assignment in jct contract

STEPHENSON HARWOOD

06 Aug 2021

Assignment under JCT: a costly lesson for beneficiaries

In the recent judgment of Aviva Investors Ground Rent Group GP Limited and Aviva Investors Ground Rent Holdco Limited v Shepherd Construction Limited [2021] EWHC 1921 (TCC), the TCC has taught a costly lesson to the beneficiary of a purported assignment who was seeking to pursue a claim against a contractor under a JCT building contract.

The crux of the case depended on the interpretation of an assignment provision in the contract that permitted the Employer to assign the right to bring proceedings in its name to a subsequent owner of the property. Despite the clause first featuring in the JCT standard form in 1987, there had been little commentary on it prior to this case.

Background to the claim

A developer called Camstead Limited employed Shepherd Construction Limited to demolish an existing building and construct new self-contained student apartments in Cambridge pursuant to an amended JCT Design and Build Contract 2005 Edition.

After completion of the works, the freehold interest in the property was conveyed twice, first to an investor called RMB and then to Aviva.

Following the tragic Grenfell Tower fire in 2017 and subsequent government guidance relating to fire risk assessments, Aviva investigated and identified various fire safety defects at the Property. Aviva issued proceedings against Shepherd in September 2020 and relied on a deed of assignment between Aviva and Camstead that purported to assign to Aviva the full benefit of the JCT contract and the right to bring proceedings. The deed of assignment was executed at or around the same time as the issue of the court proceedings in which Aviva advanced claims for damages of over £4 million, being the alleged cost of the necessary remedial works.

The court applications and assignment provisions

The judgment deals with two interim applications, the first from Aviva to join Camstead as a Claimant and the other from Shepherd to strike out Aviva's claim.

It was Shepherd's case that there was no valid assignment and so no basis to join Camstead. This argument turned on the proper interpretation of two clauses under the JCT contract, namely:

• Clause 7.1.1 (amended from the standard form): " The Employer shall be entitled upon giving the Contractor 14 days' written notice of its intention to do so, to assign the benefit of this contract by absolute assignment to any person (save any to whom the Contractor makes reasonable objection in writing before the expiry of the said period of 14 days) and in this contract the term "Employer" shall be construed accordingly. "
• Clause 7.2 (unamended from the standard form): " Where clause 7.2 is stated in the Contract Particulars to apply then in the event of transfer by the Employer of his freehold or leasehold interest in or of a grant by the Employer of a leasehold interest in the whole of the premises comprising the Works or (if the Contract Particulars so state) any Section, the Employer may at any time after practical completion of the works or of the relevant Section grant or assign to any such transferee or lessee the right to bring proceedings in the name of the Employer (whether by arbitration or litigation whichever applies under this Contract) to enforce any of the terms of this Contract made for the benefit of the Employer… "

The TCC noted that whilst clause 7.1.1 required Camstead to give notice of the assignment and in effect to seek Shepherd's consent, that restriction was limited in practice because Shepherd could only raise a reasonable objection once that notice was given. However, on the facts of the case, Aviva accepted that there had been no assignment under clause 7.1.1 because no notice of the purported assignment had been given to Shepherd. In the words of the TCC, Aviva had therefore 'pinned its colours to the mast' by relying on a purported assignment under clause 7.2 instead.

In response, Shepherd submitted that clause 7.2:

• only permitted assignment to the first assignee (i.e. not Aviva who was the second owner of the Property); and/or
• only allowed proceedings to be commenced in the name of Camstead as the original Employer under the JCT contract.

The TCC (Mrs Justice Jefford) agreed with Shepherd's arguments.

First, the TCC found that clause 7.2 is expressly concerned with a transfer by the Employer of a freehold or leasehold interest and there was " no wording that would encompass a subsequent transfer by [the first] transferee to another ". A distinction was therefore drawn between (a) the initial transfer of the freehold interest of the Property from Camstead to RMB and (b) any subsequent transfer of the freehold interest. Accordingly, the purported assignment from Camstead to Aviva, as the second owner of the Property, could not take effect under clause 7.2. The TCC went on to say that, even if clause 7.2 could be interpreted as applying to subsequent owners as well as the first transferee, it would nevertheless make commercial sense for it to be construed in a limited way. This is because, if clause 7.2 permitted Camstead to assign to any subsequent owner without consent, it would render clause 7.1.1 largely superfluous.

Secondly, the TCC found that " all that can be assigned [under clause 7.2]… is the right to bring proceedings in the name of the Employer " (emphasis added). Thus, the claim should have been brought in the name of Camstead, and Aviva could not advance a claim for its own losses. The TCC came to this conclusion because that is what the clause says and, if clause 7.2 permitted Camstead to assign to a subsequent freehold owner the right to bring proceedings and claim that subsequent owner's losses, it would have the effect of permitting an assignment of the benefit of the JCT contract without notice or consent, which would again render clause 7.1.1 pointless.

In light of those findings, the TCC accepted Shepherd's application to strike out Aviva's claim and denied Aviva's application to join Camstead to the proceedings.

Practical lessons

The TCC's primary finding that clause 7.2 only permits an assignment to the first assignee, and not any subsequent assignees, limits its application significantly. Had Aviva had the benefit of a valid assignment under clause 7.1.1 (i.e. with notice), it would not have needed to rely on clause 7.2 and that would have ultimately saved its claim from being struck out. This case is therefore a salutary reminder to ensure that you comply strictly with the assignment clause, or else risk having no recourse should things go wrong.

The other decision from the TCC that clause 7.2 only permits the assignment of the right to bring proceedings in the name of the Employer is perhaps unsurprising given the clause's clear and unambiguous wording. However, it does call into question what purpose the clause has if the assignee cannot rely on an assignment under clause 7.2 to bring a claim for its own losses. The TCC's response to this is that such an assignment gives the assignee the right to enforce the obligations of the Contractor after practical completion, such as the obligations to make good defects or to pay liquidated damages for delay. Further, although not addressed in the judgment, it is possible in limited circumstances for an Employer to recover losses sustained by a new building owner. However, the claims that a new owner can bring pursuant to a clause 7.2 assignment are not as far-reaching as might have been expected. It follows that the new owner would be well advised to seek an assignment under a provision like clause 7.1.1 instead.

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Assignment, construction law, and legal black holes: another illustration

David Sawtell is a barrister at 39 Essex Chambers and PhD student at the University of Cambridge.

David Sawtell

Time to read

The decision of Jefford J in Aviva Investors Ground Rent Group GP Ltd v Shepherd Construction Ltd [2021] EWHC 1921 (TCC) illustrates one of the potential difficulties encountered when the current owner of a building, who was not the original contracting party with the contractor, seeks to bring a claim for construction defects. The new building owner has a loss in the form of remediation costs, but no contractual claim. The original employer has the benefit of the contract, but no practical interest in bringing a claim. An assignment of the original employer’s rights to the current owner is a commonly used device to bridge that gap, which has sometimes been described as a ‘legal black hole’. The Aviva v Shepherd case demonstrates some of the difficulties that may be encountered in the process.

The importance of assignment

Subject to limited exceptions, the normal rule in English contract law is that for a party to bring a successful claim for breach of contract, they have to be a party to that contract. There are many reasons, however, why a contracting party may want to allow another party to take on their right to claim under a contract. In construction, the party engaging the contractor (the employer) might want to allow a new owner of the building to claim for any breach of contract against the contractor in their own name. Subject to any contractual prohibition, it is generally possible for the employer to transfer the benefit of the construction contract to the new owner by way of assignment.

