Construct.law - Summer 2024

IET’s new revision 7 of the Model Form of Contract (MF/1): What has changed?

By Melanie Tomlin & Joseph Bearman

10 years after the publication of Revision 6 (2014 edition) of the Model Form of Contract for the design, supply and installation of electrical, electronic and mechanical plant (MF/1), the Institution of Engineering and Technology (IET) has released Revision 7 (2024 edition), shortly followed by an erratum containing a summary of corrections.

Regular users of the MF/1 may be comforted to know that the risk profile of the contract has not changed though the door has been opened to extending the duration of liability for latent defects, as discussed below. Here is an overview of some of the more notable changes:

Extensions of time (EoT)

The grounds for EoTs have not changed substantially. The EoT for industrial disputes has been qualified to exclude disputes restricted to between the Contractor and its employees and/or the Contractor’s subcontractors (Clause 33.1(c)). Interestingly, the IET have not chosen to include drafting specifically on epidemics, the Contractor instead needing to rely upon the force majeure type wording in clause 33.1(d); something which the JCT have chosen to expressly include in some of the JCT 2024 Editions now being published.

Liability for Latent Defects

At the end of Defects Liability Period, the Contractor is released from all liability save for correction of latent defects notified within a latent defects liability period. Revision 6 had expressly provided for that latent defects liability period to be 3 years after the date of taking-over of the works (Clause 36.10). During that period, the Contractor is required to repair or replace the latent defect, at its option. Notably there is no provision for the Purchaser to itself remedy a latent defect or arrange for others to do so and recover its costs from the Contractor. With the exclusive remedies clause (clause 44.4), recovery of these costs is prevented. This is an issue Purchasers will need to give careful consideration to. Under Revision 7, the parties have free rein to specify the duration of the latent defects liability period in the Appendix. This potentially ties in with another change made to Revision 7:

Allowing the parties to sign the contract as a deed (rather than as a simple contract allowed for under Revision 6).
Allowing for the template forms of bonds and guarantees to be signed as deeds (rather than as a simple contract allowed for under Revision 6).

Professional indemnity insurance (PII)

Revision 7 now requires the Contractor to maintain PII in the amount and for the duration specified in the Appendix (Clause 47.5) though the drafting doesn’t include the more often seen proviso that such insurance is available in the market on reasonable rates and terms; something that Contractor’s may seek in view of the more often volatile insurance market.

Adjudication

To give effect to the statutory right to adjudicate pursuant to the Housing Grants, Construction and Regeneration Act 1996 (as amended), Revision 6 had contained an optional Special Condition 2 which allowed for the parties to refer a dispute to adjudication, with the decision being binding until finally determined by legal proceedings, arbitration or by agreement. That drafting has now moved into the General Conditions in Revision 7 (Clause 53) unless the International Contracts Schedule is applied, when it is omitted.

Slavery, Bribery and Corruption

With the introduction of the Modern Slavery Act 2015 after the last revision (albeit the Bribery Act 2010 was some time before), Revision 7 now includes new clauses 54 (Anti-Slavery and anti-human trafficking) and clause 55 (Anti-bribery and anti-corruption) to be complied with by the Contractor.

Termination for Force Majeure

The definition of Force Majeure remains the same in Clause 46.1, with the IET again choosing not to follow the JCT’s lead of including dedicated epidemic drafting. Revision 7 does now qualify either party’s right to terminate the contract (after either party has not performed any of its obligations for a continuous period of 120 days because of an event of Force Majeure) by carving out the situation where the Corporate Insolvency and Governance Act 2020 (CIGA) applies (Clause 46.3). CIGA restricts the rights of a supplier of services to terminate its contract where the recipient is insolvent. There is also now included a window of just 21 days after the expiry of the 120 day period when a termination notice may be issued.

Termination for the Contractor’s default (Clause 49.1):

Timescales have been shortened:

The Contractor has 14 days (rather than the previous 30 days) after receiving the Engineer’s written notice to commence suspended works in the absence of a reasonable excuse.
The Purchaser may give 14 days’ notice (rather than the previous 21 days) of its intention to terminate the contract on the occurrence of the Contractor’s default events listed in clause 49.1 (though it is an immediate notice if it is on the ground of the Contractor’s insolvency).

There are new Contractor default grounds for breaches of the anti-slavery and anti-human trafficking provisions (clause 54) or anti-bribery and anti-corruption provisions (clause 55).

Termination for the Purchaser’s default

The Contractor’s right to terminate is made subject to CIGA. The description of what constitutes insolvency has been expanded to include recent changes in insolvency legislation; now also including where a moratorium is applied for or is entered into pursuant to Part A1 of the Insolvency Act 1986 or any step is taken in relation to a scheme of arrangement under Part 26 or Part 26A of the Companies Act 2006 (Clause 51.1)

International Projects

Revision 7 introduces an ‘International Contract Schedule’ intended to enable users to omit certain UK-specific provisions contained in the General Conditions in order for it to be more readily used on overseas projects. In such cases, the parties should seek advice on the local laws applicable to their projects.

General

In common with the JCT 2024 editions currently being published, the IET have introduced gender neutrality and updated notice provisions, in this case omitting reference to faxes.

What haven’t they included?

Construction (Design and Management) Regulations 2015: there is no provision for the Contractor to be appointed either as the principal designer or principal contractor under these regulations.
Dutyholders Regime under Part 2A of the Building Regulations 2010: again no reference to the Contractor being appointed for the roles of the principal designer or principal contractor under these regulations.
Despite giving the parties the option to extend the duration of the latent defects liability period, surprisingly, there is still no provision for collateral warranties from either the Contractor or any of its subcontractors.
Could the contract embrace more themes from the Construction Playbook such as including a greater emphasis on collaborative working or sustainable development or the trend towards mediating disputes?

Supreme Court overturns Court of Appeal decision: Statutory adjudication will not apply to a typical collateral warranty

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