When can the JBCC contract be cancelled due to slow work?
One of the key obligations of the contractor under the JBCC contract is to proceed with work at a diligent or expeditious rate.
If a contractor fails to proceed with due diligence can the JBCC agreement be terminated by the Employer and if so, what are some of the practical considerations to be taken into account by contractors and principal agents alike?
The 4.1 and 5.0 versions of JBCC contains some form of the following worded phrase (Clause 15.3) “On being given possession of the site the contractor shall commence the works within the period stated in the contract data and shall proceed continuously, industriously and with due skill and appropriate physical resources to bring the works to… (in the 4.1 version it says – with due skill, diligence, regularity and expedition and bring the works to…) Practical Completion…” (Own emphasis added).
In the 6.1 and 6.2 versions of JBCC, the following is said under clause 12.2.7: The contractor shall, on being given possession of the site commence the works and proceed with due diligence, regularity, expedition, skill and appropriate resources to bring the works to practical completion and to final completion. (Own emphasis added).
From the wording of these clauses, the word “shall” denotes an obligation of a party to the contract. As a result, we can accept that the intention of the agreement is to place an explicit obligation on the contractor. When an obligation is not fulfilled by a party, we refer to that party as being in breach of the contract. For ease of studying this clause, I divide the obligation found under 12.2.7 into 4 separate parts:
- There is an obligation on the contractor to commence with the works;
- there is an obligation on the contractor to proceed with due diligence, regularity and expedition;
- there is an obligation on the contractor to use due skill and appropriate resources;
- there is an obligation on the contractor to bring the works to practical and final completion stages
It follows then that a contractor who fails to proceed with due diligence, regularity and expedition is in contravention of this obligation and henceforth, such a contractor is in breach of the agreement.
Just as parties enter into agreements by mutual consent, they can also mutually choose to end a contractual relationship. However, no party is allowed to simply escape liability by ending a contract unilaterally. Our legal system allows for the cancellation of a contract where there is a breach of contract that is serious enough to warrant such cancellation. The courts refer to “default that goes to the root of the contract” (See Swartz and Son (Pty Ltd v Wolmaransstad Town Council 1960).
Nonetheless, a termination may also result from a contractual right (lex commissoria) and this principle is the same as termination following a breach.
In terms of the JBCC agreement, such a termination clause is indeed part of the agreement and the courts have agreed that it’s not necessary for a party to prove that slow progress is a material term to the contract in order to establish breach. Clause 29.0 contains this lex commisoria and pursuant to this clause the employer may terminate the agreement where the contractor has failed, amongst other reasons, to proceed with the works in accordance with clause 12.2.7, which is the diligence, regularity and expedition clause we reviewed earlier.
The matter is thus settled. On the plain wording of it, a contractor who fails to proceed with due diligence, regularity and expedition is in breach of the contract. Such a breach is not only serious enough to allow the employer to cancel (default that goes to the root of the contract), but it is also an explicit right bestowed upon the employer by the agreement.
What does it look like when a contractor fails to proceed diligently?
The problem here is the interpretation of what would constitute the proceeding or the failure to proceed with due diligence, regularity and expedition by a contractor.
Such an observation may be subjective. Take for example the contractor who, after taking possession of a particular site, has started to mobilise his resources and procuring his materials. In the background he is frantically running around and diligently proceeding with the works, albeit not physically on site yet. A person walking past the site within the first month may casually remark that nothing is going on and a principal agent may adjudge the whole spectacle as a blatant failure by the contractor to proceed diligently with the work.
Or worse, imagine the contractor who simply falls behind schedule over time due to the normal instances of delay suffered by a contractor at his own risk … (i.e., Oom Piet did not pitch with the grader this morning, the concrete wasn’t delivered, the subcontractor forgot his toolbox at home, our champion bricklayer is absent, and the list goes on.)
The reality is that the contract isn’t specific in this regard and it may therefore create disputes based on interpretation. However, such is the nature of all contracts and law in general and that’s why the lawyer you golfed with last week still has a job.
What are some principles of interpretation?
When there is a dispute on the interpretation of wording it is up to the arbitrators, adjudicators and the courts to interpret the contract. Without venturing into the minutiae and legal principles of this process, we can accept that these interpretations endeavour to follow the principles of reason, practicality and common sense.
