Termination ' Where Did It All Go Wrong?

• Published date: 19 August 2021
• Subject Matter: Corporate/Commercial Law, Employment and HR, Real Estate and Construction, Contracts and Commercial Law, Contract of Employment, Construction & Planning
• Law Firm: Gatehouse Chambers
• Author: Mr Kort Egan

Is it just me who has seen a lot of disputes regarding wrongful termination since the beginning of the COVID-19 pandemic? A large proportion of those disputes have concerned whether a party has terminated in accordance with the provisions in a JCT contract. While parties frequently attempt to exercise termination provisions under JCT contracts, very few seem to do so effectively.

The termination provisions in JCT contracts are not to be taken lightly. There are a number of potential pitfalls for both employers and contractors.

Taking the JCT Standard Form of Building Contract, 2016 Edition (SBC 2016) as an example to look at some of the most common and uncommon mistakes.

Failing to serve the notices in accordance with the contract

Section 8 of the SBC 2016 is headed "Termination". Clause 8.2 is headed "Notices under Section 8" and states that each notice referred to in this section (that is, section 8) "shall be given in accordance with clause 1.7.4".

Clause 1.7.4 provides that any notice expressly required to be given in accordance with the clause shall (that is, must) be delivered by hand or sent by Recorded Signed for or Special Delivery post.

Notably, clause 1.7.4 does not provide for service of notices by email.

Failing to specify one of the defaults in the contract

Clause 8.4.1 of the SBC 2016 states that if before practical completion of the Works the Contractor commits one or more of the specified defaults in sub-clauses 8.4.1.1-8.4.1.5 then the Architect/Contract Administrator may give a notice specifying the default or defaults.

Clause 8.4.1 therefore requires a notice to specify one of the listed defaults rather than an altogether different reason that purportedly justifies termination.

Failing to follow the prescribed timings

Continuing with termination by an Employer, clause 8.4.2 of the SBC 2016 provides that if a Contractor continues a specified default for 14 days from receipt of the notice under clause 8.4.1, the Employer may, on or within 21 days from the expiry of that 14-day period, terminate the Contractor's employment by a further notice.

Clause 8.4.3 provides that if the Employer does not issue a notice within the 21-day period and the Contractor repeats a specified default then the Employer can by notice terminate the Contractor's employment upon or within a reasonable time after such a repetition.

There are a number of matters to be wary of in these clauses:

• Clause 8.4.2 requires the Contractor to have continued a specified...