By an assignment, the party who has suffered the loss can acquire the benefit of the construction contract. The original employer is often not the party who now owns the building suffering from construction defects. The party with the claim for breach of contract would not be the party who has suffered the loss. The danger is that the financial loss for the cost of remediating those defects may “ disappear . . . into some legal black hole, so that the wrongdoer escaped scot-free ” (Lord Keith of Kinkel in G.U.S. Property Management Ltd. v. Littlewoods Mail Order Stores Ltd 1982 SLT 533, 538). The House of Lords in Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd  accepted that the original contracting party may be entitled to enforce against the contractor on behalf of the third party. This option, however, may not be open to the new owners. The original employer might not exist anymore or be insolvent, or otherwise unwilling or unable to bring a claim on behalf of the new owners. Instead, it is often preferable for the new owners to have the benefit of the construction contract themselves by way of an assignment.

The law of assignment is, however, technical. As Hudson on Construction Contracts (14 th edition, Sweet & Maxwell, 2021) accurately reflects at paragraph 9-002:

“The pitfalls associated with the assignment of the benefit of quality obligations have not yet been resolved so satisfactorily. The standard forms of contract have not solved all of them, nor have they been solved by legislation.”

The facts of the case

The claimants in Aviva v Shepherd had to overcome a contractual prohibition on the employer being able to assign the benefit of the construction contract. The House of Lords in Linden Gardens upheld the validity of such prohibitions on contractual assignments. The standard form construction contracts (including the commonly used JCT contracts) reflect the fact that the contractor will want to deal with the original employer during the construction phase, but that the employer may well want to assign the benefit of the construction contract after practical completion. If the assignment was invalid, then the Aviva claimants had no claim.

The original employer, Camstead Ltd, had engaged Shepherd to build new student apartments in Cambridge. After practical completion, Camstead conveyed the freehold interest in the property to a group of companies. The freehold was conveyed a second time to the Aviva claimants. It was then discovered that the building had a number of construction defects relating to both fire safety and other issues.

Camstead entered into a deed of assignment with the Aviva companies, transferring its rights under the contract. The Aviva claimants issued proceedings against Shepherd. Shepherd applied to strike out the claim on the basis that there was no valid assignment from Camstead to the Aviva claimants.

The ultimate conclusion of the case was that the new owners of the building had failed to circumvent the prohibition on assignment and that consequently the assignment from Camstead to them was ineffective, leaving them without a claim.

The prohibition on assignment

The contract in the Aviva v Shepherd case contained a slightly modified form of the standard JCT wording, at clauses 7.1.1 and 7.2.

Clause 7.1.1 stated that, “ The Employer shall be entitled upon giving the Contractor 14 days’ written notice of its intention to do so, to assign the benefit of this contract by absolute assignment to any person (save any to whom the Contractor makes reasonable objection in writing before the expiry of the said period of 14 days) and in this contract the term “Employer” shall be construed accordingly .”

Clause 7.1.1, therefore, allowed the original Employer to assign the benefit of the contract to any person before or after practical completion, but only upon giving notice to the Contractor, Shepherd, who was able to make a reasonable objection.

Clause 7.2 stated that, “… in the event of transfer by the Employer of his freehold or leasehold interest in or of a grant by the Employer of a leasehold interest in the whole of the premises comprising the Works or (if the Contract Particulars so state) any Section, the Employer may at any time after practical completion of the works or of the relevant Section grant or assign to any such transferee or lessee the right to bring proceedings in the name of the Employer (whether by arbitration or litigation whichever applies under this Contract) to enforce any of the terms of this Contract made for the benefit of the Employer …..”.

Clause 7.2 provides for an exception to the requirement for notice and implied consent under Clause 7.1.1: after practical completion of the works and in the event of the original Employer transferring their freehold or leasehold interest in the premises, the Employer could grant or assign to that transferee or lessee the right to bring proceedings in the name of the Employer without notice to or consent from the Contractor.

No notice of the assignment to Aviva had been given. It was accepted that they could not rely on Clause 7.1.1. The question for Jefford J was whether they could, instead, rely on Clause 7.2.

The answer to this turned on its correct interpretation. For a number of reasons, it was held that the assignment was ineffective and that Aviva therefore did not have a claim against Shepherd. The main point for Jefford J was that the reference to ‘the Employer’ in Clause 7.2 was held to be to the original employer. The transfer of the freehold to Aviva was not from Camstead, but from a subsequent transferee. Clause 7.2 did not encompass a transfer from that first transferee to a second onward purchaser. That was enough to dispose of the claim. Jefford J then went on to hold that, in any case, all that Clause 7.2 allowed to be assigned was the right to bring proceedings in Camstead’s name, as opposed to bringing them in the Aviva claimants’ own name.

No assignment of the tortious claim

The Aviva companies’ argument that Clause 7.2 did not prohibit an assignment of any rights in tort was also rejected. It was unclear how far this argument would have got the Aviva companies in any case: following Robinson v PE Jones   (Contractors) Ltd [2011] EWCA Civ 9 , it was extremely doubtful that Shepherd owed Camstead a relevant duty of care in tort. Jefford J noted that there was no apparent authority as to whether these clauses prohibited transfers of claims in tort. She ultimately concluded that any duty that Camstead could rely on would only arise from the existence of the contract and the contractual obligations. This was a benefit of the contract which was therefore caught by Clause 7.1.1.

Conclusion - technical difficulties

The technical difficulties encountered by the Aviva claimants were real ones. It is quite common for contracts and collateral warranties to contain a prohibition on onward assignment of the benefit of the construction contract to subsequent transferees after the first transfer from the original employer to a new lessee or freehold owner. This can be overlooked in company group restructuring or in other conveyances. Assignment provisions need to be read carefully and complied with to avoid falling into the kind of pitfalls encountered in this case. Unfortunately, this is yet another illustration of the potential obstacles that a subsequent owner of a defective building might face when seeking to recover their losses from the original contractor.

How to cite this blogpost (Harvard style)

Sawtell, D. (2021) Assignment, construction law, and legal black holes: another illustration. Available at: https://www.law.ox.ac.uk/housing-after-grenfell/blog/2021/08/assignment-construction-law-and-legal-black-holes-another (Accessed [date])

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Assign of the times? JCT clause 7.2

The assignment clauses

The dispute.

• clause 7.2 only envisaged assignment to the immediate (or first) assignee;
• the clause only allowed proceedings to be commenced in the name of the original Employer (i.e. Camstead); and
• any proceedings could only be for losses suffered by the original Employer.
• " all that can be assigned, as the clause [7.2] says, is the right to bring proceedings in the name of the Employer " and so any claim would have had to have been brought in the name of Camstead; and
• " There is no wording that would encompass a subsequent transfer by [the transferee of the original Employer] " as in the clause " [t]he words "any such" plainly refer to the person to whom an interest has been transferred or granted by the Employer " (i.e. not by any other party). Therefore, only the first transferee/assignee, Hotbed, could bring such a claim in the name of the Employer.

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What You Need to Know about the JCT Standard Building Contract

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Even for those who work in the UK construction industry, exactly what the JCT Standard Building Contract does can be somewhat murky.

However, it is necessary to understand this contract. Back in 2011, in the UK alone, there were over 65,000 complaints about builders. The Joint Contracts Tribunal (JCT) has attempted to optimize the building process in the UK by publishing consistent contracts and guidelines that contractors and builders should adhere to.

Today, we’ll be covering the basics of the JCT Standard Building Contract, so you can gain more clarity when conducting construction projects in the UK or collaborating with UK builders.

Table of Contents:

Introduction

The various jct contract forms, benefits of using a jct contract, considerations when using a jct contract, format & provisions.