For instance, in the absence of specifications on a particular standard of workmanship and quality, a principal agent is not entitled to expect an incomparable and peerless quality from a contractor. Under such circumstances the contract must be interpreted as requiring the contractor to provide a reasonable standard of work. What is reasonable you may ask? Reasonable in this context means it must be consistent with the standard of work one can expect on similar projects, carried out under similar circumstances by a similar contractor.
It is my opinion that the same principle should apply in respect of a contractor failing to proceed with due diligence and perhaps we can lean on the principles applied by the Supreme Court of Appeal in the case of MSC Depots (Pty) Ltd v WK Construction (Pty) Ltd & another (157/10) [2011] ZASCA 115 (08 June 2011).
In the particular case a submission was made by the principal agent and employer that the contractor was in breach of clause 15.3 (Clause 12.2.7’s equivalent in an earlier JBCC version) because of numerous defects that manifested themselves in workmanship during the project. It was alleged that these defects were so numerous that the contractor was in breach of not proceeding with due skill.
The bench of learned judges however found that the JBCC contract allows for the rectification of defects. Therefore, a contractor cannot be in breach of clause 15.3, provided he remedies such defects with due skill, regularity and expedition. The court found that this was indeed the case and there was thus no breach of its obligations under clause 15.3.
How should we interpret slow progress?
One of the ways in which can interpret slow progress is through a dynamic CPM programme. Although there is no obligation on the contractor to strictly adhere to a programme, it does not change the fact that non-adherence to the programme can become valid proof that the contractor is not proceeding with due diligence.
According to Finsen 1, the purpose of the programme is to demonstrate how the contractor intends to comply with his obligation to proceed with due diligence and complete the work by the completion date. This is echoed by the JBCC in clause 12.2.6 and 12.2.10 which places an obligation on the contractor to prepare and submit a programme to the principal agent… in sufficient detail to enable the principal agent to monitor the progress of the works and also to regularly update the programme to illustrate progress.
A programme therefore becomes a crucial component of this argument, as it becomes a statement by the contractor not only how he plans to execute the work to reach completion, but also the tempo he intends to execute at, to reach completion and fulfil his obligation. Because the programme must adhere to 12.2.6 and 12.2.10 it becomes a critical tool to monitor progress, or the lack thereof.
As a consequence, a contractor who appreciably fails to progress as per his submitted programme, can be deemed not to proceed with due diligence.
However, the mere existence of a delay by the contractor on his programme, may not be enough to secure a breach that warrants termination as we have seen in the principles on display in the case of MSC Depots (Pty) Ltd v WK Construction (Pty) Ltd.
When we apply the common sense and reasonability test, we would find that contractors, as a normal consequence of construction, routinely encounter delays to their programme which they are able to rectify through acceleration, fast-tracking or other methods. Delays to a programme is therefore consistent with what we can reasonably expect and should not warrant a blanket and brief approach to breach and consequent termination.
Summary notes to contractors and principal agents
It must still be noted by contractors that poor workmanship is not excused just because there is no specification. In the same manner, slow progress cannot be swept under the carpet indefinitely to prevent an Employer to exercise their rights.
For principal agents, it must be noted that you could jeopardise the Employer’s rights by bluntly terminating, even when slow progress can be proven on a programme. Cognisance must be taken by both parties of the following:
- Ensure firstly that a contractor’s programme is fit for the purpose of monitoring progress and that the information contained in updates and forecasts is reliable and accurate. Get expert help for this function.
- When work is not progressing diligently, ask incisive questions: – is this due to the contractor’s own default, are there clear planning and strategies from the contractor to recoup the time, is the contractor working diligently to make up lost time?
- Where there is a clear lack of planning and no diligence from the contractor to recoup lost time, ensure formal notifications about the breach is communicated and be very clear on the expectations and requirements to remedy the breach. Also obtain expert opinions on the current status any recoupment plans to see if they are viable and if a completion on time is still possible.
Termination of the agreement is a serious remedy and it’s always advisable to obtain the assistance of legal professionals when this remedy is contemplated.
Finsen. E, 2005. 2nd Edition. The Building Contract, A commentary on the JBCC Agreements. Juta & Co Ltd.
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