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The conclusion of the building contract is a complex, sophisticated process, which requires the close and attentive review of the contract options. Whereas the parties are free to decide on the specific provisions of the contract or the building agreement (Lewis, 1996), building and construction related areas. Naturally, when these contracts are concluded, the parties may unintentionally omit some provisions or contract clauses, which ultimately may happen to be the integral parts dictated by the legal prescriptions of the government (Gray, 2006). The most widely applied set of the government prescriptions in the building area is the so-called New Engineering Contract system and the standard JCT contracts. Both systems are widely applied by the manufacturers. Naturally, both systems have their positive and negative features. This report is to provide a comparative analysis of the both system and to infer which system is more adaptable and therefore more apt for the industrial needs of the enterprise.
New Engineering Contract
The Basics of the NEC (New Engineering Contract) Regulatory Framework
The system of the New Engineering and Construction Contract has been drafted by the Institute of Civil Engineers of the United Kingdom. The aim of this contract was to eradicate completely the casualties that frequently occurred on the building and engineering constructions (Brook, 2005). Legally, these contracts outline the rights and the responsibilities of the Contractor and of the Executor (the wording of the NEC uses the term “the Employer”) .
The structure of the contract is twofold. The Part One of the Data Contract includes the information that has been provided by the Employer (the Executor), i.e. the detailed description of the results, which this party of the contract is seeking to achieve. The Part Two of the Contract Data contains information about the conditions drafted by the Contractor, i.e. the materials, the stages of the construction and the other elements of this party to the contract (Chappel, 2007).
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The main peculiarity with these types of contracts is the provision, that the Reform Group of the Cabinet of the United Kingdom recommends these principles to the applied when the contract is concluded with the public entities of the United Kingdom. To illustrate, the building n and other procurement contracts with the Cabinet and with the other government bodies of the United Kingdom are always concluded on the basis of these
The NEC is aimed at achieving several goals (Champney, 2008). First and foremost, the aim of this type of contracts is to ensure the overall compliance with the Achieving Excellence in Construction Governing Guidelines.
Another important objective of these contracts is to safeguard the mutual understanding and extra-rapport between the parties to the contract. These types of contracts can be applied to the majority of the commercial situations.
One of the main advantages of these contracts is their flexibility. In other words, the parties to these contracts may opt to deviate from the specific provisions of the contracts, provided that these deviations have been subsequently approved by the authorized state authorities of the specific country, is approved by the corresponding government authority.
The Application of the JCT Contracts and their Peculiarities
Etymologically, the word combination JCT Contract is derived from the Joint Contracts Tribunal (Pether, 1994). Alongside with the NEC contracts, these instruments are applied in the construction and building industries. These imperative e guidelines have been elaborated by the Association of the Consulting Engineers of the United Kingdom in in 1931.
The most recent renovations of these guidelines took place in 2005 and 2011. The main objective of these guidelines is to ensure that the standard form of the building contracts has been elaborated and to remove the inaccuracies, which are inherent to the building industry in general. Nowadays, the JCT operates as an independent business agency, which exercises consulting services and which provides effective counseling on the matters of building, construction and architecture.
The following types of contracts are prescribed by the system of the Joint Contracts Tribunal System:
- The Construction Management Documentation (Instruments). This documentation is designed under the guidelines of this system to assure the management of the company is properly exercised.
- Management Contract – the document which specifies the rights and the obligations of the managerial echelon of the specific construction process.
- The Design and Build Agreement – the set of provisions, which specify the rights and the responsibilities of the project developer and the contracting authority of the agreement. In these types of contracts the accent is made on the specification of the fundamental structures and designing of the specific building project.
- The Major Project Form – this contract form is used when the basic provisions of the contract need to be outlined and specified to guarantee the understanding of the parties involved into the construction or building project
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The Peculiarities of the JCT contracts
First and foremost, it must be highlighted that the significantly broader number of the peculiarities in comparison with the NEC contracts does exist. To illustrate, these contracts directly specify the prohibition of the upfront payments exercised by the contracting party to the party, which exercised the performance of the contact (Broome, 1997). However, under the provisions of these contracts, the interests of all parties are duly guaranteed and the contract supervisor is appointed by the Tribunal or by the parties to accept the payment and to ensure that subsequently the payment will be exercised. Besides, this participant of the process ensures, that if the contract is not implemented, the upfront payment will be eventually returned to the party, which has exercised the payment.
The provisions of these contracts stipulate directly that the parties are entitled to seek the extension of the performance of the contract, if the impediments have been caused by the factors, which very beyond the control of the parties. Besides these contracts provides the scope of the specific reasons, which may serve as an excusatory reasons, which may justify the situation when the project has not been fulfilled (Champney, 2008) And in this case, the party which failed to ensure the performance of the contracts is automatically discharged from liabilities, if those provisions have been duly observed.
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The Comparative Chart
Although the aims of these strategic tools are almost identical in its nature (to insure that the conclusion of the building contract has been exercised properly, and that the all provisions mandated by the government or by other governing authorities)namely the discrepancies of these strategic tools must be accentuated in order to ascertain which strategy shall be applied by the parties to safeguard the interests of the both.
|The provision||JCT Contracts||NEC Contracts|
|The timeframes||Are regulated by the discretion of the parties||The timeframes and the deadlines of the contract are defined by the parties, but the mandatories of the law must be always taken into consideration and observed|
|The liability for non-performance||The reference is incorporated, that the liability is defined by the law||The liability is defined under the law, but the parties are free to set their own procedure, of the this algorithm is subsequently approved by the respective state authorities|
|The terms of the contract||Are defined in the unified forms||Are elaborated by the parties|
|The deviation from the mandatory provisions of the government||Is not allowed in any case||The deviation is possible, when the respective assent is obtained from the public authority which is duly authorized to issue these approvals|
|The upfront payment||Is allowed||Is allowed, but a specific procedure shall be followed|
|The participation of the third parties||Is not specified and is left for the discretion of the parties||Is regulated by the system of the contracts|
|The model contracts||The list of the model contracts is incorporated into the system||The models are not specified and the specific contractual provisions are to be elaborated by the parties on the basis of the available options and model provisions.|
Generally, considering the unpredictable, volatile and unstable character of the contemporary market of the building and contracting services, it can be assumed that the Joint Tribunal contracts are considerably more favorable for the needs of the specific business entity, although this assumption may seem to be subjective in its nature (Gray,2006). The flexible character of the norms and the simplified procedure of the government regulation and supervision ensure that the interests of the parties are guaranteed (Lewis, 1996). In particular, namely the flexible natures of these contracts help the non-breaching party to be freed from liability if the violation of the contract has been perpetrated unintentionally.
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Another argument for the option of the JCT contracts, rather than the NEC ones is the stipulation that the although the provisions of these contracts are highly persuasive, they are still of the recommendatory character, and therefore the procedure of the deviation is considerably more simple than the one is the NEC contracts, in where the bypass of the obligatory government building standards the approval of the specifically appointed state authority(Brook,2005).
Overall, it seems to be highly advisable for the construction entities as well as for the other participants of the construction process to opt for the JCT 2011 contracts to ensure that their rights and interests have been duly observed.
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