The Joint Contracts Tribunal (JCT), founded in 1931, is an organization that represents many interests in the construction and building industries in the UK.

It has produced many standard forms of documentation, such as guidance notes and contracts, for the UK construction sector. Note that if you do come across a reference to a “JCT contract”, it will likely refer to a standard building contract.

These contracts are, like architectural construction documents , extremely helpful, if not crucial, in construction projects.

Usually, JCT contracts are made between contractors and employers to facilitate the building project delivery process.

The contracts state all relevant terms and conditions, including costs, specifications, and obligations of all parties. Hence, all parties can understand what needs to be done, the due dates, the costs, and who needs to do what.

The Standard Building Contract can be used with traditional methods of procurement where the design is finished prior to the beginning of the tendering process. You can use it along with the JCT Standard Building Sub-Contract.

Note that the JCT rewrites and revises the forms each decade or so. The most recent one is the 2016 version. This includes some new features, including revisions of the Section 4 Payment provisions, revisions of the Collateral Warranties requirements, provisions for Parent Company guarantees and grant of performance bonds, and more.

JCT contracts are, essentially, a suite of contracts that are available for use in forming clear, legally binding and formal contracts for construction projects.

Their popularity can be attributed to them suiting a wide range of procurement options and projects, as well as their goal of being fair to each party involved.

The range of contracts can be used for everything from simple home extensions to complex, multi-million pound construction projects.

The most commonly used contracts, as listed by JCT, are the JCT Standard Building Contract, Minor Works Building Contract, and Design and Build Contract.

There are many benefits to using a JCT contract beyond responsibilities and roles.

Resolution of Disputes: JCT contracts contain information on how to deal with disputes. Often, the provisions will nominate an adjudicator or arbitrator who can make decisions regarding the parties’ accountability. Hence, there is a lower chance of having expensive and long court proceedings.

Risk Allocation: Thanks to the contracts’ standard formatting, all parties will usually be familiar with project risks and their distribution for each side. The goal is for the terms to not favor any party.

Standardization : Since JCT has been around for so long, their contracts take into account most challenges that could be expected to arise during a project. This saves contractors and builders the trouble of drafting a new custom contract.

Protection Against Poor Contractors : The contracts can be used as a way of protection against poor contractors. Most eventualities, such as penalties for overdue work, are covered in the contract.

It is crucial that you understand what the contracts include, especially if you are unfamiliar with utilizing them. Here are some things to consider:

Requirements Must Be Accurate : If there is a poor assemblage of requirements, it may lead to unsatisfactory results on behalf of the contractor.

Time & Money Involved : The cost and time-frame of the project will increase if there are disagreements, which will result in negotiations over the terms and conditions of the JCT contract.

Lack of Flexibility : Once a contract has been made, it will be difficult to make any changes to the requirements. Furthermore, any changes made could lead to project delays and higher costs.

Beware of Lack of Review : If, prior to signing, the agreement has been improperly reviewed or drafted, or if it has been heavily amended, you may end up agreeing to unfavorable terms.

Most JCT forms follow the following format:

Articles of agreement

Particulars

Conditions are often further subdivided into:

Definitions

Carrying out work

Control of work

Damage, injury & insurance

Collateral warranties, third party rights & assignment

Termination

Disputes settlement

As with all contracts, you might benefit from a solicitor who can ensure that the contract has been properly reviewed and drafted.

Another necessary element in smooth construction work is construction documentation . BluEntCAD provides high-quality drafting services with a quick turnaround time. We serve home builders, real estate developers, large architectural and engineering companies, and custom home designers. Browse our portfolio to see how we’ve helped companies like yours.

Ready to make your next construction project a success with proper construction documentation ? Contact us now!

Your Citation

CAD Evangelist. "What You Need to Know about the JCT Standard Building Contract" CAD Evangelist, Oct. 14, 2022, https://www.bluentcad.com/blog/jct-standard-building-contract/.

CAD Evangelist. (2022, October 14). What You Need to Know about the JCT Standard Building Contract . Retrieved from https://www.bluentcad.com/blog/jct-standard-building-contract/

CAD Evangelist. "What You Need to Know about the JCT Standard Building Contract" CAD Evangelist https://www.bluentcad.com/blog/jct-standard-building-contract/ (accessed October 14, 2022 ).

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JCT Contracts Explained

What is a jct contract.

The JCT contracts are a suite of building contracts that are available as off-the-shelf products for use in forming formal, clear, and legally binding contracts on construction projects. 

The JCT suite is one of the most commonly used contract suites in the UK construction industry, and its widespread popularity can be attributed to a combination of the JCT having designed standardised forms to suit a wide range of projects and procurement options, and the forms having been drafted to be fair for each party to the contract.

The different JCT contract forms

The JCT produce a wide range of contracts from those designed for use on simple home extensions, right through to contract forms suitable for the most complex multi-million-pound projects.  

The JCT list their most commonly used contracts as the JCT Standard Building Contract, Design and Build Contract, and Minor Works Building Contract.

The Standard JCT Contract

The Standard JCT Contract is drafted to suit larger works, or works of a complex nature that involve a high degree of building services or specialist work and its drafting to include provisions allowing:

• for the contractor to design discrete parts of the works.
• works to be carried out in sections.
• for specialists to be named in the contract.

The Standard JCT Contract provides for the works to be designed or detailed on behalf of the Employer, and for the Employer to provide drawings and documentation to define the scope and quality of the works. The Standard JCT Contract is also available in several variations depending on whether the contract is to be a lump sum or is subject to remeasurement. 

The Standard Form is typically seen on large complex commercial construction projects, particularly where specification and design are important factors the Employer. 

The JCT Design and Build Contract

The JCT Design and Build Contract is drafted to suit projects where the Contractor is to be responsible for both completing the design of the works and the construction of the works. In such instances the Employer will provide detailed information to the Contractor, known as the Employer’s Requirements and the Contractor is paid a lump sum price to complete the detailed design and construction of the Employer’s Requirements.

This form of contract is very popular due to its single point of design responsibility, which means that if a defect is found the Employer need only pursue the Contractor rather than ascertain whether it arises from faulty workmanship or the design of one of the various consultants. 

The Design and Build Contract is typically seen on a wide range of commercial projects, particularly where certainty of cost and speed of construction are important factors for the Employer. 

The JCT Minor Works Contract

The JCT Minor Works Contract is drafted to suit projects where:

• the work involved is simple in character; 
• the work is designed by or on behalf of the Employer;
• the Employer is to provide drawings and/or a specification and/or work schedules to define adequately the quantity and quality of the work; and
• an Architect/Contract Administrator is to administer the conditions.

There is also a version of the Minor Works Contract which contains provisions for the Contractor to design part of the works.

The Minor Works forms are typically seen on small simple commercial projects. 

Which JCT contract should I choose? 

A key question that is often asked is which form of JCT contract should I choose for my project. The answer as to which form is most appropriate will depend upon the nature of the project and the most suitable procurement route for that project, taking into account project deliverables as to time, cost and quality. A further factor to then consider is whether the conditions within the standard suites should be amended to suit the specific needs of your project. 

Procurement, contract selection and drafting contract amendments are an important task as the resulting contract will define the parties’ roles, rights, and obligations for the project. Getting this wrong can have a significant negative impact on the project or one or more parties. 

As such we would recommend that you contact us prior to selecting a form so that we can provide detailed procurement and contract advice specific to your needs.

