A New Approach to Construction Contracts
The Construction Contracts Act 2013 (The Act) applies to most types of construction contracts entered into after the 25th of July 2016. Most notably the Act applies to Construction Contracts for works or advice relating to Construction, Alteration, Repair, Scaffolding and Painting.
Some of the contracts that the Act does not apply occur where the contract price is €10,000 or less or the contact relates to a dwelling that is smaller than 200 sq.m were one of the parties to the contract occupies or intends to occupy the property as their residence.
The objective of the Act is to regulate payments in respect of Construction Contracts with a particular focus on the timing of payments.
Contracts that are governed by the Act must set out the following;-
- The amount of each interim and final payment and how such payment is calculated.
- The date each payment falls due and how this date is determined.
- The time between the payment claim date and the payment due date.
- Parties to Construction Contracts are prohibited from withholding payments that are due unless they have responded within 21 days of the payment claim date.
- Work can be suspended by a party to a Construction Contract until payment is made in full.
It is therefore apparent that the provisions for the timing of payments exist to protect subcontractors and the Act sets out that the date when payment falls due cannot be later than 30 days after the payment claim date.
The Act has most importantly introduced that a party to a contract will have the right to refer a payment dispute for adjudication. A dispute can be referred to adjudication after giving 7 days’ notice.
If both parties cannot agree as to who the adjudicator should be, an application can be made to the Chairman of the Construction Contracts Adjudication Panel who will appoint an adjudicator from the panel. An Adjudicator must reach a decision within 28 days or within 42 days if consent is given by the party who referred the dispute.
If adjudication does not satisfactorily deal with the matter, arbitration can then be attempted and failing that, proceedings can be initiated in the courts.
Parties are expected however to abide by the decision of the arbitrator pending the outcome of arbitration or litigation.
Each party to the dispute will be responsible for their own legal costs.
It is hoped with the introduction of the adjudication process as an initial method of resolving payment disputes that fewer and fewer payment disputes will end up entering the court’s process.