The Construction Acts

The Construction Acts Legislation

On the 1st May 1998 the world of construction disputes changed forever with the Housing, Grants, Construction and Regeneration Act 1996 (Part II).

The legislation broadly gives rights to commercial parties in a construction contract to payment and statutory adjudication. Until then the construction industry resolved its disputes using Court or Arbitration, which proved long winded and costly, thus it was difficult to obtain any form of equitable commercial solution at speed.

The evolution of adjudication since 1998 speaks for itself; it has developed into the most popular, fast, commercial process of ADR in Construction. The mere fear of it now induces settlements in Arbicon's experience.

On the 1st October 2011, the HGCR Act 1996 was updated by the Local Democracy Economic Development and Construction Act 2009 and revised to deal with bits that do not work or need improving. Our experience is that many institutions and contractors alike do not understand the implications that the new Act imposes and we have caught out many parties on this lack of understanding, with particular reference to the New Payment Notice rules.

If any contract terms are absent the Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (England) Regulations 2011 is implied into the contract covering payment and adjudication rights and procedures. 

In brief, the combination of the two Construction Acts give rights to the parties to a construction contract. As exampled in the following the parties have a right to:

Adjudication

1. Refer a dispute arising under the contract to adjudication;
2. Refer the matter at any time;
3. Obtain an adjudicator's decision in 28 days (or longer if agreed);
4. An adjudicator's decision that is impartial and binding on the parties;
5. The provision of the Scheme for Construction Contracts should the contract not comply with the Act;
6. Refer a dispute under an oral or written contract.

Payment

1. Stage payments if the work period is more than 45 days long;
2. An agreement on the amounts and when they are to be paid, if not the Scheme applies;
3. An adequate payment mechanism (i.e a Payment Due Date, Payment Period and Final Date for Payment). In the case of this the Scheme applies;
4. A Payment Notice from the Payee within 5 days of the Payment Due Date;
5. A Default Payment Notice in the absence of a Payee Notice given in (4) above;
6. A Payless Notice to be served before the agreed time before the Final Date for Payment date (under the Scheme this is 7 days);
7. Ignore any payment provision that makes payment conditional on performance of obligation under another contract;
8. Ignore any payment provision that makes payment conditional on a decision by any person in respect of obligations under another contract (pay when certified for example);
9. Ignore any provision making the date required for a payee's application for payment to be the strict Payment Due Date. The Scheme will apply;
10. Any Payment Notice (including Default Payment and Payless Notices) must state the amount due even if zero and the basis for calculation.

Other Rights

1. Suspend performance in the event of non payment with 7 days notice and an entitlement to an extension of time and all associated loss and expense incurred with demobilisation, re-mobilisation and prolongation as examples;
2. Ignore any provision relating to "pay when paid" except where clear express agreement is in place that such a provision applies on the dependency of a third person who becomes insolvent;
3. Ignore any provision that imposes the costs of the adjudication on one of the parties in any event including the adjudicator's costs and legal costs.
4. Require the adjudicator to correct any clerical or typing errors made by accident.
5. The Statutes are now well tested by case law. Arbicon have been involved in adjudication since the outset and thus have specialised legal knowledge and experience in executing claims through adjudication and all other ADR processes. We are construction people dealing with construction issues!

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