New JCT sustainability clause prompts uncertainty

By embedding sustainability considerations into the core contract rather than making them an optional supplement, the new clause 2.1.5 in the Joint Contracts Tribunal (JCT) 2024 suite could mark a significant development.

The clause allows contractors to suggest environmentally beneficial modifications to a project, but explicitly limits their liability by stating that 'no such instruction shall extend [their] obligations in relation to design under this contract'.

While this provision appears to support sustainability, its legal and practical implications remain ambiguous. Specifically, the new clause raises two key issues:

• its enforceability and effectiveness in encouraging sustainability improvements, particularly compared to alternatives such as NEC4 option X29
• the potential for additional legal risks to contractors, especially concerning design responsibility and liability should a suggested change under clause 2.1.5 later result in defects or performance issues; this remains a danger in spite of the apparent limitation in the clause.

Nevertheless, the clause remains largely aspirational: contractors are permitted though not required to suggest sustainability improvements, but there are no incentives for them to engage, or indeed penalties for failing to do so. This means that, although it is now embedded in the contract, it remains functionally optional in practice.

By comparison, NEC4's option X29, while optional, introduces enforceable carbon reduction targets and structured compliance mechanisms. JCT 2024 lacks any equivalent enforcement framework, meaning there is no guarantee that clause 2.1.5 will lead to meaningful sustainability improvements.

Ultimately, although the new clause signals a shift in contractual priorities, its advisory nature limits its impact.

While the clause's explicit limitation of the contractors' obligations seemingly protects them from additional design liability, its practical interpretation will vary depending on the specific JCT contract form in use.

In a JCT contract for a traditional project, where the employer retains design responsibility, a modification suggested by the contractor should not impose additional liability. However, in design and build (D&B) contracts, where the contractor assumes full design responsibility, the distinction is less clear.

If a contractor suggests replacing a conventional ventilation system with a more energy-efficient alternative and the employer instructs the change, for example, liability for performance failures could still be contested.

Would the contractor retain responsibility for design defects in this instance, despite the employer's formal instruction? The decision in Multiplex Construction Europe Ltd v Bathgate Realisations Civil Engineering Ltd & Ors [2021] EWHC 590 (TCC) reaffirmed that a contractor's design liability must be explicitly allocated in the contract, and that employer instructions do not necessarily relieve them of this responsibility.

This principle raises concerns about whether clause 2.1.5 truly mitigates contractor risk –particularly on D&B projects, where sustainability-motivated modifications may introduce unintended obligations.

For example, if a contractor were originally responsible for designing a gas-fired boiler system under a contractor's design portion (CDP) in a JCT contract but later suggested replacing this with air-source heat pumps, it could introduce additional design complexities beyond the initial scope, such as:

• electrical infrastructure upgrades
• structural loading calculations
• acoustic assessments.

These elements may not have been in the original CDP, so if they were to lead to a dispute, the contractor would need to demonstrate that the employer's instruction fundamentally altered the design liability, referring to the wording of clause 2.1.5 and supporting their position through contractual documents.

Without clear contractual definition, the risk of so-called design creep remains a significant issue for contractors under JCT contracts.

Unlike traditional defects, changes made to improve sustainability – such as the use of low-carbon materials or energy-efficient systems – may not show performance failures until well into the asset's life cycle. 

This raises significant concerns about final certificates, latent defects and the potential for extended liability under statutory limitation periods.

Under the Limitation Act 1980, claims for breach of contract in England and Wales must generally be brought within six years for simple contracts or 12 years for contracts executed as a deed, as is common under JCT.

However, the Building Safety Act 2022 has significantly extended liability periods for defective residential buildings, meaning that contractors suggesting sustainability-related modifications on certain projects may face liability beyond traditional JCT limitation time frames.

The 2022 Act extends the limitation period for claims under the Defective Premises Act 1972 from six to 15 years for new claims, and retrospectively to 30 years for claims arising before June 2022.

 It also introduces a 15-year limitation period for claims where construction products cause a building to be unfit for habitation.

This means that if a sustainability modification later fails – for example, if a suggested energy-saving measure leads to long-term structural damage or health risks – contractors could face claims decades after project completion.

The 2022 Act's extended limitation periods are particularly relevant to mid- and high-rise residential buildings, where liability for safety-critical defects has been significantly lengthened.

In that case, even though the contractor fulfilled its contractual obligations and obtained certification, it was still liable for failures in offshore wind turbine foundations due to an implied fitness-for-purpose obligation.

This suggests that, if a design change made under clause 2.1.5 for reasons of sustainability does not perform as expected, the contractor may still be held responsible even after a final certificate is issued.

Similarly, in Pearce & High Ltd v Baxter & Anor [1999] EWCA Civ 789, the courts held that, although a final certificate is generally conclusive, this depends on the contract wording and does not prevent claims for latent defects.

In Pearce, the Court of Appeal confirmed that final certificates and defect clauses do not, without clear and express wording, override common law rights to claim for latent defects or shorten the statutory limitation period for such claims. 

This approach aligns with the JCT provisions allowing 28 days to challenge a final certificate, but does not attempt to exclude liability for latent defects or restrict statutory timeframes.

Given the long life cycle of sustainability measures, though, performance failures may only become apparent years or even decades later. 

Without clear contractual provisions specifying the duration of liability for such improvements, contractors could unintentionally assume extended responsibility, particularly in projects affected by the 2022 Act.

Future amendments to JCT contracts may therefore need explicitly to define the risk allocation for long-term sustainability performance failures, ensuring that liability does not extend beyond reasonable contractual expectations.

In practice, however, the contractor's exposure will also depend on how the contract is amended by the parties.

Where clients or their advisers introduce bespoke drafting – such as extended performance obligations, unclear allocation of design responsibility or broad sustainability commitments – there is a risk that liability could extend well beyond the standard JCT position. Clarity at the drafting stage is essential to manage this risk effectively.

To be more effective, future amendments to the suite could introduce:    

• mechanisms for contractors and employers to share savings from sustainability measures
• performance-based incentives, rewarding contractors for meeting defined energy efficiency targets
• greater legal clarity, specifying whether and how long sustainability-related design changes extend a contractor's obligations.