New Year’s Evolution – JCT 2024 Edition

The Joint Contract Tribunals (JCT) is expected to release an updated edition of its suite of standard form contracts early this year. In this article, we consider what we know so far about the JCT 2024 and the likely changes that it will introduce.

The current edition of the JCT contracts suite, the JCT 2016, is one of the most widely used standard form contract suites in the UK construction industry. However, almost a decade on since its publication, the JCT 2016 is due a refresh. No doubt mindful of this, in June 2023 the JCT announced the JCT 2024, the successor to the JCT 2016. Whilst a final release date has yet to be confirmed, the updated suite is anticipated to be released in the early part of this year.

What do we know so far?

We summarise below the main updates and changes that the JCT has suggested that we can expect to see from the JCT 2024.

Modernising and streamlining

The JCT 2024 will use gender-neutral language. We expect that this will be similar to the NEC4, with words such as ‘he’ or ‘his’ replaced by terms such as ‘it’ and ‘its’.

There will be increased flexibility around the use of electronic notices. In our experience, most projects now rely on email and electronic project management systems, so this is a sensible change which should help make compliance with notification obligations easier for the parties. We expect that amendments in this regard may include an update to current clauses featured in many of the JCT 2016 forms of contract which require certain notices (generally concerned with insured events and termination) to be delivered by hand or sent by Recorded Signed for or Special Delivery post.

The JCT 2024 will also accommodate execution by electronic signature, which has become increasingly popular in recent years, particularly with the rise in remote working since the pandemic. As with the use of electronic notices, our experience is that a majority of JCT contracts are now concluded via electronic signature and so these amendments should help to bring the published contracts in line with current market practice.

JCT Target Cost Contract

The JCT 2024 will introduce a new family to the suite comprising the JCT Target Cost Contract (TCC) and Target Cost Sub-Contract. Standard form target cost contracts are already available from the NEC, ICE, ICC and IChemE (amongst others), so it is perhaps unsurprising that the JCT will now publish its own offering. It will be interesting to see the take up of this new option in residential and commercial development, which is most often carried out under JCT contracts.

Generally, target cost arrangements require a client to pay the contractor’s actual costs of carrying out the works, subject to a target cost agreed at the beginning of the project. At project-end, the parties then compare those actual costs with the target cost and the contractor either shares any savings against the target or contribute towards the overspend. We expect that this approach will be reflected in the JCT TCC, with some autonomy for the parties to agree the gain and pain share mechanisms.

As many readers will have experienced, target cost drafting and the attendant ‘pain’ and ‘gain’ share mechanisms are invariably keenly negotiated from both a commercial and legal perspective. It will be interesting to see what formulation or framework the JCT includes in the TCC as a starting point and whether this represents a ‘market’ position. Regardless, we expect that this drafting will be the subject of significant negotiated amendments.

Legislative changes

The JCT 2024 will incorporate ‘major updates’ in relation to the Building Safety Act 2022 and its secondary legislation. We expect that this will include drafting which addresses (amongst other things) extended limitation periods and responsibilities related to the new “gateway” regime for higher-risk buildings (for more information, see our article here). Changes are also expected in relation to termination accounting, including the addition of a due date for the final payment after termination, and to reflect what the JCT describes as ‘new insolvency grounds’ under the Corporate Insolvency and Governance Act 2020 (“CIGA”). The latter is perhaps a nod to the new company moratorium and restructuring plan mechanisms introduced by CIGA, albeit this is unclear at present.

Fluctuation provisions

Whilst it is unclear whether changes will be made to the content of the fluctuation provisions, JCT plans to move them to an online document to increase prominence and accessibility. This is in addition to the JCT fluctuations hub, which is intended to provide articles, information and training resources to support the use of the fluctuations provisions. Given the economic uncertainty that the construction industry continues to face, fluctuation provisions under JCT contracts may increasingly be adopted. In our view, it is important that parties properly manage the risk of price volatility in their contracts, and well-drafted fluctuations provisions can play a crucial role in this.

