A reminder of the balance that often needs to be struck between statute, standard form contracts and bespoke schedules of amendments
During recent negotiations between employer and contractor on the form of building contract to be entered into for a fairly significant value development project, the interplay between certain statutory entitlements, the wording in a standard form of contract and the provisions that are agreed in bespoke schedules of amendments came to the fore.
The form of building contract being used is the JCT Design and Build 2016 (“DB2016”), with amendments. The section 111(10) Construction Act 1996 (‘Act’) statutory position, under which a paying party is not required to make payment to the unpaid party if the unpaid party has become insolvent after the period for issuing a pay less notice has expired, is addressed in DB2016 clause 8.7. In that provision, this right is conferred on the employer in the event that the contract has been terminated (for any of several reasons, one of which being insolvency of contractor).
In the schedule of amendments to the DB2016 being negotiated between the parties, an additional sub-clause was added to DB2016 clause 4.9, specifying that a relevant payment need not be made by the employer to contractor if the contractor has become insolvent after the date for issuing a relevant pay less notice has passed. Essentially, the additional wording provides for the Act right to be relied on, but not (as in the unamended DB2016 form) only in connection with a linked termination.
In negotiation, the new sub-clause was identified as a point for discussion, it being clear that the parties were not in agreement as to the origins and intention of the wording insofar as the Act and the wording elsewhere in the DB2016 were concerned. Ultimately, following clarifying discussions, the point of challenge was dropped; the wording remains in the schedule of amendments. The discussion and the challenge to the schedule of amendments served as a useful reminder to be aware of statutory entitlements that are present in some form in a standard form contract, and the potential for these statutory entitlements to be enhanced or addressed differently from the approach taken in drafting the standard form in question.