The format of the JCT contract and its key provisions 

The majority of JCT forms follow the standard format of: 

• Articles of Agreement
• Contract Particulars (where the parties set out project-specific information)
• Conditions of Contract; and
• Schedules (which can be added into the contract if desired)

The Conditions are then typically divided into the following main sections:

• Definitions
• Carrying out the works
• Control of the works
• Injury, damage and insurance
• Assignment, third party rights and collateral warranties
• Termination
• Settlement of disputes

It is beyond the scope of this article to discuss each clause in detail. However, please do contact us if you require detailed advice on specific contract clauses.

Contract amendments

Any amendments to the contract should be checked closely as they can alter your rights and become onerous contracts. Onerous points to be aware of include bespoke or amended payment provisions, defects and retention, set-off clauses, design responsibility, extension of time, loss and expense, condition precedent, acceleration, supplementation, and contract termination. Our advice guide on onerous construction contracts explains how to deal with these provisions. 

How we can help you

It is critical to take appropriate advice before entering into any form of building contract. The implications of entering into a contract that does not properly document your intent can lead to you taking on more risk and responsibility than you intended. This in turn can be catastrophic if an issue arises on the project. Many construction disputes can be mitigated by ensuring that the construction contracts are properly prepared and understood prior to commencement.

At Arbicon we offer advice in respect of procurement routes, contract drafting, clause amendments and also regularly undertake risk reviews of contracts that you may have been asked to enter.

If you would like advice on a JCT contract, or have a JCT dispute, please use our  contact form  or call one of our offices.

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JCT Design and Build Contract

In this article I’ll discuss the principles of Design and Build Contracts by reference to the Joint Contracts Tribunal (JCT) suite of contracts. This is followed by a clause by clause guide to using the JCT Design and Build Contract.

Chapter 1 – Introduction to the JCT Design and Build Contract

What is Design and Build Contracting?

“Design and Build is a contractual arrangement in which the contractor offers to design and build a project for a value inclusive of both the design and construction costs.”

In Design and Build Contracting there is reference to three key stakeholders:

• The Employer – the client for the overall project
• The Contractor – the   Main Contractor   on the project
• The Subcontractor(s) – any Subcontractor(s) employed on the project

The simple concept that makes Design and Build Contracts different to traditional is that the Employer seeks to transfer more design responsibility to the Contractor. The Contractor has greater design input on a Design and Build Contract than with the traditional   procurement route . Under the JCT Design and Build Contract, the Contractor has an equal-level of design responsibility as the Architect.

Design and Build is a modern   Procurement Route in construction , unlike in other industries where it has been in use for a long period of time. Construction has lagged behind due to the emergence of architecture as a profession that has led the industry for the majority of the past century.

Chapter 2 – Where to find key Clauses

It can be difficult to identify Clauses in the JCT Design and Build Contract with ease. The table below extracts the page number and Clause reference for the important day-to-day Clauses.

Chapter 3 – How to use the JCT Design and Build Contract?

The JCT Design and Build Contract is a detailed and lengthy contract with over 100 pages, but it is designed to be simple to navigate if you know where to look. The Contract is split into three sections; the Articles of Agreement; the Conditions and the Schedules.

These sections are further broken down into subsections. Using the table below, the key Sections, Subsections, Clauses and Page numbers are identified based on the 2016 edition of the JCT Design and Build Contract.

Chapter 4 – Navigating and Understanding the JCT Design and Build Contract

1. the articles of agreement, articles of agreement and recitals (pages 1 – 2).

This section of the Contract is where you will find details of the date of the Contract and who the parties to the contract are – their registered company name, registered address and company registration number.

The Articles (pages 3 – 5)

There are nine different Articles included in this section of the contract and in effect the Articles provide headline details on the major agreements within the Contract. A description of each is provided in the table below:

The Contract Particulars (pages 6 – 17)

The Contract Particulars in the JCT Design and Build Contract state the aspects of the Contract that are bespoke and particular to the specific project. This section includes:

• Where to find the Employers Requirements and Contractors Proposals
• Where to find the   Contract Sum Analysis   (breakdown of the price of the works)
• The Date for Completion of the Works
• The Date for Possession of the Site
• Sectional Possession and Sectional Completion dates
• The rate of Liquidated Damages
• The length of the Rectification Period
• The Retention percentage

The Attestation (pages 18 – 24)

The Attestation pages are the area of the Contract where the signatures and details of the individuals who signed the contract can be found. You will also find whether the Contract is   signed under hand or as a Deed .

There are key differences between contracts   signed as a Deed or Under Hand . Executing a contract as a Deed means that the limitation period for starting legal proceedings for a breach of contract is significantly longer – 12 years rather than six if signed underhand.

2. The Contract Conditions

Clause 1 – the definitions and interpretations (pages 25 – 31).

This section deals with how the Contract is to be interpreted by the parties and potentially by any third party in the event of a dispute.

The   Definitions   explain the formatting of the Contract. For example, when a word or phrase in the Contract starts with a Capital Letter this is a defined term in the Contract. This means the term can be defined by the list of definitions on Page 25 of the Contract, which explain exactly what that word means in the context of the Contract.

Knowledge of this fact makes understanding and using the Contract much easier. Here are some examples:

• “ Contract Sum ” is defined in the Contract as “the sum stated in Article 2”.
• “Business Day” is defined as “any day which is not a Saturday, a Sunday or a Public Holiday”

With regards to   Interpretation , pages 29 to 31 detail how the Contract and the terms and conditions within it are to be interpreted. This is useful to understand in the event there is a disagreement regarding any matters during the project.

An example of its application could be used in the event there is a disagreement about the Scope of Works:

• The Employer states that a brick wall is included in the Scope as it’s shown in the Contract Scope of Works document.
• The Contractor states the brick wall is excluded by referring to an email where it was excluded during Tender Stage. This email excluding the brick wall is however not included in the Contract.

In this case, Clause 1.3 of the JCT Design and Build Contract regarding   Interpretation   is useful as it states:

“The Agreement and these Conditions are to be read as a whole. Nothing contained in any other Contract Document or any Framework Agreement, irrespective of their terms, shall override the Agreement or these Conditions.”

This means that the Contract Document is the entire agreement between the two parties and only documents included within it are relevant. Therefore, the Contractor’s email excluding the brick wall is irrelevant as it’s not a Contract document.

An understanding of the Interpretation clauses is important as it allows the parties to understand what the agreement is with clarity. It’s good practice to refer to this section before signing a Contract.

Clause 2 – Carrying out the Works (pages 32 – 41)

Clause 2 of the JCT Design and Build Contract lays out what the Contractor’s obligations are. Clause 2 includes many Clauses and Sub-Clauses which define the criteria under which the Works will be completed. The Clauses are summarised below:

Contractor’s Obligations   – Clauses 2.1 and 2.2 are focused upon the minimum expectations of the Contractor for the Works with a failure to meet the requirements effectively being a breach.

The Contractor under Clause 2.1 is required to “complete the Works in a proper and workmanlike manner” and to comply with the Laws of the country, including Health and Safety while Clause 2.2 focuses on materials, goods and workmanship selection in order to ensure these are suitable.

For example. the Contractor is obligated to “take all reasonable steps” to make sure its employees and operatives working on the project hold Construction Skills Certification Scheme (CSCS) cards which, in theory, would increase the quality of the workmanship and Health and Safety practices across the project.

Possession   – Clauses 2.3 to 2.6 detail the process of the Employer   handing over   the site to the Contractor. From the Date of Possession, the Contractor is obligated to “regularly and diligently proceed” which means that the Contractor must maintain regular progress of the Works. This wording obligates the Contractor to work every day moving forward until the works complete.

Clause 2.4 also states that if the Contract Particulars allow it, the Employer can delay the Date of Possession by up to six weeks.

