You Should Switch to JCT 2016 Now

You should now switch your main contracts, or your sub-contracts if you are a contractor, to the 2016 editions now.

There are rumours that JCT 2011 will not be supported in the long term and this makes sense, though of course, changes that were contained in JCT 2011 were driven by changes to legislation (the amended Construction Act) whereas the changes that comprise the new 2016 documents were not.

If you are a contractor and your employer has asked you to price for work under a 2016 contract then that form will dictate which form of sub-contract you should be using and be in no doubt, if you are being asked to work under 2016 main contract then you should be using 2016 sub-contracts.

The simple reason for this is that they are not just subtly different but in some respects very different and this focuses principally on the amendments to the payment terms. 

If you need to know more we can tell you more, but the salient points are these:

  1. There is a new Interim Valuation Date that will be the same within the main contract and sub-contracts.  This is not the same as the date by when interim payment applications are to be made but this applications will need to all be in on or shortly before the Interim Valuation Date.   If a first interim valuation date is not stated then automatically the first date is one month after the date of possession.   This may not suit you. 
  2. The payment clauses are in section 4.  An employer or main contractor makes interim payments in accordance with section 4 depending on the basis of payment (stage payments or periodic) and of course the works might be valued on the adjustment basis or the re-measurement basis.
  3. From the outset right up to the due date for the final payment, the monthly due date for each interim payment at main contract level is 7 days after the interim valuation date.  This assumes that the interim payment application is made on or before the relevant interim valuation date so you need to co-ordinate sub-contractors to get their applications in in time to form part of the main contractor’s application to the employer on or before the relevant interim valuation date.
  4. An interim payment application must identify the “sum that the contractor considers to be due to him and the basis on which that sum has been calculated”.  If the application is received later than the relevant interim valuation date the due date is pushed back to 7 days after the date of receipt of the application.
  5. The paying party must still give a payment notice specifying the amount that the payer considers to be or have been due at the due date in respect of the relevant payment, and the basis on which that sum has been calculated.  That establishes the notified sum and that must be paid.  If you do not give a payment notice then there is a very good chance that the application will specify the notified sum and it may be higher than you want to pay so you must get the notices right.
  6. Not later than 5 days after the due date for the final payment (final account!) and even if there is a dispute regarding the status of the relevant statement of adjustments of the contract sum, whoever is liable to pay the final payment must give a final payment notice to the other party stating, yes you guessed it, the sum that the payer considers to be or have been due at the due date and the basis upon which that sum has been calculated.
  7. The final date for payment of all applications for interim payment and the final payment is now 14 days from the due date.  Inevitably on any bank funded scheme that may get changed but it should still be the same throughout. 
  8. In the case of final payment unless a pay less notice has been served, the payer will pay the sum stated in the final payment notice or if there is no such notice given, the balance stated in the relevant statement of adjustments of the contract sum on or before the final date for payment. 
  9. The requirements for pay less notices remain the same and as before these must state the amount the paying party considers to be due at the date the notice is given and the basis on which that sum is calculated.  As has been the case since 1st October 2011, a payment notice and a pay less notice do and indeed should look pretty much the same.  They will look like a valuation but as at two slightly different dates (1) the due date and (2) the date of the pay less notice respectively.  If your pay less notice does not look like a valuation then it is probably wrong.
  10. Even if the amount that is due is zero, there should still be a payment notice, a final payment notice, a pay less notice or a final statement.  If there isn’t but the person seeking payment has made an application but doesn’t get responded to then you may end up having to pay money that is not due.

For any help with these questions call Emma Judge or Andrew Rimmer at Turner Parkinson.

Andrew Rimmer, Construction Partner

Andrew Rimmer