6 vital things you must know about the Construction Contracts Act…

There are some important points to keep in mind when entering in to a construction contract.

1. Progress Payments:   Unless agreed otherwise, the 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 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 not permitted, and if included in a contract are 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:

(i) Give notice of intention to suspend work; and/or

(ii) Recover the money due as a debt.

This is a pay now/argue later type provision, so, if a payment schedule is not given, the client must pay the payment claim and cannot raise any defence to Court action.

4. Suspension of Work:  Contractors are 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 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 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.