How does the JCT contract define insolvency?
A party is insolvent if: • he enters into an arrangement, compromise or composition in satisfaction of his debts (clause 8.1.1); or • without a declaration of insolvency, he passes a resolution or makes a determination that he be wound up (clause 8.1.2); or • he has a winding up order or bankruptcy order made against him (clause 8.1.3); or • he has appointed to him an administrator or administrative receiver (clause 8.1.4). Does the contract terminate automatically? No. Termination only takes effect on receipt of notice (clause 8.5.1 and 8.10.1). Notice must be in writing (clause 8.2.3). However, from the onset of insolvency the contractor’s obligation to carry out the works is suspended (clauses 8.5.3.2 and 8.10.3), and, if the contractor is insolvent, the employer’s payment obligations are suspended until a final account is issued (clause 8.5.3.1). This means that the works can only continue by agreement between the parties. Such agreement may take the form of a novation to a third p