Contract Documents   – Clauses 2.7 to 2.9 provide an explanation on where the contract Documents shall be held; what constitutes construction information and also how the site boundaries are defined. It’s is key that, on the Date of Possession being provided to the Contractor, the Employer should have already defined the site boundaries to the Contractor.

Discrepancies and Divergences   – Clauses 2.10 to 2.16 are important clauses in respect to the commercial management of the project.

Given large volume of documents included in the contract, there will be a discrepancy between contract documents. These Clauses explain how to manage discrepancies and confirm who is responsible and whether the matter constitutes a Change that often leads to an impact in terms of time and money.

An example of the application of this Clause is as follows:

If the Contractor identifies a discrepancy within the Architect’s Drawings (Employer’s Requirements) the Contractor is to notify the Employer of this and can confirm the cost of both and their intention to complete the cheaper option. If the Employer chooses the more expensive option, this is treated as a Variation to the   contract sum .

Design Work, Liabilities and Limitation   – Clause 2.17 allows the parties to understand the Design Liability and Limitation of the Contractor under the JCT Design and Build Contract. The Contractor has major obligations and the same level of responsibility as the Architect under a JCT Design and Build Contract. This is confirmed by the following wording:

“…the Contractor shall … have the same liability to the Employer … as would an architect or other appropriate professional designer…”

Fees, Royalties and Patent Rights   – Check this Clause to understand the impact of Fees, Royalties and Patent Rights deriving from the design works. What the contract says here is that any Royalties or Fees (relating to the Employer’s use of the design) are deemed to be included by the Contractor in the   Contract Sum   and cannot be charged as extra.

Unfixed Materials and Goods – property, risk etc.   – This Clause relates to ownership and payment of Materials on and off site as well as who holds the risk for damage to these materials.

Where payment for materials on site has been made, the materials become the   property of the Employer   and ownership of the materials is transferred. In terms of which party is responsible for loss or damage to them once ownership is transferred, check which Insurance Option, B or C, has been selected in Schedule 3 ( Insurance Options ).

Adjustment of Completion Date   – More commonly referred to as   Extension of Time , the Adjustment of the Completion Date Clauses are found from 2.23 to 2.25. These are some of the most important and commonly used Clauses in the Contract as they explain the grounds upon which a Contractor must submit a   Notice of Delay   and how a Contractor is able to adjust the completion date (apply for an   extension of time ).

Often, the Commercial success of a project hinges on the Contractor making regular Notices of Delay. Read our article on   Giving Notice   for more information on this.

Relevant Events   – A   Relevant Event   is an event during the progress of the works that causes a delay to the completion date and potentially gives the Contractor rights to request an   Extension of Time . Clause 2.26 defines in detail what constitutes a Relevant Event under the JCT Design and Build Contract. For more explanation of Relevant Events please refer to our article titled the   JCT and Relevant Events

Practical Completion, Lateness and Liquidated Damages   – These Clauses deal with matters relating to   Practical , Sectional and Non-Completion under Clauses 2.27 and 2.28. A key matter which often drives disputes is covered under Clause 2.29 which defines the exact rules that the Employer must follow if they wish to apply Liquidated Damages due to late completion by the Contractor.

Partial Possession   by Employer   – This Clause allows the Employer to take   Partial Possession   of the Project during the construction works and before   Practical or Sectional Completion .

Taking Possession in “parts” is interesting as in some cases the Employer can request the early Possession of parts of the site and should this happen it can be of benefit to both parties. For the Contractor, it can lead to the   early release of retention   and a reduction in their insurance obligations and the value of Liquidated Damages.

This kind of arrangement is not uncommon and an example of when this could happen is in the Construction of a Residential Tower. It may be that that the Tower is 10 storeys high and when levels 1 to 5 are finished, the Employer can move tenants in on these floors while Fit-Out works on the upper levels finishes.

Defects   – Clauses 2.35 and 2.36 state what the Contractor is required to do upon completion of the project in regard to defects and making good any defects during the   Rectification Period . This Period is usually 12, 18 or 24 months long. The length of the   Rectification Period   is confirmed on page 9 of the contract (in the Contract Particulars).

Contractor’s Design Documents   – Clauses 2.37 and 2.38 state how and when the Contractor must provide As Built Drawings which are drawings showing the final details of the project as constructed. These are required as during the construction process elements of the design are often changed on site due to physical constraints not foreseen during design.

As Built Drawings are important and tied to the release of the   Practical Completion   certificate by the Employer. The Contractor needs to have a procedure in place for managing and issuing As Built Drawings to ensure this does not impact the release of the   Practical Completion   Certificate.

The Clause also confirms that by signing the Contract, the Contractor grants the Employer unreserved rights to use its drawings and that this will not infringe any Copyright legislation.

Clause 3 – Control of the Works (pages 42 – 46)

Access and Representatives   – Clauses 3.1 and 3.2 are very simple and confirm that, always, the Contractor must allow the Employer access to the works and further, that the Contractor must appoint a nominated Site Manager at the start of the Works to be approved by the Employer.

Sub-Contracting   – these conditions describe the basis upon which the Contractor can   subcontract   elements of the work. The Contractor is not permitted to   subcontract   the whole or any part of the Works and, perhaps more importantly the Design, without the Employer’s prior consent. It is rare for consent to be withheld as the Employer must always act reasonably. However, the terms do require the Contractor to notify and receive consent.

Employer’s Instructions   – This section confirms the Contractor’s obligations to comply with reasonable instructions from the Employer. Should reasonable instructions not be complied with in seven days, the Employer can instruct others to complete the works and where an a dditional   cost (a cost higher than it would’ve been incurred using the Contractor) is incurred, this can be deducted from the   Contract Sum .

The Contractor does have a right to   reasonable   objection of instructions under Clause 3.9.2 which states that any instruction which alters the standard of any of the materials or goods can be reasonably rejected by the Contractor given their design obligations on the project.

CDM Regulations   – Clause 3 refers to both parties’ statutory obligations to one another regarding the CDM Regulations.

Clause 4 – Payment (pages 47 – 55)

Contract Sum and Adjustments   – This section of the Contract is all about money and on what grounds the   Contract Sum   can be adjusted. Clause 4.2 states that the   only   reasons for adjusting the Contract Sum are for costs associated to the following:

• Agreed Variation Works
• Agreed   Acceleration Works
• Agreed Fluctuations (see Contract Particulars)
• Agreed   Loss and Expense
• The Instruction of   Provisional Sums

Taxes   – Clauses 4.4 and 4.5 refer to the application of VAT and CIS taxes to the Contract Sum.

Payments and Notices   – Clause 4.7 to 4.11 deal with the construction payment process under the JCT Design and Build Contract. This   payment mechanism   is compliant with the most recent UK legislation from 2009, the   Local Democracy, Economic Development and Construction Act   and the Clauses are summarised as below:

• Clause 4.7   – Explains that the Employer shall make Interim Payments to the Contractor and that the Due Date shall be seven days after the Valuation Date and five days later the Employer shall submit their   Payment Notice   to the Contractor.
• Clause 4.8   – This clarifies what must be included in a   Payment Notice   and that it should show “the basis on which the [payment value] has been clarified.”
• Clause 4.9   – States that 14 days after the Due Date the Final Date for Payment falls. This date is the date when the Employer will transfer funds to the Contractor. This Clause references a “ Pay Less Notice ”; for more information on what a Pay Less Notice is refer to our article titled the JCT and Pay Less Notices.
• Clause 4.10   – This Clause clarifies the “Pay Less Notice”; for more information on what a Pay Less Notice is refer to our article titled the JCT and Pay Less Notices.
• Clause 4.11   – In the event of non-payment or non-compliance with the above-mentioned Clauses, the Contractor has the right to suspend works and the process for doing so is explained in this Clause.

