Construction Matters August 2010
 
Welcome to Construction Matters from the experts at Cobbetts. 
 
JCT revision 2
 
A reminder that JCT has published Revision 2009 to its suite of JCT Contracts 2005.
 
The revisions include the incorporation of new sustainability provisions and modifications to the payment provisions. New Guides have also been published to provide practical help on the operation and administration of the contracts.
 
The changes will effect the recitals, articles of agreement, contract
particulars, conditions and the schedules although most of the changes do not affect the operation of the contracts.
 
The main changes include new payment provisions which now provide for interim certificates to be issued every two months unless otherwise agreed. There is a new contractual obligation on the contractor to issue a payment notice and, if necessary, a withholding notice if the final certificate means it is to pay the employer a balance due.
 
Antiquities are now dealt with as a relevant matter and there is a change regarding the holding of retentions. The employer is obliged to certify to the architect/contract administrator and to the contractor that he has placed the retention into a relevant bank account.
 
Schedule 2 introduces the new 'acceleration quotation', and the 'schedule 2 quotation' is known as the 'variation quotation'.
 
There is a new schedule 8: supplemental provisions which comprises six sections addressing collaborative working, health and safety, cost savings and value improvements, sustainable development and environmental considerations, performance indicators and monitoring, and notification and negotiation of disputes.  These should be carefully considered before
agreeing to incorporate them all and if any of these provisions are not to apply; this should be clearly stated in the contract particulars. Unless the contracts state otherwise, in the contract particulars or in bespoke amendments, these provisions are deemed to apply.

Whose right is it anyway?
 
In 2009, almost 3000 construction firms entered into some form of insolvency procedure, leaving many parties owed money by insolvent firms. These debts could be pursued against the third party's insurer under the Third Parties (Rights) Against Insurers Act 1930.  However, debt recovery will be made quicker, cheaper and easier once the Third Parties (Rights) Against Insurers Act 2010 is commenced by Parliament.
 
The 1930 Act operated to give the third party the right to claim against the insurer of that debt once liability had been proven. The Act did this by affecting a transfer of the rights of the insured to the third party, the transfer taking place upon the insolvency of the insured party.
 
Under the new Act, the third party will no longer need to prove liability of the insured before commencing proceedings against the insurer.  The liability and an order that the insurer pays up can be litigated in one set of proceedings.  Furthermore, the new Act provides the third party with rights to information about the insurance policy, allowing access to information at an early stage in proceedings.  With a greater understanding of the rights transferred to them, the third party can make a more informed decision whether or not to commence or continue ligation.

Retention of title - making the most of a bad situation
 
It wasn't so long ago that retention of title (RoT) clauses took somewhat of a backseat. Afterall, deciding who owned what on a construction site given the number of parties involved in any one project was not an easy task. However, given current market conditions and the increase of buyer insolvency, many suppliers are turning their attention back to the clause in an attempt to claw back their goods.

Put simply, a RoT clause shifts the usual law under the Sale of Goods Act 1979 and Sale of Goods and Services Act 1982, where ownership of goods passes on delivery to the site, and instead ownership only takes place once goods have been paid for. However, whether the clause serves its purpose will depend on factors such as the use of the items supplied- it may well be that the goods have a low scrap value or have, for instance, been used to construct a wall using the bricks of one company and the cement of another. Where the goods have been fixed to the land, the goods then become the property of the land owner.
 
Given the ever changing body of case law on RoT, a review of such clauses should be undertaken regularly. Anyone who supplies goods to a construction project should ensure that it is expressly clear when title to the goods is passed on. It should be remembered that a RoT clause is an extra to usual credit control methods and not a substitute for it, therefore a supplier would be well advised to put into place several different methods should he wish to be successful in the event a RoT clause is called upon.

For more information on any construction related matter contact:
 
James Bessey
0845 404 2444
james.bessey@cobbetts.com
 
Penny Tate
0845 404 1733
penny.tate@cobbetts.com
 

The content of this newsletter is for information only and should not be relied upon as a substitute for legal advice.   Copyright 2010 Cobbetts LLP - All Rights Reserved - August 2010