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Changes to the Construction Act

1st October 2011

After five years in consultation, October brings about revisions to the Construction Act but exactly what will that mean for an industry that is going through possibly its most challenging period yet?
The Construction Act – which came into force in England and Wales on October 1, with Scotland following in November – has an impact on all construction contracts.

Although the changes are not enormous in substance they are mandatory (no contracting out is permitted).

Construction documents which do not comply will have terms implied into them by the Scheme (the default set of payment and adjudication clauses that apply to non-compliant contracts).

Part of the reason for the changes was to reduce the administrative burden to construction businesses. This is particularly relevant for the Act’s payment regime, which is where the Act has arguably changed most.

All contracts will now be required to trigger payments by a notice period given by the payer or payee.

If the payer fails to provide a payment notice, the payee’s preceding payment application may qualify as one or he/she may issue their own payment notice.

Whether payment is triggered by a payer’s or a payee’s payment notice, the payer may give notice that he/she will pay less than the sum stated in the payment notice (a payless notice).

If the payer fails to give a valid payless notice he/she must pay the sum stated in the payment notice by the final date for payment without any deduction. If he/she does not, the payee can go to court or first obtain an adjudicator’s decision requiring payment.

Also, or instead, the payee can on seven days’ notice suspend all or part of his/her work, pending payment.

Other changes include removing the requirement that the ‘construction contract’ must be in writing. The amended Act still retains, however, a requirement that the contractual provisions as to the adjudication machinery (e.g. notice, timetable etc) should be in writing, with the default provision that, if they are not, the relevant provisions of the amended Scheme apply.

This is an interesting development, especially if contract disputes occur and parties argue that they agreed a contract and the nature of its terms.

Finally, there are changes to adjudication where clerical or typographical errors arising by accident or omission in their decisions can be changed. It is anticipated that a five day time limit after receipt on this will apply.

Adjudicators must now also inform the parties of the date of receipt of the referral notice and the date for the decision is calculated from the receipt date instead of the referral notice date.

So, there we have it, the Construction Act has played a major part of the construction industry since it became law in 1998 and these changes, although some would say not ground-breaking, really do have an impact on all construction firms.

David Brooks
Managing Director

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