The Draft Construction Contracts Bill, published by the DBERR (Department for Business, Enterprise and Regulatory Reform) earlier this year, has been confirmed as part of the Government's legislative programme for the current parliamentary session.
The new legislation will apply to Scotland, England and Wales. It will make some fundamental changes to the Housing Grants, Construction and Regeneration Act 1996, with the stated aim of improving the operation of construction contracts and encouraging parties to resolve disputes by adjudication.
The most significant change is the abolition of the requirement for contracts to be in writing in order for the 1996 Act to apply. Oral contracts or oral / partly written contracts will now come within the scope of the 1996 Act provided the adjudication provisions are "evidenced in writing."
Other key changes include:
Amendments To The Payment Provisions
- The simplification of payment notice provisions.
Amendments To The Adjudication Provisions
- Slip Rule – (Scotland Only).
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- Contracts must include provisions which allow the adjudicator power to correct clerical or typographical errors arising by accident or omission in his or her decision after it has been issued.
- Costs of Adjudication.
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- Any provision in the contract dealing with the allocation of costs of the adjudication is ineffective unless it is made in writing after the appointment of the adjudicator.
- Where the contract provides for payment of costs (other than the fees and expenses of the adjudicator) by one party, the adjudicator may determine that such provision is unreasonable and may disallow certain costs on that basis.
- Provision is made for parties to be liable on a joint and several basis to pay the adjudicator such reasonable amount as he may determine for fees (for work reasonably undertaken) and expenses reasonably incurred.
- Disputes as to a reasonable amount or whether work is reasonably undertaken and expenses reasonably incurred to be decided by the court.
Other Changes
- Interim third party payment decisions are ineffective where expressed to be "binding" – to ensure that all disputes about interim or stage payments can be referred to adjudication.
- Improvement of the right to suspend performance, allowing the suspending party to recoup more of its costs.
- No requirement to pay notified sum (before final date for payment) where payee became insolvent after prescribed period and contract permits payer not to pay sum due in this event (prompted by Melville Dundas case).
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
