Can a JBCC contract be cancelled where there is no principal agent?

The contract cannot operate as intended without an independent principal agent to fulfil this role. It is neither advisable nor permissible for the employer to assume the role, or for the parties to proceed without a properly appointed principal agent.

What happens when the principal agent withdraws?

In the case of Botsang-Ledile Construction & Projects CC v Minister of Public Works, the Court had to wrestle with the contractor’s entitlement to terminate an agreement where the principal agent ceased acting.

In that case, the parties had concluded a JBCC Principal Building Agreement Edition 4.1, and the Principal Agent was GM Architects and Project Managers.

During the execution of the construction of the Dube Police Station, the Principal Agent’s firm was liquidated. They accordingly advised the parties that they could no longer continue with the role.

The contractor pointed to the requirement that a new principal agent be appointed within ten days, as the absence of the Principal Agent led to delays in the project.

Ultimately, the contractor sent a letter to the Department of Public Works of its intention to cancel the contract as a result of their failure to appoint an alternate principal agent.

The contract was cancelled by the contractor on 28 March by a Notice of Cancellation issued in terms of clause 38.

The contractor then claimed outstanding payment and damages, including loss of profit.

The evidence at the trial showed that the Department had appointed Gosiame Development Consultants on 9 March, and the Principal Agent was introduced to the parties at a site meeting on 12 March. The minutes of the site meeting confirmed the appointment. The contractor’s representative attended the site meeting, and the minutes were sent to the contractor.

The court accordingly found that the contractor must have been aware of the appointment of the new principal agent, and this breach by the Department had been remedied prior to the contractor sending notice of termination.

In addition, the court found that at the time of cancellation, the contractor was significantly behind program and had only completed approximately 50% of the work for purposes of practical completion. The court accepted that this constituted a material breach of the Agreement.

The Court found, therefore, that the contractor was not entitled to cancel the Agreement as it had done and the contractor’s claim was dismissed with costs.

The judgment reinforces the contractual obligation on an employer to appoint a Principal Agent within ten days if the previous Principal Agent ceases to act. In terms of the current JBCC Agreements, edition 6.1 and later, it is recorded that a contractor may suspend or terminate where the employer fails to appoint another principal agent or where the agent fails to act.

In this case, the employer had remedied the breach before the contractor cancelled – the contractor could no longer cancel for an earlier breach that had been remedied.

Interestingly, the Court found that being significantly behind the program and not having the works at a satisfactory state of completion constituted a material breach.

This may not always be the case because if the contractor can show there were justifiable delays, additional contract instructions or legitimate revisions to the date of practical completion, it may be shown that it is not actually in material breach.

In this case, the contractor failed to lead any of this evidence or provide this explanation to the Court, an important warning to contractors to be in a position to do so or in order to justify the right of cancellation.