Interim Payments – calculations of sums due   – Clause 4.12 to 4.15 identify the different valuation methods available to the parties under the JCT Design and Build Contract.

Listed Items   – Clause 4.15 refers to “Listed Items” in the Contract that are pre-agreed items to be included in interim payments for payment off-site. Listed Items will include the value of such materials and once paid, ownership passes to the Employer.

Retention   – Clause 4.16 to 4.18 confirms how the   Retention value   (see 4.18.1 of the Contract Particulars) is withheld and then paid back. During the Contract Works 100% of the retention is withheld form payments and then when the works reach   Practical Completion   50% of the retention is released, with the remaining 50% released upon expiry of the   Rectification Period .

Loss and Expense   – Loss and Expense is cost that results from the impact of   Relevant Events . Where a delay event has caused costs for either party this can be claimed as Loss and Expense and added/subtracted from the   Contract Sum .

Clause 4.20 clarifies the basis for doing this and states that “as soon as is reasonably” possible the Contractor must notify the Employer of Loss and Expense (also known as a   Relevant Matter ) and provide cost advice including any evidence of the costs in support. Within 28 days, the Employer must then reasonably confirm their acceptance or otherwise to these costs.

Final Statement and Payment   – Clause 4.24 obligates both parties to act promptly to conclude any commercial discussions after   Practical Completion   of the Works. The Contractor is required to submit their “Final Statement” (final cost assessment) within three months of   Practical Completion   and the Employer then has two months to conclude its assessment.

Clause 5 – Changes (pages 56 – 58)

General   – This Clause deals with Changes or as they’re more commonly known, Variations. Clause 5.1 clearly defines what matters are considered Variations.

The Valuation Rules   – these Clauses deal with how each party must Value the price of any variation and assessment falls under two main headers:

• Measured Works (Clause 5.4) – Where there is an increase in the Scope of Works the price should be consistent with the price in the   Contract Sum Analysis . For example, if the   Contract Sum Analysis   says Curtain Walling is charged at £500 per m² and there is an instruction for an extra 10m² this is to be charged at 10m² x £500. If there is no applicable rate in the Contract, then “a fair valuation shall be made” by both parties.
• Daywork (Clause 5.5) – Where the works can not be valued in line with Clause 5.4 – perhaps because they’re particularly one-off in their nature, or unique works not included in the Contract – they’re to be valued on a Daywork basis as per the rules in this Clause.

Clause 6 – Injury, Damage and Insurance (pages 59 – 66)

Personal Injury and Property Damage   – Clauses 6.1 to 6.6 deal with the Contractor’s obligations regarding Insurance and having suitable cover in place in the event of Personal injury or Property damage. This   insurance protection   must be held and maintained throughout the lifecycle of the project.

Insurance of the Works and Existing Structures   – Clauses 6.7 to 6.14 are to be read in conjunction with the Contract Particulars and the Schedules of the JCT Design and Build Contract. The Contract Particulars (page 13) state which   Insurance Option   has been selected (Option A, B or C) and Schedule 3 details the implications of implementing this.

Professional Indemnity Insurance   – Professional Indemnity Insurance, often referred to as PI cover, must be held by the Contractor to cover its professional expertise in the field of design. The Contractor holds the same level of liability as an Architect under the JCT Design and Build Contract and must hold Professional Indemnity insurance confirming this level of expertise.

Joint Fire Code – compliance   – Clauses 6.17 to 6.20 are to be read in conjunction with the Contract Particulars if the particulars state the Joint Fire Code applies. If it does apply refer to these Clauses for its application.

Clause 7 – Assignment, Performance Bonds and Guarantees, Third Party Rights and Collateral Warranties (pages 67 – 69)

Assignment   – Assignment is a legal term used in contract and property Law. It is the process whereby a person, the assignor, transfers rights or benefits to another, the assignee. The JCT Design and Build Contract does not allow Assignment of the Contract by either the Contractor or the Employer and Clause 7.1 confirms this.

Performance Bonds and Guarantees   – Clause 7.3 states that if the Contract Particulars (page 15) confirm that the contract includes for a   Performance Bond   then immediately upon signing of the Contract, the Contractor is to provide a   Performance Bond   to the Employer.

Third Party Rights from Contractor   and   Collateral Warranties   – Clauses 7A to 7E deal with the rights of 3 rd   Parties to the Contract.

An example of a 3 rd   party is a future Tenant or a Funder who may have rights to the Contract at a later stage. These 3 rd   parties may need to enforce specific terms of the contract and these Clauses give them the rights to do so.

For example, if the project was supposed to use certain, long-lasting, materials which it does not, these Clauses allow the 3 rd   party to enforce a contract term or to highlight a breach.

Collateral warranties   are more express agreements associated with specific 3 rd   parties such as a known tenant and provide for the duty of care in the Contract to be extended by one of the contracting parties to the 3 rd   party (not in the contract). A simple example of the relevance of this is the   Design and Build Contractor   owes a duty of care to the future occupier of the development in so far as any subsequent defects which may arise are concerned.

As with   Performance Bonds   and Guarantees, always check the Contract Particulars (page 16) to see which 3 rd   Party Rights or   Collateral Warranties   apply to the specific Contract.

Clause 8 – Termination (pages 70 – 75)

General   – This Clause deals with Contract Termination. The JCT Design and Build Contract require one or both parties to meet certain obligations. If these obligations are not met, the parties involved can enforce contract termination Clauses to void and close the contract.

One of the most common reasons for Termination is when one of the parties becomes insolvent and can no longer administer their obligations. Clause 8.1 details what the definition of insolvent means regarding a Company; a Partnership; an Individual or a Person.

Termination by the Employer   – Clause 8.4 states the various reasons for which the Employer is permitted to terminate the Contract. The Employer must give notice stating the breach and the Contractor then has 14 days to remedy the breach. If the Contractor does not remedy, the Employer can terminate the Contract “on, or within 21 days from” the expiry of the 14-days.

  If the Contractor is terminated, Clause 8.7 details the steps the Employer can take to appoint other persons to complete the works.

Termination by the Contractor   – Clause 8.9 states the differing reasons for which the Contractor is permitted to terminate the Contract.

One of the main reasons is a lack of payment in accordance with Clause 4.9. Lacking payment is one of the primary drivers for Contractor Termination and the Contractor must give notice of any breach giving the Employer 14 days to remedy the matter. If the Employer does not, the Contractor has the right to terminate the Contract “on, or within 21 days from” the expiry of the 14-day period.

Termination by either Party   – Clause 8.11 deals with more general causes for Termination whereby events outside of both parties’ control occur (i.e. civil commotion, terrorism, government intervention etc.). Where these events cause serious delay to the Contract either Party can give notice of their intention to terminate as per the rules in Clause 8.11.

Consequences of Termination   – Clause 8.12 confirms how costs (Loss and Expense) flows as a result of termination and how both parties should act in the case of termination.

If the Contract is terminated by the Contractor – the Contractor must as soon as is reasonably possible (within two months) prepare and submit details of the account including the value of the works completed; the cost of removal from site and any other loss and expense incurred. The Employer then has 28 days to assess the submission and is obligated to reasonably pay what is due.

Clause 9 – Settlement of Disputes (pages 76 – 77)

General   – In the event of a dispute, the JCT Design and Build Contract provides three different remedies that are available to the parties to stimulate resolution. Each have their advantages and disadvantages and are more suited to certain applications which should be considered dependant on the context of the dispute.

