Off-site materials and the conditions

Under JCT, materials and goods on site are included in an interim valuation as a matter of course, provided they are properly and not prematurely delivered and adequately protected. Off site is different. They are included only where they are listed in the contract, and only where the conditions attached to listed items are met.

Why the difference

If materials are on site and the contractor becomes insolvent, the employer has the materials. If they are in a fabricator’s yard two hundred miles away and the contractor becomes insolvent, the employer has paid for goods it cannot identify, does not own and cannot collect.

Every condition below exists to close one part of that gap.

The conditions

• Listed. The items must appear on the list annexed to the contract. Materials that are not listed are not payable off site, however substantial.
• Vested. Property must have passed to the contractor, so that it can pass to the employer on payment. If the supplier retains title, paying buys nothing.
• Set apart and marked. Stored separately, clearly identified as belonging to this contract and this employer. Goods in a general stockpile cannot be identified as yours.
• Insured. Against loss and damage, from delivery to the storage location until delivery to site.
• Bond, where required. For uniquely identified items the contract may require a bond, and for items not uniquely identified it generally does.

The precise requirements vary between forms and between the uniquely and not uniquely identified categories. The contract particulars decide.

What goes wrong

The commonest failure is retention of title. The contractor has not paid its supplier, the supplier retains title until it is paid, and the employer pays the contractor for goods the supplier still owns. If the contractor then fails, the supplier collects its materials and the employer has paid twice.

The second commonest is identification. Photographs of a stack of steel with a laminated sign do not establish that these particular sections are set apart for this contract, especially where the fabricator is running four similar jobs.

Verifying, not accepting

Someone should see them. A visit to the storage location, checking the marking, the segregation and the paperwork, is proportionate for any material sum, and is what the conditions actually contemplate.

Accepting a schedule and an invoice is not verification. It is trust, and the conditions exist precisely because trust is not the right basis for the decision.

They come out again

When the materials are built in, they stop being a materials line and become measured work. Leaving them in both places double counts, and it is an easy error to make because the two entries are managed in different places and often by different people.