Construction Law and Procedures IV
JBCC SERIES 2000
6.1edition 2014
Module 14 formation of
construction contracts
Lecture Outline
Principal Agent
Payment
Subcontractors
Programme
Risk identification and allocation
Dispute resolution
Principal Agent
The Employer appoints a Principal Agent (PA), who acts
on behalf of the Employer with full authority and obligation
to act in terms of the agreement.
The PA can either be an Architect, Quantity Surveyor,
Engineer or Project Manager depending on the scope of
the project.
The PA does not have powers to amend or change the
contract.
Payment
Contractor has to work with the PA to prepare a cashflow
statement and valuations by providing required docs.
Failure to provide such documentation, will render a
reasonable estimate done by the PA.
The PA has to regularly issue payment certs to the
contractor until and including final payment cert.
A nil or a negative payment certificate may be issued by
the PA if so happens.
Payment
The employer shall pay the contractor the amount certified
in an issued payment cert within 14 calendar days.
The contractor shall issue to the employer the amount
certified in an issued payment cert within 21 calendar
days;
Material and goods supplied and certified shall be come
the property of the employer on payment thereof;
The contractor shall pay all subcontractors within 7
calendar days of the date of due payment from employer;
Sub-contractors
The JBCC allows the PA to appoint subcontractors to
undertake works under the supervision of the main
contractor, and those are:
Nominated Subcontractors
Selected Subcontractors
Employer’s Direct Contractors
The JBCC also allows the main contractor to appoint his
own Domestic Subcontractors.
Programme
On receipt of construction information within 15 working
days submit a programme to the Principal Agent.
The Contractor shall update and revise the programme
as the progress changes.
The Principal Agent either accepts or rejects the
Contractor’s programme with reason (time period for
the PA’s approval not stipulated).
Regularly submit a progress report to the PA
Designate a competent person to administer the works
and implement notices and contract instructions
The JBCC is however not specific about the dates for
submission of the programmes.
Risk Identification and allocation
Payment guarantee – provided by the
Employer to provide the guarantees within 15
working days [11.0]).
Construction guarantee (11.1.3)– provided
by the Contractor to cover his contractual
obligations.
The Contractor shall have to choose
between the 3 types of construction
guarantees prescribed below:
Risk identification and allocation
Security as a cash deposit – the Contractor issues
a cash deposit in the value of 10% of the contract
sum.
Security as a variable construction guarantee – the
Contractor issues a guarantee initially equal in
value to 10% of the contract sum.
Security as a fixed construction guarantee and
payment reduction of the value certified – the
Contractor shall issue a fixed construction
guarantee initially equal to 5% of the contract value
(11.1.3) and the PA shall make a payment
reduction from the Contractor’s interim payments.
The JBCC allows for penalties for late completion.
Risk identification and allocation
The JBCC allows for the indemnification of both
parties against the listed losses.
The Contractor shall not be liable for the cost of
making good physical loss or damage arising out of
circumstances beyond his control.
Guarantee for advance payment – where an
advance is required equal in value to the aggregate
amount of all such advance payments.
Provide a replacement guarantee for construction
(variable or fixed) at least 20 working days before
such security expires.
Failure to provide security a retention equal to 10%
will be withheld on interim payments.
Dispute resolution
Should a disagreement arise between any of the
parties, that party may give notice of such;
An attempt to resolve the matter shall be made and
a signed resolution shall be recorded in writing;
Should the disagreement fail to be resolved within
10 working days of notice, = dispute
dispute shall be referred to adjudication within 10
working days of the expiry of above non resolved;
Notice of adjudication shall clearly define the scope
of dispute and the relief sought by adjudication;
Failure to comply with the above procedure shall
cause dispute to be resolved via arbitration and not
by adjudication.
Adjudication
Adjudicator to be appointed in accordance with
JBCC rules for adjudication and shall be conducted
in terms of such rules;
Adjudicator shall not be eligible for subsequent
appointment as arbitrator;
Determination given by the adjudicator shall be
immediately binding and implemented by the
parties;
A dissatisfied party may give notice to the other
party and ADJ within 10 working days of receipt of
the determination;
Subsequent to an objection of the notice the matter
shall be taken to arbitration.
Adjudication
Late determination by adjudicator, then either party
may give notice for determination to be delivered
within 10 working days of receipt of notice.
Failure by ADJ after notice receipt his appointment
is automatically terminated.
Furthermore, the the matter may be referred to
further ADJ or arbitration at the option of the
claimant;
Arbitration
The arbitration shall not be construed as an appeal
or review from any adjudicator’s determination.
Any such determination shall remain in force and
continue to be implemented until overturned by an
arbitration award.
The resolution of the dispute shall be treated as a
new matter
The referring party in the adjudication shall be the
claimant in the arbitration;
The arbitrator shall be appointed by agreement
between the parties within 15 working days of
notice of either party;
Arbitration
Failing which on application by either party:
By the body stated in the CD failing which:
By the chairman for the time being of AArbSA
Applicable rules shall be by agreement between
the parties and the arbitrator
Failing which shall be by the arbitrator;
The arbitrator shall have the power to finally
determine the dispute;
Including power to make, open up and revise any
certification, opinion, decision, determination,
requisition, or notice relating to the dispute as if
such were not made.
Mediation
Notwithstanding the provision relating to ADJ and
ARB parties may by agreement refer to mediation
in which event:
The provisions relating ADJ/ARB shall be deemed
to be suspended from the time such agreement
until notice by either party that they be resumed.
The appointment by the mediator, the procedure
and the status of the outcome shall be agreed
between the parties.
The parties shall continue to perform their
obligations in terms of this agreement,
notwithstanding that a disagreement or a
dispute exists between them