Mediation   – The JCT Design and Build Contract advocates the cheapest and quickest route. Mediation is a structured process where a neutral 3 rd   party (The Mediator) assists the parties in resolving the dispute through specialist negotiation techniques.

The problem with Mediation is that the result is non-binding and the Mediator cannot impose a decision on the parties. Any settlement must be on the basis that the parties voluntarily agree to accept it. With more contentious or high-value matters this is unlikely.

Adjudication   –   Adjudication   is another common form of   dispute resolution   that became familiar in UK construction with the implementation of the 1996 Housing Grants Construction and Regeneration Act. Adjudication is quick and relatively inexpensive but is still likely to be costlier for both parties than Mediation depending on the complexity of the issue.

Clause 9.2 details how the parties can instigate Adjudication and refers to the Contract Particulars for details of who the nominated contract Adjudicator is. The benefit of using Adjudication over Mediation is that the decision is binding. However, it’s possible for the ruling to be overruled if the dispute is referred to Arbitration or litigation (Court).

Arbitration   – This is a form of alternative   dispute resolution   which enable the parties to resolve disputes outside the courts.   Arbitration   sees any dispute being concluded by Arbitrators (a panel of one or more persons) and the decision is legally binding and enforceable. Clause 9.3 details the procedures and roles of both parties and the Arbitrator under the Contract.

The Contract Schedules

Schedule 1 design submission procedure (pages 78 – 79).

This section of the Contract is where you will find details on exactly how the Design Submission Procedure works and how the parties are to interact during the design stages of the project.

The Conditions state that:

• The Contractor shall submit its drawings to the Employer
• Within 14 days of receipt of these drawings, the Employer shall communicate to the Contractor, whether the document is considered to be A, B or C Status Contractor.

What do these statuses mean?

• A Status:   The document is 100% perfect and the Contractor can proceed.
• B Status:   The Contractor can proceed with the document but must incorporate the comments of the Employer.
• C Status:   The Contract cannot proceed and must resubmit the document for approval.

A practical note here is that this process can be mis-used to the detriment of the Contractor and progress of the works. Please consider therefore, that the Employer is only able to mark a document with a B or C status where:

 “the Employer [expressly confirms] that it is not in accordance with the Contract”

Therefore, the Employer must explain – by reference to the Contract – exactly why the Design Submission is not suitable. The Employer cannot simply state B or C status on the grounds of whether they like the design for example.

Schedule 2 Supplemental Provisions (pages 80 – 85)

This section details Supplemental Provisions that are to be used in the Contract if the Contractor Particulars state they’re to be used (see page 6, 7 th   Recital). Where these Supplemental Provisions are stated as “Apply” then the Terms included in the Schedule become enforceable conditions to be followed by both parties.

Schedule 3 Insurance Options (pages 86 – 88)

In Clause 6 of the Conditions it is noted that   Insurance Options   A, B and C could be chosen at the outset of the Contract. Schedule 3 simply details what the practical implication of the various options are and how they’re enforced. Refer to page 13 of the Contract Particulars to see which   Insurance Option   applies to the specific contract.

Schedule 4 Code of Practice (page 89)

The Code of Practice is a Schedule which relates to Clause 3.13.3 of the Conditions (page 45) for Work that is not considered to be in accordance with the Contract and is designed to make the operation of opening or testing the Works simple and standardised. This Clause provides a detailed procedure of what to do in this instance.

Schedule 5 Third Party Rights (pages 90 – 94)

This Schedule refers to Clause 7 of the Conditions regarding 3 rd   Party Rights. Check the Contract Particulars (page 16) to see which, if any, 3 rd   Party Rights apply to the specific Contract and then follow this Schedule for the procedure for applying the rights.

Schedule 6 Forms of Bond (pages 95 – 103)

The JCT Design and Build Contract simplifies the process of using   bonds   in the Contract by providing standard templates for; Advance Payment Bonds (Part 1); Off-Site Material Bonds (Part 2) and Retention Bonds (Part 3) within Schedule 6.

Check pages 10 to 12 of the Contract Particulars to see whether Bonds apply to the Contract and if so, use these standard templates to implement them.

Schedule 7 JCT Fluctuations Option A (pages 104 – 107)

On very large schemes which last for several years, the JCT Design and Build Contract has a Fluctuations provision. Fluctuation provisions provide a mechanism for dealing with the effects of inflation which on major, long-lasting projects, can be significant.

On larger schemes, the contractor can provide a tender based on current prices and then the Contract, using Schedule 7, makes provision for price fluctuations to specified items over the duration of the project.

The Fluctuation Clause in the JCT is almost exclusively limited to larger projects as with shorter projects, the Contractor is deemed to have included for any minor fluctuations within their Contract Sum. To see if the Fluctuation provision applies in the Contract check page 10 of the Contract Particulars.

Chapter 5 – Summary and Conclusion

Since inception, the JCT Design and Build Contract has grown in popularity and usage in the UK Construction Industry. There are few Employers who dislike the Contract as it provides a high-quality alternative to the Standard Building Contract and offers increased cost certainty from an earlier stage.

This form of contract is however complex and must be studied in detail at tender and contract execution stage so that both parties understand their obligations under the Contract form.

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Restrictions on the assignment of rights in construction contracts

Published by a lexisnexis construction expert.

An assignment is the transfer of a right or an interest vested in one party (assignor) to another party (assignee), eg the transfer of the employer’s rights under a construction contract to the purchaser of the completed works. For the purposes of this Practice Note, the other party to the contract where the rights are being assigned is referred to as 'obligor'.

For further information on what an assignment is, why it arises in a construction context, how it operates and what steps are needed to put in place effective assignments, see Practice Note: Assignment in construction contracts. See also Practice Note: Legal and equitable assignment in construction contracts for guidance on the different ways parties can give effect to an assignment in construction projects (either legally or in equity) and the requirements for each.

Where a construction document, such as a building contract, collateral warranty or consultant appointment, is silent on the subject of assignment, then generally the rights under the contract can be freely and unilaterally assigned by an assignor to a third

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Related legal acts:

• Industrial and Provident Societies Act 1965 (1965 c 12)
• Law of Property Act 1925 (1925 c 20)

Key definition:

Assignment definition, what does assignment mean.

An assignment is 'an immediate transfer of an existing proprietary right, vested or contingent from one party to another'. Assignments can occur by consent or by operation of law.

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The wrongs of assigning rights

JCT assignment provisions seldom fall under the court’s microscope. This makes a recent TCC decision about such clauses in the context of whether an employer could be joined to a cladding claim all the more important. This is not a final judgment but is instead a consideration of an interim strike out application involving Aviva Investors Ground Rent Group GP Limited and Aviva Investors Ground Rent Holdco Limited v Shepherd Construction Limited [2021] EWHC 1921 (TCC).

In 2007, the defendant contractor (“ Shepherd ”) entered into a standard form JCT Design and Build Contract 2005 edition (the “ Contract ”) with the employer (“ Camstead ”) to build student flats in Cambridge. The Contract was made under seal for which the limitation period is 12 years.

There were five sections of works which achieved practical completion between September 2008 and April 2009. Camstead transferred the freehold in 2009 to a group known as the “Hotbed companies” who sold it on to the claimants (“ Aviva ”) in 2012.

Following updated government guidance on fire safety in January 2020 in the wake of the 2017 Grenfell tragedy, Aviva investigated the cladding and allegedly identified defects.

In September 2020, Aviva and Camstead entered into a deed of assignment. This purported to assign to Aviva the full benefit of the Contract and the right to bring proceedings.

