Important changes to the Construction Act
Changes to include contracts
no longer having to be in written format
30 | 09 | 2011
Long awaited changes to the
Construction Act, which regulates dispute resolution and payment
provisions in the construction industry, are set to come into
effect in England and Wales on 1 October. Scotland will see the
changes take effect on 1 November. The changes will mean everyone
in the industry will have to review and amend their construction
contracts to bring them in line with the new legislation.
One of the main issues for the
construction industry will be the changes to payment mechanisms,
the adjudication regime and suspension rights.
Ioan Prydderch, partner and head of
construction, energy and projects at Hugh James Solicitors, says
“Individuals and companies working in the construction industry
need to be aware of the changes and, in particular, their impact on
payment mechanisms and dispute resolution.” He says: “Given the
changes, working practices, particularly in relation to payment,
will have to change and staff should be trained on how the changes
affect their roles. The changes will include how main contracts,
sub-contracts and consultant appointments operate.”
A significant change is that oral
construction contracts will now fall within the act and can now be
referred to adjudication; it will no longer be necessary for
contracts to be in writing. Further changes have also been made to
the rules governing adjudication.
Other changes include a new payment
notice regime which gives the person or company being paid the
right to serve its own notice and the introduction of a new ‘pay
less notice’. Even more attention needs to be paid to the payment
mechanism in the construction contract after the changes.
Pay-when-certified provisions that link payment to other contracts
will now generally not be enforceable. Contractors and consultants,
for example, will now also have enhanced rights to suspend
performance of their obligations if they have not been
paid.
Mr Prydderch says: “We recently had
a huge amount of interest in our training seminar on the
Construction Act changes from all areas of the construction
industry which helped our delegates to prepare for the changes. For
the last six months we’ve also been ensuring that our clients’
practices and contracts are ready for the changes so that no one is
caught out on 1 October.