Changes to the Construction Act, the Scheme and Standard Forms of Contract
Changes to the Construction Act, the Scheme and Standard Forms
of Contract
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Changes to the Construction Act, the Scheme and Standard Forms of
Contract
The Housing Grants, Construction and Regeneration Act 1996 Part
II, also know as the Construction Act, which regulates dispute
resolution and payment provisions in the construction industry, has
been amended through Part 8 of the Local Democracy, Economic
Development and Construction Act 2009.
The Welsh Government has
published a draft Scheme for Construction Contracts (England and
Wales) Regulations 1998 (Amendment) (Wales) Regulations
2011. The draft is intended to implement the changes to
the Construction Act in much the same as the current Scheme for
Construction Contracts did to the Construction Act in 1998. The
London Government has also published a similar draft scheme
covering England.
JCT is publishing its
2011 suite of contracts, which will incorporate the changes to the
Construction Act, in September 2011.
The amendments to the
Construction Act come into force in both England and Wales on 1
October 2011.
Who will this affect?
Everyone in England and Wales undertaking "construction
operations."
Impact upon your business?
The changes will
mean that everyone in the industry will have to review and amend
their construction contracts to bring them in line with the
Construction Act as amended. Given the changes to the payment
regime, working practices will need to change and staff may require
training on the new procedures.
JCT have helpfully produced a track changed version of their
changes to their 2011 suite of contracts which is available to
purchase now. Other standard forms, such as NEC and RIBA, will have
to follow suit.
The changes?
The main amendments
are:
- Construction contracts in
writing. It is no longer necessary for construction contracts to be
in writing in order to be covered by the provisions of the
Construction Act as amended. Therefore, disputes emanating from
oral contracts can be referred to adjudication.
- The adjudicator has the
power to amend typographical errors or "slips" within five days of
delivery of his decision.
- The parties are no longer
permitted to make provision in their contracts as to the allocation
of the parties’ legal costs in relation to an
adjudication.
- A new payment regime will
apply. Either party, or a third party, can give a payment notice.
Withholding notices have been abolished but replaced with "pay less
notices". If the payer fails to issue a payment notice, the payee
can now issue its own notice and under the amended Scheme
applications for payment will count as the notice. If the payer
fails to issue a pay less notice on time then they will have to pay
the amount set out in the payee’s application for
payment.
- Pay-when-certified clauses
that link payment to other contracts will not be
enforceable.
- Parties will now have a
greater entitlement to suspend performance of some if not all of
their obligations if they have not been paid. This entitlement will
not only be for the period of non-payment but also for
consequential delay due to re-mobilisation.
Contact us
For further information
on how the amendments to the Construction Act could affect your
business, please do not hesitate to contact Ioan Prydderch, Alun
Tobias or Matthew Stevens.
_s.jpg "Ioan Prydderch")
Ioan Prydderch
Partner, Head of Construction, Energy and Projects
E ioan.prydderch@hughjames.com
T 029 2039 1127
Alun Tobias
Partner
E alun.tobias@hughjames.com
T 029 2039 1143
Matthew
Stevens
Associate
E matthew.stevens@hughjames.com
T 029 2039 1157
Download
Changes to the Construction Act, the Scheme and Standard Forms of
Contract