achieve, including responsibility for any subcontracted work.
• The Minor Works Contract can also be used on public sector projects and has many features for public sector procurement
• The contractor’s essential obligation under the contract is to ‘carry out and complete the Works’ and the works to be undertaken by the contractor will be described in the contract documents. 
• Under the Minor Works Contract, a ‘Works commencement date’ and a ‘Date for Completion’ are required, staged commencement or completion are not allowed for under the contract and unlike other JCT forms, the Minor Works Contract does not refer to the contractor being given possession of the site but it does state that ‘the works may be commenced’ on the date stated in the contract.
• The contractor is also free to organise their own working methods and sequences of operations given it complies with the construction phase plan.
• And the CA to confirm practical completion has been reached, they should be satisfied that there are no patent defects, that all construction work as defined in the contract has been completed and that if the CDM Regulations apply in full, the contractor has sufficiently complied with their obligations.