JCT Design and Build contracts and statutory requirements - a trap for contractors?

As Jatinder Garcha1 ;explains a common amendment to the published form of JCT Design and Build Contract is the passing to the contractor the responsibility for errors, ambiguities and inadequacies in the Employer’s Requirements. This amendment is made as part of a wider suite of changes which make the contractor the single point of design responsibility for the Works and, accordingly, most design and build contractors within the industry generally expect and accept the amendment. In circumstances where this amendment is not made (for example, where the parties contract on the unamended published form of JCT Design and Build Contract), contractors should be aware that they are still responsible for the Employer’s Requirements meeting Statutory Requirements in certain circumstances.

In the published form of JCT Design and Build Contract, clause 2.11 states that “Subject to clause 2.15, the Contractor shall not be responsible for the contents of the Employer’s Requirements or for verifying the adequacy of any design contained in them.” It is therefore not unreasonable for a contractor to assume that the Employer is the party responsible for errors, ambiguities and inadequacies in the Employer’s Requirements. 

As a result, the general principle on cost would appear to be simple: costs are borne by the party responsible for the document in question. If there is any discrepancy within the Contractor’s Proposals and/or Contractor’s Design Documents then the Contractor is responsible for the cost of rectification. Where there is any discrepancy within the Employer’s Requirements (or in designs contained in them) which is not dealt with in the Contractor’s Proposals, the Employer is responsible for the cost of rectification; the Employer decides how the discrepancy is dealt with and such decision is treated as a Change. 

The above general principle is, however, subject to a major exception in relation to Statutory Requirements. Clause 2.15.1 of the published JCT Design and Build Contract states that if either party to the contract becomes aware of a divergence between the Statutory Requirements and the Employer’s Requirements (including where the Employer’s Requirements have been amended by any Change) they shall immediately notify the other party. The Contractor is to provide a proposal for removing the divergence, and then must complete any design and construction in accordance with the agreed proposal. 

Given that the divergence is found in the Employer’s Requirements it would be reasonable to assume that the proposal agreed by the Employer would also be treated as a Change and therefore be at the Employer’s cost.  That is not the case. Clause 2.15 states that the required amendment is to be carried out entirely at the contractor’s cost unless one of the following three exceptions applies:

1. The divergence arises from a change in Statutory Requirements after the Base Date and that such change necessitates an alteration to the Works; or
2. If an amendment to the Contractor’s Proposals is necessitated by the terms of any Development Control Requirement or approval issued after the Base Date; or
3. If there is any necessary change to any part of the Employer’s Requirements which is expressly stated to comply with the Statutory Requirements. 

Points for contractors to consider when reviewing these provisions:

1. The Contractor is under no express obligation to search for any divergence from Statutory Requirements in the Employer’s Requirements but if it fails to find a divergence and the resulting Works do not comply with Statutory Requirements, then the Contractor will be in breach of compliance with clause 2.1.1, notwithstanding that the error lay in the Employer’s Requirements. Contractors therefore need to check that the Employer’s Requirements and any Employer’s instructions do comply with the Statutory Requirements in the same way that they must check that their own design documents comply.
2. The only exception to the Contractor’s general obligation to carry out and complete the Works in compliance with Statutory Requirements is set out in clause 2.1.2, under which the Contractor’s obligation to comply with the Statutory Requirements do not apply to the extent that the relevant part of the Employer’s Requirements state specifically that the Employer’s Requirements comply with the Statutory Requirements. The Contractor is relieved of its duty only when the Employer’s Requirements make a positive assertion of compliance. If an amendment becomes necessary because a part of the Employer’s Requirements which specifically states that it complies with Statutory Requirements does not, in fact, comply, then the Employer must issue an instruction under clause 3.9 effecting a Change (clause 2.15.2.3). In reality this exclusion is likely to offer little protection, as it is unlikely that the Employer would include such express statements in the Employer’s Requirements.
3. The risk associated with divergences in the Employer’s Requirements will depend on the level of detail included within the Employer’s Requirements. The greater the level of detail the greater the risk. It is the JCT’s intention that the Employer’s Requirements should not contain detailed design. In practice they often do and the Contractor has to “spot the needle in the haystack” in terms of compliance with Statutory Requirements.

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• 1. With thanks to Mark Pantry for his practical insights.