Existing structures and who bears the risk - the importance of clarity

Construction projects often involve works to existing structures, such as refurbishment of an existing building or fit-out works prior to a tenancy. The allocation of risk in these existing structures, in particular with regards to their suitability for the works, is a potential issue between the parties when negotiating the contract. A recent Technology and Construction Court (TCC) decision has considered who is at risk for problems associated with existing structures at the site under a JCT Design and Build Contract 2016 (JCT DB 2016) with substantial bespoke amendments. The TCC found that the risk under the contract relating to the existing structures lay entirely with the employer (the opposite of the adjudicator’s decision on the same point and not the employer’s desired outcome). A stark reminder of the need for clarity in both understanding and drafting when it comes to allocation of risk in developments involving existing buildings.

We frequently see issues arise in relation to the allocation of risk for existing structures, including the risk of the unsuitability of the existing structures, such as their ability to support and / or facilitate the proposed works. For example, if an additional floor is being added to a building (either on top of the existing building or internally as a mezzanine floor), the location of structural supports and loadbearing walls can be vital information to ensure that the design for the new element will be successful. Another example is where a heritage building is adapted or converted for residential, commercial or mixed-use space. In these cases, part of the original structure is retained, and the existing structure is assumed capable of withstanding additional loads from new extensions or structural alterations. In some cases, investigations during construction can reveal defects and deterioration requiring remedial works. In other cases, they reveal inaccuracies in assumptions underlying the design, in both cases leading to delays and extra costs.

The JCT DB 2016 (and the 2024 version) does not deal clearly with the allocation of risk with regards to existing structures, save for insurance provisions and damage to the existing structures themselves. This is why parties will often amend the contract, adding additional clauses to assign the risk for existing structures to one party. In the recent TCC case, this is what the parties had attempted to do, but the ambiguity of the contract provisions meant the position was less than straightforward.

In the TCC judgment of John Sisk and Son Limited v Capital & Centric (Rose) Limited [2025] EWHC 594, the judge considered the interpretation of a heavily amended JCT DB 2016, in particular the risk allocation for existing structures on the site. The TCC found that under the contract, the risk of the unsuitability of the existing structures, including their ability to support and / or facilitate the proposed works, lay solely with the employer.

Background to the TCC case

On 20 May 2022, Capital & Centric (Rose) Limited (C&C), the employer, and John Sisk and Son Limited (Sisk), the contractor, entered into a heavily amended JCT DB 2016 for the design and construction of substantial residential works, including the refurbishment and repair of two listed mills.

A dispute arose as to who bore the contractual risk for the condition of existing structures on the site, including their ability to support / facilitate the proposed works.

Prior to the TCC proceedings, an adjudicator found on the same point that the responsibility for existing structures was solely the contractor’s risk. An adjudicator’s decision is only temporarily binding so the judge was able to make his own final determination without reference to the adjudicator’s decision.

Sisk brought court proceedings against C&C seeking, in summary, declarations that:

• the contract placed the risk of issues arising from existing structures on C&C, including their being unable to support or facilitate the proposed works; and
• that Sisk was entitled to more time and money if delays or costs arose from those issues.

Relevant contract provisions

The TCC considered the relevant contractual provisions in detail, in particular new clauses 2.42.1 to 2.42.4 and item two of the Contract Clarifications.

In brief, these clauses sought to impose all risk relating to the condition of the site, including in relation to the existing structures and to any information provided by C&C being incorrect, on Sisk. The clauses also extended to unforeseeable risks and risks related to adjoining properties.

However, clause 2.42.4 was included to create an exception, or qualification, to these risks by saying:

“This clause 2.42 shall be subject to item 2 of the Clarifications”

“Clarifications” was defined as “the clarifications headed ‘Contract Clarifications’ contained within Volume 2, Appendix 2.9 of the Employer’s Requirements”.

