Your contract’s hidden terms: implied by statute

However well-drafted your contract is, there are some terms you cannot avoid and which may be added into your contract. Implied terms can be added to your contract, without your knowledge.

They can arise from custom, be imposed by statute (legislation, laws, rules and regulations), or from decisions of the courts (known as case law).

The difference between statutorily implied terms and case law is that statute can override the terms you have written in your contract – statutory terms can “ride roughshod” over the partners’ wishes.

This post focuses on the Housing Grants, Construction and Regeneration Act 1996 (Construction Act 1996) and the Local Democracy, Economic Development and Construction Act 2009 (Construction Act 2009). Together these Acts implied terms into construction contracts relating to payment and adjudication.

For more legislation, go to my slideshare.

Implied payment terms

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 all these requirements, then the Acts will add new terms, on a piecemeal basis.

Implied adjudication terms

The Acts 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

What should you do?

You should check that any contract meets the 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!

The standard standard forms comply with the Acts’ minimum requirements, either in their core clauses or in a secondary option. 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).



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