Your contract, as written, can be over-ruled by mandatory terms introduced by legislation (or statute). The main legislation relevant to construction contracts is:
1. The Housing Grants, Construction and Regeneration Act 1996, HGCRA, known as the Construction Act 1996; and
2. Local Democracy, Economic Development and Construction Act 2009, LDEDCA, known as the Construction Act 2009.
Together these Acts interfere with your contract terms relating to the payment process and adjudication. These Acts can override the clear terms of your contract – statutory terms can “ride roughshod” over the partners’ wishes.
Implied Terms on Payment
The Acts set out the minimum requirements that your contract must include:
- Instalments: payment by instalments, stage payments or other periodic payments for work in excess of 45 days – the contract should set out the amounts of payments and the intervals at which or circumstances in which they become due (s109(1))
- Mechanism: an adequate mechanism for determining what payments become due under the contract & when (s110(1)(a)), which cannot be linked to payment under a separate contract
- Final Date: a final date for payment (s110(1)(b))
- Payment and Pay-Less Notices: requiring the payer to provide a payment notice, or the paid-partner can provide a default payment notice – not later than 5 days after the due date (s110A(1)) and the period under s111(7) for giving a pay-less notice.
If your contract does not include clauses dealing with those requirements then the Acts will add new terms, piecemeal.
Implied Terms on Adjudication
The Act (s108) sets out the minimum requirements that your contract must include:
- Notice: The right to give a notice “at any time” of your intention to refer a dispute to an adjudicator
- Appointment: A method of securing the adjudicator’s appointment of an adjudicator within 7 days of the notice
- Timescale: The adjudicator has to reach a decision within 28 days and it can be extended by 14 days with the referring party’s consent or longer with the consent of both parties – after referral
- Role of the adjudicator: the adjudicator has to act impartially, inquisitorially and is immune from liability if she acts in good faith
- Binding : The decision of the adjudicator is binding until the dispute is finally determined
When the Construction Act 1996 first came out, ICE 6th edition retained the use of the Engineer to consider a notice of dissatisfaction as the first step in a dispute resolution process (clause 66(2)). The Act, on the other hand, permits a partner to a construction contract to bring a dispute to adjudication at any time. ICE had to amend their standard form, and quickly!
Does Your Contract Comply?
Most of the standard forms comply with the Acts’ minimum requirements. Let’s face it, payment procedures under construction contracts are complex enough without constantly looking over your shoulder to see if there is an Act or two breathing down your back and trying to interfere!
Many letters of intent do not comply with these minimum requirements. For these contracts, you will need to grab some peace and quiet and read the Scheme for Construction Contracts (as amended).