We represent clients in all building and construction disputes, including residential, commercial and industrial. We act primarily for construction companies, but also for contractors and owners. We have particular expertise in payment claims and adjudications under the Construction Contracts Act 2002.
Our understanding of Construction Law arises from our background in Leaky Buildings as well as our familiarity with the industry. We often handle claims that involve complex and technical building matters. Adina Thorn Lawyers understands the finer details of the Construction Contracts Act including the latest revisions and case law.
Things you need to know – Construction Contracts Act 2002
The Construction Contracts Act came into effect in 2003 and changed the way the building industry went about its business, particularly in the way contracts are established, managed and payments made. The Act adopts a “pay now, argue later” approach – i.e. the intention is that disputes do not hold up the flow of payment in the industry.
The Act applies to a wide variety of construction contracts – including residential contracts (with some exceptions).
The construction contract should set the number of progress payments under the contract; the interval between those payments; the amount of each of those payments; and the date when each of those payments becomes due. If the contract does not provide for this, the Act specifies a ‘default’ regime which will automatically apply.
A clause in the contract that payment is conditional on receiving payment from another party – i.e. “pay when paid” or “pay if paid” clause – is ineffective. Progress payments cannot be conditional.
At the end of each payment period (usually at the end of the month), the contractor can serve a Payment Claim (i.e. invoice) in respect of the work. This must be writing and contain details of the work / period to which it relates / amount claimed, and must expressly state that it is made under the Act. It is very important to comply with the required formalities, otherwise the Payment Claim may be invalid.
Once received, this Payment Claim must be paid before the due date (20 working days after service of the Payment Claim) or a Payment Schedule must be provided to the contractor (explained next).
If a party who has received a Payment Claim (“the payer”) takes issue with it, within 20 working days they must provide a Payment Schedule to the other party (“the payee”) which sets out the amount they are prepared to pay (if any) – this is known as the “scheduled amount”. Any difference must be explained, including how the scheduled amount was calculated; why it is different from the claimed amount and; if money is withheld, the reasons for that.
If a party does not provide a Payment Schedule, the payee may recover from the payer, as a debt due to the payee, in any court (i) the unpaid portion of the claimed amount and (ii) the actual and reasonable costs of recovery awarded against the payer by that court. In addition, the payee may serve notice on the payer of the payee’s intention to suspend the carrying out of construction work under the construction contract.
Adjudication / Dispute Resolution
The Act provides a fast-track process for disputes, known as “adjudication”. It is intended to provide a quick and inexpensive method of settling disputes.
The only disputes that can be referred to adjudication are those which relate to payments under the contract (for example, progress payments) and any disputes you have about the rights and obligations of the parties under the contract.
Once appointed, the Adjudicator must make a decision within a very tight timeframe and the decision is binding on both you and the contractor (although it is not necessarily final). It is also enforceable as a Court judgment, giving access to the normal range of enforcement procedures. The contractor can also seek a charging order over the building site, to secure payment. There is also a right to suspend construction work in certain circumstances.
Other forms of dispute resolution can be used in parallel with Adjudication, including arbitration or Court proceedings.
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