Rainey Collins Lawyers

6 Vital Things You Must Know About the New Construction Contracts Act

By Alan Knowsley, Thursday, 18 November, 2010, Construction

Some of the old practices for subcontracts are prohibited under the Act which came into force on 1 April 2003 and it affects almost all construction contracts.

1. Progress Payments
Unless agreed otherwise, the new Act gives contractors the right to receive monthly progress payments whether or not these are stipulated in the contract.

2. Pay When Paid Clauses
Progress payments may not now be subject to a condition that these are only payable if and when the head contractor is paid. “Pay when paid” and “pay if paid” clauses are no longer permitted, and if included in a contract are now invalid.

3. Claims for Payment
Payment claims may be served on the owner or head contractor at the end of each month unless the contract specifies a different period. The payer must then within 20 working days pay either the amount claimed, or such other amount as the payer sets out in a Payment Schedule (which must explain the reasons for any difference between the claimed amount and the schedule amount).  If the payer does neither the contractor may:

• Give notice of intention to suspend work; and/or
• Recover the money due as a debt.

4. Suspension of Work
Contractors are now legally entitled to suspend work if they have not been paid.  Any provision in a contract attempting to prohibit this action is invalid.

5. Charging Orders
A contractor can now apply for a Charging Order against a construction site owned by the employer under a construction contract or an “associated person” to the employer.

6. Disputes Resolution
A new dispute resolution procedure called “adjudication” is established by the Act.  This is intended to offer a quick and cheap method of settling differences between the parties, as an alternative to arbitration or court proceedings.

Although a number of these new provisions do not apply to residential contracts, they will affect contractors and sub-contractors throughout the building industry.

Call us Toll Free on 0800 733 424