JCT 2024’s approach to limiting contractor liability needs care

The Joint Contracts Tribunal (JCT) has been steadily releasing the 2024 update versions of its family of contracts. Major releases so far include the Design and Build (D&B), Standard, Intermediate and Minor Works contracts.

Consistent with previous versions of its contracts, JCT has chosen again not to include a clause providing for an overall cap on the contractor’s liability, not even as an optional clause. This is a marked contrast to the NEC suite of contracts which has always provided for the option of a cap to be included. JCT has included a footnote in the D&B contract conditions advising that the parties may wish to agree an overall cap. The footnote refers to the accompanying contract guides for guidance and a model clause. A similar note appears in its updated Standard and Intermediate building contracts.

It is notable that JCT has not included the cap, even with JCT’s stated intent of future-proofing the contracts. We recognise that there is not one statable ‘market position’ on including an overall cap, but JCT has not taken what would have been the braver line of including it, at least as an option for discussion.

In the D&B contract guide for the 2024 contract, JCT set out a model clause and a corresponding new entry to be added to the Contract Particulars setting the level of the cap. The guide makes the sensible point that parties including such a cap may want to add a termination right for the employer if the cap is reached. In our experience, that right may need to be triggered even before the full amount of the cap is exhausted.

The guide recognises that there is an interaction between any such proposed cap and the existing optional clause in the design forms of the JCT contract, such as clause 2.17.3 in the D&B contract, which limits the contractor’s liability for consequential loss in respect of a breach of the contractor’s design obligations. The JCT guide recommends that the design cap be excluded if the overall cap clause is added.

This is an interesting steer. Most often when caps on liability are being discussed, the contractor will want to talk about the inclusion of both an overall cap and the inclusion of the design-related limit, perhaps as a sub-limit set at the level of the contractor’s professional indemnity insurance. It is unlikely that contractors would see the overall cap as a direct replacement or substitution for the design cap.

The model limitation clause refers to the cap as being a total aggregate limit and applies the limit whether the liability arises under contract, or by way of tort, negligence or breach of statutory duty. The model form carves out from the cap losses relating to the Defective Premises Act, losses in respect of bribery and corruption, and also losses from wilful default or deliberate concealment. These exclusions will need consideration, as phrases such as ‘wilful default’ are not capable of easy interpretation. Also carved out are relatively standard exclusions cross-referring to the death, personal injury, and damage to property indemnities under clauses 6.1 and 6.2 of the D&B contract, as well as losses arising from fraud.

There is an option in the model clause to exclude liability for liquidated damages arising from delay from the overall cap. As the guide notes, parties are going to have to decide if any delay damages incurred by the contractor will count towards the overall agreed cap or are separate and in addition to the overall cap. The guide suggests that if delay damages sit outside the overall cap, then a separate cap on delay damages be agreed, with a corresponding right to terminate if that cap is reached.

By including a footnote flagging the issue of a cap on liability, JCT has encouraged more discussion on the subject. They have highlighted some of the discussions that need to be had as to including a cap and its components and consequences. JCT is right that early discussions should be had by the parties. It is not an easy subject – it requires careful consideration and advice to be taken by both employers and contractors.