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It is common practice in South Africa for Nominated and Selected Subcontractors to be appointed by Main Contractors by means of a letter of Appointment which incorporates the provisions of the JBCC Nominated / Selected Subcontract agreement (NSSA). The effect of which is that the JBCC NSSA agreement is “Incorporated by reference”. A hardcopy JBCC NSSA is very seldomly signed by the parties. Some Subcontractors are not even aware that they are appointed in terms of this agreement. Main Contractors may incorporate further terms into the letter of appointment which may contradict the terms contained in the JBCC NSSA. If this is the case which provision will apply and is the Subcontractor bound by the JBCC NSSA Incorporated by reference?

Is The Contract Incorporated By Reference Enforceable?

It is trite law that provisions of a contract may be incorporated by reference. The positions differ slightly whether the letter of appointment incorporating the agreement by reference has been signed by the parties. If the letter of appointment has been signed by the parties, then it can be accepted that the person who signs the document has assented to the contents of the agreement. The signature also provides sufficient proof that the person who signed the document has availed himself to the terms and provisions in the agreement. When the letter of appointment is unsigned it is more uncertain because it is more difficult to establish if the parties have in fact assented to the contents of the agreement. However, an unsigned letter of appointment will not render the agreement unenforceable. Therefore, a JBCC NSSA agreement incorporated into a letter of appointment will be an enforceable agreement.

JBCC Principal Building Agreement

The Subcontractor will not only be bound by a JBCC NSSA incorporated by reference but also by the terms of the JBCC Principal Building Agreement (PBA) which the Main Contractor concluded with the Employer if this has also been incorporated by reference. We often find that the letter of appointment incorporates both the terms of the PBA and the NSSA.

Time Bars and Important Clauses

The JBCC NSSA regulates very important aspects of the appointment between the Contractor and the Subcontractor such as payment, interim and final completion and extension of time claims, to name a few. If the Subcontractor is unaware that the JBCC NSSA applies to his appointment on the project the Subcontractor will be unable to adhere to time bars which will prevent the Subcontractor from claiming in terms of the agreement.

For example, in terms of clause 23.4 of the JBCC NSSA ed 6.2 the Subcontractor has 15 working days from becoming aware of a delay to notify the Contractor of the intention to submit a claim for an extension of time, failing which the subcontractor shall forfeit such claim. Furthermore in terms of clause 30.1 of the JBCC NSSA ed 6.2, a disagreement which has not been resolved within 10 working days from receipt of notice of disagreement shall be deemed to be a dispute and the Subcontractor has a further 10 working days to refer the dispute to adjudication by means of a notice of adjudication failing which the dispute will be resolved by arbitration not adjudication.

The JBCC NSSA also regulates the terms of Payment. In terms of clause 25 of ed 6.2 the Contractor shall pay the Subcontractor the amount certified in an issued subcontract payment advise within 21 Calendar days of the date of issue of the payment interest. If the Contractor does not pay the Subcontractor, the subcontractor may approach a court in terms of an application for payment for the non-payment of an unpaid certified Subcontract payment advice.

What Should Subcontractors Do?

Subcontractors should always be aware of the special conditions incorporated into the letter of appointment and request copies of such documents from the Contractor before accepting the appointment. Upon receipt of these documents the Subcontractor should thoroughly read through the letter of appointment, bill of quantities, special conditions and any other document which will regulate their appointment by the Contractor.

Ideally the Subcontractor should be appointed in terms of a JBCC NSSA with duly completed subcontract contract data setting out the intended date of access and the date for Interim Completion. This will safeguard the duration of the subcontract construction period and will avoid the scenario where the subcontract has to immediately accelerate when access is granted.

A Subcontractor can only ensure that both parties are performing in terms of their obligation prescribed by the agreement if he or she has read the agreement and is familiar with the terms. In the case where a dispute arises a legal representative is approached to assist the Subcontractor, the Legal representative must be provided with a copy of the JBCC PBA and NSSA in order for them to effectively advise and assist the Subcontractor in his or her claim.

If a Subcontractor is unsure of whether the appointment is subject to an agreement incorporated by reference, contact a legal representative to read through the appointment in order to determine whether the appointment is subject to the JBCC NSSA agreement (or any other agreement) and to also advise on special conditions added by the Main Contractor into the letter of appointment or Bill of quantities as to whether they contradict the clauses provided for in the agreement.