There is a plethora of reference manuals, reported court decisions, guidance notes, articles and research papers on both the topic of Contract Law, the requirements of a valid contract, the JBCC Contract as well as a web of other contractual related matters. What we attempt to do herein, is to provide a basic level of understanding to members to assist them with the understanding of a contract.

It is our assessment that understanding contracts and managing them correctly are a critical component to successfully running a construction project. A handshake and gentlemen’s agreement is insufficient taking into consideration the complexities involved in the construction environment with there being obligations between Owners, Principal Agents, Architects and Contractors who in turn have Subcontractors and the further complexities of variation orders and changes to the scope of works which are likely to arise.

The basic elements of a valid contract in law are as follows:

• Consensus between the parties

A contract is based on agreement. Both parties have agreed what each of them will do, how they would go about doing it and what should happen if there is a breach. The agreement is made freely and voluntarily without compulsion, threats or fear.

The aspect on agreement is particularly important when consideration is given to the obligations created under a standard form construction contract for example, a Contractor has undertaken to provide a notice to any claim for money and / or time in terms of any of the listed grounds under the said contract within an agreed time frame, failing which the Contractor shall be time barred. A written agreement also alleviates disputes around the contents of the agreement and the obligations of the respective parties whereas a verbal agreement usually is plagued around issues of proof. 

• Capacity to contract

The parties signing or entering into the contract must have contractual capacity. This means that they must be atleast 18 years of age and in the case of a company (known as a juristic person with separate legal personality), have the necessary authority to bind the company to the agreement. In the case of a company, to avoid disputes surrounding the capacity to contract, it is not uncommon for parties to request a written resolution authorising the party signing the contract to do so. 

• Formalities

Formalities may be prescribed by law or by agreement. An example of the former would be the Alienation of Land Act which requires a written deed of alienation signed by the Parties thereto or their authorised agents.

In the case of construction contracts one may find that approval of plans or other condition precedents before works may be executed. Where these are specified, they must be adhered to. 

• Legality of the Agreement

In order for a contract to be valid, the obligations of the parties must be legal. There cannot be any obligation on any party which is illegal. 

• Possibility of performance

The obligations of the parties must be possible. Where performance is impossible, a contract is voidable. 

• Contractual certainty

The contractual terms must be sufficiently explanatory of the obligations of the parties and what is expected of each party. In terms of certainty, at times parties go to lengths to specify exactly what materials, specification and brands are required in executing works. 

• Offer and Acceptance

In arriving at the resultant agreement, there are prior negotiations between the parties. This takes the form of an offer and acceptance where the one party offers to do or not to do something in exchange for what the other party may do or not do. In a construction agreement, this is generally for the Contractor to execute the construction activities in exchange for remuneration.

As we have highlighted above, there is a plethora of precedents and texts relating to contracts and the host of associated matters thereto and exploring them is not facilitative of the purpose of the article, which is to provide a basic understanding of the legal requirements of a contract and a brief overview of the JBCC.

We will now turn to discuss some of the basic concepts of one of the widely used standard form of contract, the JBCC Contract. There are different versions to this contract and we shall provide a general overview. It is therefore important to have reference to the specific version of the JBCC signed and the obligations created therein.

There are advantages to a standard form contract, for example they usually represent industry good practice and due to them being standard, managing them is consistent once a party is familiar with it.

A disadvantage will conversely be where one is unfamiliar with a standard form of contract, it would be difficult to understand and manage and can create complex issues for the party concerned.

The parties to the JBCC Agreement are the Employer and Contractor. The Employer is usually the owner of the site or project. Both parties are detailed in the Contract Data. The Employer appoints a Principal Agent who acts in a representative capacity of the Employer. Depending on the Employer, the Principal Agent may also make decisions on behalf of the Employer that have a binding effect. Sometimes these are modified in special terms or in the state clauses to the JBCC agreement therefore reference to these will be required. Further to the Principal Agent, the Employer may appoint agents to deal with certain special aspects of the work, example an Engineer. It is imperative to take note of these from the Contract Data in order to ascertain which party is to deal with on certain elements.

 A typical sequence of a JBCC Contract entails the following:

• Issue of tender documentation
• Submission of Tender by due date
• Agree the contract
• Agreed contract start date
• Provide required securities within 15 days of start date
• Construction period runs from agreed start date to agreed date of practical completion
• Defects liability period (usually 90 days from date of practical completion)
• Final Completion

In the JBCC, the Contractor has the obligation to produce and manage a construction program. Regular updates to the program are required and it is incumbent on the Contractor to produce same.

The JBCC agreement also provides a detailed notice and claims procedure where a Contractor intends to apply for additional cost and / or time. The prescripts of the agreement must be followed and the grounds must be on listed grounds in terms of the agreement in order for the Contractor to be successful with a claim in this regard. The listed ground state which events entitle the Contractor to additional time only and which events entitle the Contractor to additional cost and time. The time provisions with regards to these must be adhered to in order not to be time barred.

It is imperative that any instructions in terms of the JBCC must be in writing and that the Contractor must comply with these instructions. Where these instructions require additional cost and/ or time, the notice and claims provisions of the agreement must be used.

Parties often introduce what is termed special conditions of contract wherein the standard terms are modified. Close regard must be given to these terms and the effect that they have on the standard terms.

NB: The above write-up is not to be construed as legal advice. Should you require legal assistance, please contact your lawyer.

Bilaal Dawood | Bilaal Dawood Attorneys