Contract Clarifications

The Contract Clarifications, item (or row) 2, read as follows:

The parties’ cases

Sisk argued that item two of the Contract Clarification assigned the risk of existing structures to the employer (being an “Employer Risk”), meaning the contractor was entitled to extra time and payment if issues arose. Sisk claimed the additional tender clarification document in the electronic version of the contract merely noted past negotiations and did not override this, so the employer bore the risk for existing structures.

C&C maintained that it had rejected Sisk’s attempt to shift existing structures risks to the employer and relied on pre-contract discussions and the additional tender clarification document that it contended was incorporated into the contract. Thus, they argued that the contractor bore the risk for existing structures.

The judgment

The judgment considered the interpretation of “Existing Structure Risk” and “Employer Risk” – the judge held that these could reasonably obviously be understood in their normal or natural meaning, especially in the context of a construction contract. The terms referred, respectively, to the contractual risks associated with the condition of the existing structures, and the contractual risks accepted by the employer.

The judge also considered the admissibility of pre-contractual negotiations and concluded that there was no basis for them to have regard to these in this case. This decision follows established case law regarding pre-contractual negotiations. It also perhaps blocks any potential appeal by concluding that this decision would not have been any different if they’d had regard to the pre-contractual negotiations.

The judge agreed that the tender clarification was a contract document, but that it was not “the Clarifications” referenced in clause 2.42.4.

Allocation of risk

Of most interest to those considering the allocation of risk in relation to existing structures, the judge determined that C&C was the contractual “risk owner” in relation to the suitability of existing structures, despite the ambiguous language.

It was decided that the additional, bespoke clauses placed comprehensive risk for all matters relating to the existing site on the contractor, including the risk in relation to the condition of the existing structures. The only limitation to this broad allocation of risk is found in clause 2.42.4, which refers to “the Clarifications” being carved out. The judge decided that this exception carved out particular risk from the contractor’s wider responsibilities regarding the existing structures and did not undermine the overall risk allocation framework.

So, the risk relating to the condition of the existing structures, including their ability to support / facilitate proposed works, lay entirely with the employer.

Risk allocation for existing structures is often amended in JCT DB 2016 (and 2024) contracts, as the standard form does not fully address the issue. However, the case above highlights how extensive amendments can create uncertainty. Here, the employer’s attempt to shift all risk to the contractor ultimately failed.

Commentary

The case is a reminder that bespoke contractual provisions, related to risk allocation or otherwise, must be clear, unambiguous, and consistent throughout the contract.

It also highlights that the court is unlikely to take pre-contractual negotiations into account when making its decision. The written agreement should therefore reflect all terms that the parties agreed upon during negotiations.

Although the case here clearly turns on its facts, it emphasises the importance of careful drafting and paying close attention to all contract documents, including the employer’s requirements and technical documents.

Some key take-aways from the case and our experience:

1. Allocate risk first, draft second – decide who bears risk upfront, then draft accordingly.

2. Contract provisions should be clearly drafted and unambiguous at all times, especially in the key risk areas that have been negotiated between the parties.

3. Consistency is key! All contract documents should be carefully reviewed to ensure there is no conflict between them.

4. Keep it simple – overly complex amendments and carve outs can create ambiguities and are more likely to lead to disputes.

5. Consider whether the original clause can be amended, rather than including carve-outs, to avoid the risk of having conflicting drafting.

6. Use a priorities clause where appropriate, especially where tender or negotiation documents form part of the contract (although this should be avoided where possible – especially last minute / midnight additions!).

7. The court is likely to interpret contractual terms based on their plain meaning and the contract as a whole.

8. The Court is unlikely to consider pre-contractual negotiations (unless one of the limited exceptions applies).

9. Each case will be fact specific – consider the exact terms of your contract, in particular any bespoke amendments.

Authors: Corinna Whittle and Tomos Rossiter

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at April 2025. Specific advice should be sought for specific cases. For more information see our terms & conditions.