At the same time as entering into the purported assignment in September 2020, Aviva issued proceedings against Shepherd for c. £4m in relation to remedial works arising from the alleged defects. Aviva notified Shepherd of the purported assignment three weeks later.

In January 2021, Aviva applied to join Camstead as a claimant; CPR 19.5(2) provides for the addition of a party to proceedings after the end of any relevant limitation period. Shepherd cross-applied to strike out the proceedings under CPR 3.4(2) on the basis that no reasonable grounds had been disclosed to bring the claim because there was no basis to join Camstead, no valid assignment and therefore Aviva had no right to bring the claim. They succeeded.

JCT assignment clauses

Two assignment clauses were scrutinised. Clause 7.1 gave the employer (Camstead) the right to assign the benefit of the Contract to any person: (i) if it provided 14 days' written notice to the contractor (Shepherd); and (ii) subject to any reasonable objection by the contractor before the expiry of the 14 days.

The Judge, Mrs Justice Jefford, referred to a hypothetical position in which there was no reasonable objection as meaning the contractor was giving implied consent. The unamended form of clause 7.1 provided that “neither the employer nor the contractor shall assign the contract or any rights under it without the written consent [our underlining] of the other” .

Clause 7.2 (which was in its unamended form) applied if the employer transferred the freehold or leasehold and entitled the employer to assign to "any such” transferee or lessee, the right to bring proceedings in the employer’s name to enforce the contract.

Aviva accepted that the lack of notice (or consent) required under 7.1 meant there had been no valid legal assignment of the right to sue but argued that there had been a valid equitable assignment under clause 7.2.

The decision

The Judge found that, under clause 7.2, only the right to bring proceedings in the name of the employer could be assigned; thus  proceedings had to be brought in Camstead’s name. Aviva was the wrong claimant. Furthermore, the words of the clause meant that the right could only be assigned to the first transferee, Hotbed. The clause could not be construed in a way which would cover the subsequent transfer by Hotbed to Aviva. Further, the clause did not permit an equitable assignment of the benefit of the contract (without notice or consent). Otherwise, this would mean the limitation in clause 7.1 would have no substantive effect since the employer would always be able to assign in equity, to any future owner, the right to bring proceedings without notice or consent.

She also found that clause 7.2 expressly concerned the assignment of contractual rights and was not a basis for an assignment of rights in tort.

It is, the Judge decided, “ inherently unlikely ” [our underlining] that a contractor will “ owe a duty of care to the employer to prevent or avoid economic loss ”. Why, asked the Judge, would a contract prohibit the assignment of causes of action in contract without consent but leave the possibility that a cause of action in tort could remain? The reality is that any duty in tort will generally coexist with a duty in contract and so assignment of that right would be subject to the terms of the deed. While it is conceivable that certain specific circumstances might give rise to a cause of action in tort, independent of contract, no such duty had been pleaded by Aviva.

There was no valid assignment from Camstead to Aviva and therefore no reasonable grounds to bring the claim. The Judge refused Aviva’s application under CPR 19.5(2) to join Camstead to the proceedings after expiry of the limitation period and granted Shepherd’s strike out application under CPR 3.4(2).

Another decision in the context of losses arising from potential cladding and fire safety risks. However and importantly, the Judge has only concentrated upon a narrow aspect of what was involved being contract interpretation or limitation on a summary basis. The court did not consider the wider issues which will be looked at if or when a claim proceeds to trial.

This case is of interest to practitioners, developers and contractors alike. It provides some analysis of the JCT forms addressing the importance of notice, consent and how the transfer of assignments are treated. It demonstrates the importance of checking the status of the claimant and the effect of clause 7.2. It is easy to overlook wording which has remained in place for 34 years with scant judicial consideration.

For further examples in our series of articles focussed on cladding related claims, see our articles about RG Securities and Martlett Homes .

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Jct design and build 2024.

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12.6: Assignment, Delegation, and Third Party Beneficiaries

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• Page ID 49082

Contracts are by law assignable and delegable. This means that the rights conveyed by the contract may be transferred to another party by assignment , unless an express restriction on assignment exists within the contract, or unless an assignment violates public policy. Likewise, the duties imposed on a party may be transferred to another party by delegation , unless the contract expressly restricts delegation, there is a substantial interest in personal performance by the original party to the contract, or if delegation would violate public policy.

As a general rule, a party may assign contract rights without the consent of the other party. This is common in the construction industry where a general contractor may assign rights and delegate duties to subcontractors for specific work that needs to be performed under the main contract. For example, the general contractor may delegate the duty to perform electrical work to an electrician, as well as assign the right to be paid for the work performed.

In delegation and assignment, the original contracting party is not “off the hook” if it transfers its duties or rights to another party. For instance, a subtenant assumed the rights and duties imposed on the original tenant in a lease. If the subletting tenant does not pay the rent, the original tenant is still liable.

The way to excuse oneself from legal liability under a contract is through novation. Novation is essentially a new contract that transfers all rights and duties to a new party to the contract and releases the previous party from any further obligation. It is the procedure in which one party is dismissed completely from the contract because a third party is substituted. In this situation, the dismissed party no longer has any liability under the original contract. To be effective, all parties must agree to the novation.

Third Party Beneficiaries

Assignment and delegation under a contract should not be confused with rights of third party beneficiaries. A third party beneficiary is someone who is not a party to the contract but stands to benefit from it. Life insurance policies are a classic example of contracts with third party beneficiaries. The insurance company and the insured are parties to the contract. But the person who receives payment upon the death of the insured is the third party beneficiary.

Third party beneficiaries can either be intended or incidental. An intended beneficiary is someone who the parties intend to receive the benefit of the contract. For example, the named beneficiary of a life insurance policy. The beneficiary does not need to know about the contract to have his or her rights vest.

An incidental beneficiary is someone who benefits from a contract but was not intended by the parties to benefit. For example, if a business pays for a professional to landscape its property, the neighbors are incidental beneficiaries to the landscaping contract. They benefit from the improved appearance and property values, but the business did not enter the contract with an intent to benefit them. Incidental beneficiaries do not have a legally enforceable interest in the contract.

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Giants Add UDFA PK Jude McAtameny to Roster

McAtameny will help take some of the load off of Graham Gano as he continues recovering from season-ending knee surgery.

• Author: Michael Lee
• Publish date: Apr 30, 2024

In this story:

The New York Giants have signed kicker Jude McAtameny to their 90-man roster.

Another Irish player signs to the NFL! Irish Kicker Jude McAtamney has signed with the New York Giants as a UDFA 🇮🇪 Congratulations Jude! 🏈 pic.twitter.com/XVBHhvizJ6 — NFL UK & Ireland (@NFLUKIRE) April 29, 2024

McAtamney, 6-2 and 205 pounds, hails from Derry, Ireland. He played two years of college ball at Rutgers; before that, he was a midfielder for the Derry Under-20s team.

In 2022, McAtamney played in all 12 games for the Scarlet Knights, going 12-for-18 on field goals, with five of his attempts coming at 40+ yards (including a long of 49 made twice). He finished as the team's scoring leader with 59 points.

Last season, McAtamney played in 13 games and earned Academic All-Big Ten honors. He set a Rutgers school record with 40 touchbacks on 60 kickoffs, with zero going out of bounds after setting in as the team's kickoff specialist. He only had one field goal attempt, which he did not convert.

McAtamney gives the Giants another leg to help take some of the onus off of Graham Gano, who is recovering from season-ending knee surgery. Gano is expected to be ready to play in Week 1 of the 2024 season, but the Giants want to ease his load in training camp while also giving McAtamney a chance to put together some NFL film.

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