Understanding JCT Lump Sum Contracts: A Detailed Glossary Of Construction Terms – Part 2

Author: Bart Kolosowski
Published: October 19, 2023

Read Part 1 Here :

 JCT Lump Sum Contracts: A Detailed Glossary Of Construction Terms – Part 1

 

Quality and Completion

After gaining an understanding of the time-related elements of a project, it’s crucial to focus on the standards of quality and the completion of works. This section elucidates these terms as they appear in the JCT SBC 2016 form of contract.

Specification: A detailed description of the materials, workmanship, and construction methods required for the project. It forms part of the contract documents and sets the standard for what is to be delivered.

Standards and Codes of Practice: These are the benchmarks and guidelines, often nationally or internationally recognised, that the works must comply with. Non-compliance could lead to legal ramifications.

Workmanship: Refers to the quality and skill with which the Contractor and any Sub-Contractors execute the works. Good workmanship is expected to be in accordance with the contract documents and relevant standards.

Material Quality: Pertains to the standard of materials used in the construction, which should align with what is outlined in the Specification and relevant codes.

Material and Workmanship Clauses: Specific clauses within the contract that outline the required quality for both materials and workmanship. Failure to comply can result in corrective actions or even termination of the contract.

Notice of Dissatisfaction: A formal notice issued by either party, declaring dissatisfaction with a decision made, usually by the Contract Administrator or an Adjudicator. This often leads to Arbitration or Legal Proceedings.

Tests on Completion: Various tests carried out to ensure that the project meets all the standards and specifications outlined in the contract before it is deemed complete.

Practical Completion: The stage when the works are finished to the point where they can be safely and effectively used for their intended purpose, even though minor works or corrections may still be outstanding.

Snagging List: A list of minor defects or omissions in the work that need to be rectified by the Contractor before the Final Certificate is issued.

Defects Liability Period: A stipulated period following Practical Completion during which the Contractor is obliged to return to the site to rectify any defects that become apparent.

Certificate of Making Good Defects: Issued once all identified defects have been rectified to the satisfaction of the Contract Administrator, typically marking the end of the Defects Liability Period.

Final Certificate: The formal document issued by the Contract Administrator signifying the formal conclusion of the contract, usually after the Defects Liability Period has ended and all defects have been made good.

Understanding these terms relating to quality and completion allows for a holistic view of project expectations and deliverables. In the next section, we’ll tackle dispute resolution mechanisms under the JCT SBC 2016 form of contract.

 

Risk and Insurance

While understanding the responsibilities and obligations tied to quality and completion is essential, it’s equally important to navigate the complexities of risk and insurance. This section will discuss these terms as they relate to the JCT SBC 2016 form of contract.

Risk Allocation: Defines which party is responsible for bearing specific risks related to the project, usually outlined in the contract documents.

Contractual Indemnities: Provisions that outline the responsibilities of one party to compensate another for specific types of loss or damage.

Employer’s Risk: Risks that are specifically identified in the contract as being the responsibility of the Employer, typically these include events like force majeure or change in laws.

Contractor’s Risk: Risks for which the Contractor is responsible, such as workmanship, material quality, and adherence to time schedules.

Joint Names Policy: An insurance policy under which both the Employer and the Contractor are named, offering protection to both parties against specified risks.

Insurance in Respect of Injury to Persons or Property: Covers liability that may arise from personal injury or property damage connected to the construction work.

All Risks Insurance: A comprehensive insurance covering all risks associated with the project except those specifically excluded.

Professional Indemnity Insurance: Covers the Contractor and other professionals against claims arising from professional errors or omissions.

Public Liability Insurance: Insurance covering legal liabilities in the event of third-party injuries or property damage not associated with the works.

Insurance of the Works: Insurance taken out to cover the actual construction work against risks like fire, theft, and natural disasters.

Loss or Damage: General term covering any detrimental impacts on the works, personnel, or property, usually discussed in the context of insurance coverage.

Latent Defects Insurance: Coverage against defects in design, workmanship, or materials that are not discovered during the defects liability period.

Joint Fire Code: A set of guidelines and requirements aimed at minimising the risk of fire during construction projects. Compliance may be obligatory, depending on project specifics.

Understanding these risk and insurance elements can significantly affect a construction project’s financial and legal aspects. In the next section, we’ll tackle dispute resolution mechanisms under the JCT SBC 2016 form of contract.

 

Disputes

After diving into risk and insurance terms, it’s vital to look at the mechanisms in place for resolving disputes. This section elucidates these terms as outlined in the JCT SBC 2016 form of contract.

Adjudication: A fast-track method for settling disputes by an appointed Adjudicator. This is a temporary measure and can be later confirmed, varied, or revoked by Arbitration or Legal Proceedings.

Arbitration: A more formal, private method of dispute resolution involving a neutral third-party arbitrator. The decision is legally binding and enforceable but can be a lengthy process.

Mediation: An informal and confidential method involving a neutral third party to facilitate communication and help parties reach a voluntary agreement. Mediation is not binding unless an agreement is reached and formalised.

Legal Proceedings: The formal action of taking a dispute to court. This is usually a last resort due to the time and cost implications.

Contract Administrator’s Decision: The Contract Administrator may make decisions on certain disputes as defined by the contract. These decisions are temporarily binding unless challenged through Adjudication, Arbitration, or Legal Proceedings.

Being well-versed in these dispute resolution mechanisms ensures that you’re prepared for any eventuality and can navigate conflicts in a more informed manner. In our final section, we’ll delve into terms related to contract termination under the JCT SBC 2016.

 

Termination

As we draw to the end of our comprehensive look at the JCT SBC 2016 form of contract, it’s crucial to explore the terms around contract termination. Knowing when and how either party can legally terminate the contract provides clarity and a roadmap for worst-case scenarios.

Termination by Employer: Specifies the conditions under which the Employer has the right to terminate the contract. Typically, reasons include the Contractor’s insolvency, failure to progress works as planned, or significant breaches of contract.

Termination by Contractor: Outlines the scenarios where the Contractor has the right to terminate the contract. Common grounds include Employer insolvency, failure to pay, or material breaches by the Employer.

Termination for Cause: Refers to the termination of the contract due to significant breaches, which could be by either the Employer or the Contractor. This typically triggers specific penalty clauses and may involve legal action.

Insolvency: This covers scenarios where either the Contractor or the Employer becomes insolvent, unable to meet financial obligations. Insolvency is often grounds for immediate termination.

Suspension of Works: Occurs when either party temporarily halts work on the project. This may be instigated for various reasons such as safety issues, insolvency, or contractual disputes. Prolonged suspension could eventually lead to termination.

Understanding the ins and outs of contract termination is not only beneficial for risk management but also vital for both parties’ legal protection. This concludes our glossary of terms for the JCT SBC 2016, ensuring you’re well-equipped to navigate any project with confidence.

 

Conclusion

In conclusion, we’ve endeavoured to provide a comprehensive yet accessible glossary of key terms and clauses within the JCT SBC 2016 form of contract. Our aim has been to shed light on the intricacies of this complex contract form, allowing stakeholders from all disciplines to navigate its requirements with greater ease and confidence.

While we’ve been meticulous in our approach, we are sure that we have overlooked certain terms that you find crucial. We invite you to share your insights and suggestions in the comments section below. Your input will not only enrich this resource but also aid others in mastering the JCT SBC 2016.

We hope that you’ve found this glossary to be a useful tool for your projects, ensuring that contractual pitfalls are avoided and opportunities are maximised. Thank you for joining us on this educational journey through one of the UK’s most widely employed construction contracts.

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