THE JCT STANDARD FORM OF SUB-SUBCONTRACT

For many years, there has been a need for a standard form of contract to regulate the works carried out by the sub-subcontractors of our industry. The options have been either a draconian in house form imposed by the subcontractor or highly defensive “conditions of sale” produced by the more sophisticated specialists. This often leads to the classic “battle of the forms” with resultant disputes.

Thanks to the JCT, there is now a sensible alternative, with the publication of the JCT Standard Form of Sub-subcontract. The guidance notes state that this is a “simple, straightforward form of contract”. It is quite brief (12 pages in all) and Recital 3 provides for pricing documents and “further documents forming part of the sub-subcontract” to be identified and incorporated within the agreement. These documents include :schedules of rates or prices, dayworks rates and/or percentages, fluctuations details, insurance arrangements, attendances, programme information, site working hours, order of works, design responsibilities etc.

Where the sub-subcontract works are of significant value, the subcontract conditions should be made available to the sub-subcontractor and attached to the form. In any event, the footnotes advise that, where the conditions of the subcontract are not on a standard published form, or contain amendments thereto, a copy of the said conditions or amendments, excluding prices, should be annexed to the agreement and signed by the parties. Clause 4 then obliges the sub-subcontractor to “perform the obligations and assume the liabilities of the subcontractor” to the extent that such obligations and liabilities relate to the sub-subcontract works.

Clause 3 contains a specific provision that the subcontractor “shall in no way hinder or prevent” the other party in performing his obligations. One can envisage more sophisticated sub-subcontractors pursuing “breach of contract” claims on the back of this clause.

Instructions must be in writing, and any oral instructions confirmed by the subcontractor within 2 working days. Variations will be valued by the subcontractor on a “fair and reasonable basis”. If the sub-subcontractor incurs loss and expense as a result of a variation, he must notify “as soon as is reasonably practicable”. There are no other grounds for loss and expense. This seems an unfortunate omission, since it leaves the sub-subcontractor having to pursue damages under common law.

The grounds for extension of time are stated as “variations” and “other reasons beyond the control of the sub-subcontractor”. The latter phrase is imprecise, and there may be considerable argument as to entitlements. It may be that the absence of specific mechanisms for extension due to acts of prevention on the part of the subcontractor could set time at large, leaving the subcontractor with no enforceable end date. If so, this is very undesirable.

Payment is to be monthly, with the final date for payment to be 31 days after the due date. The subcontractor must, not later than 5 days after the due date, give written notice of amounts due and the basis thereof. Notice of withholding must be given no later than 5 days before the final date, with grounds and amounts. There is no provision for payment in respect of unfixed materials, whether on or off site. Neither is there any provision for retention.

There is provision for interest on late payments and suspension by 7 days written notice. There is no “pay when paid” clause in the event of the end client’s insolvency.

The parties are encouraged to resolve any disputes or differences by use of mediation in accordance with the CEDR procedures. However, this is optional and requires the agreement of both parties.

Adjudication can be commenced at any time, in accordance with Part 1 of the Scheme for Construction Contracts, with the nominating body to be selected by the referring party from a list of four such bodies.

The sub-subcontract is worded so that it is not to be executed as a deed. Therefore, the limitation period is six years after breach. If the subcontract is in the form of a deed, the subcontractor may wish to consider amending the agreement to bring the sub-subcontract into line with his own obligations.

This is a brave attempt to fill a much needed void in the contractual arrangements of the industry. It is greatly preferable to most of the bespoke forms. However, its very brevity raises problems. Extension of time is imprecise. Loss and expense is restricted to that arising from variations. The form is silent regarding damages and setting off by the subcontractor for non-completion. However, these aspects could be tidied up by bespoke amendments to the standard form. All in all, this new form is a welcome addition to the JCT family.

John Russell

Contracts and Training Consultant

Cheshire CW4 7DP

Tel: 07770 986444

Email: swsubbie@globalnet.co.uk

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