Loss and expense

The JCT 2024 will allow parties to include optional additional grounds for the contractor to claim loss and expense in the Contract Particulars. For example, where epidemics directly affect the works. This is clearly a response to the COVID-19 pandemic and ‘pain points’ felt by contractors as a result. We expect that any amendments in this regard will be linked to the existing Relevant Matters regime, which is the usual route to recovery of loss and expense in the JCT.

In practice of course, many current JCT contracts adjust the applicable “Relevant Matters” by way of bespoke schedules of amendments.

Extensions of Time

The JCT 2024 will introduce new Relevant Events, which are matters for which the contractor is entitled to claim an extension of time under the JCT. Again, this is expected to include the addition of a reference to epidemics, recognising that such an event could cause both delay and loss and expense.

The relevant matter which deals with antiquities (e.g. JCT 2016 Standard Building Contract, Clause 4.22.3) will also be extended to deal with unexploded ordnance, contamination and asbestos, providing a broader set of circumstances in which a contractor may be able to claim for an extension of time in reliance on it. Separately, the JCT 2024 is expected to include a new provision as to how contractors practically deal with, treat and notify the employer upon encountering unexploded ordnance, contaminated materials and asbestos. These changes will significantly alter the current JCT position on ground conditions and physical conditions risks and should be welcomed by contractors.

On a more practical level, the JCT 2024 will also reduce the time that the architect / contract administrator has to assess a contractor’s claim for an extension of time from 12 to 8 weeks from the date that it receives the contractor’s particulars (e.g. JCT 2016 Standard Building Contract, Clause 2.28.2). This is a positive move from a contractor’s perspective, as it will require the architect / contract administrator to make its position known earlier. From an architect / contract administrator’s perspective, it is important to be aware of this shortened deadline and to ensure that appropriate processes are in place so that it can be met. It will be interesting to see whether the JCT will also use this opportunity to introduce express consequences (e.g. a deemed acceptance mechanism, as used in certain provisions of the NEC4) for failing to comply with the assessment deadline – this is notably absent in the JCT 2016.

Future proofing

The JCT 2024 is expected to include updates to reflect the objectives of the Construction Playbook. Published in 2020 and updated in September 2022, the Construction Playbook offers government guidance on the assessment, procurement and delivery of public works projects and programmes. We assume that changes to the JCT suite in this regard will be linked to the Construction Playbook’s 14 key policies, which include early supply chain involvement and support for an outcome-based approach to projects and programmes (for more information, see our article here).

The JCT 2024 will also incorporate as standard previously optional supplemental provisions relating to collaborative working and sustainable development and environmental considerations. These set out the need for parties to support collaborative behaviour and encourage the contractor to suggest amendments which may improve the environmental performance of the works. This reflects the wider push that we are seeing in the construction industry with regards to more collaborative contracting and support for environmental, social and governance initiatives.

Liquidated damages

The JCT 2024 is expected to provide that where works are incomplete at the date of termination, liquidated damages can be levied up to termination and only general damages for delay can be claimed thereafter. This is to reflect the Supreme Court’s decision in Triple Point Technology Inc v PTT Public Company Ltd [2021] UKSC 29, which confirmed the “orthodox” view that it was ‘general law’ that the accrual of liquidated damages comes to an end on termination of the contract, and, after that, the parties must seek damages for breach of contract under the general law (see para. [35] of the Supreme Court’s decision here). For more commentary on the Triple Point decision, see our article here.

Disputes, arbitration and adjudication

The Contract Particulars to most contracts in the JCT 2016 suite list out Adjudication nominating bodies and Arbitrator appointers that the parties may use. This was perhaps unnecessarily restrictive, and so the JCT 2024 will instead allow the parties the flexibility to choose their own nominating body or appointer (albeit the list of bodies is expected to be retained).

The Supplemental Provision dealing with notification and the negotiation of disputes will also be incorporated into the main terms, rather than being optional. This requires the parties to promptly notify each other of any matter that appears likely to give rise to a dispute or difference, with a mechanism for senior executives to then to meet for negotiations to resolve the matter. This builds on the theme of collaborative working seen in other changes that the JCT 2024 will introduce.

This summary is based on information published by the JCT in June and July 2023. We will provide further updates on the JCT 2024 Edition as and when more information becomes available.