News Blog : New Construction Act (2009)

Another piece of government legislation came into force in the construction industry on 1^st October 2011 (Scotland 1^st November 2011) via The Local Democracy, Economic Development and Construction Act 2009.  This new act significantly amends the older Housing Grants, Construction and Regeneration Act 1996.

Importantly, from the 1^st October any construction contract entered into on or after this date must comply with the provisions of the Act.

So, what changes have been made to the 1996 Act:

Pay when paid

The 1996 provisions for pay-when-paid have been strengthened

The terminology of the legislation can be confusing, so we have altered the terms to make it clearer

Payment Notices

Notified Sum: Is the amount the Giver is stating is due to the Receiver and the basis on how the amount has been calculated.  This is to be issued by the Giver to the Receiver not later than 5 days after the contract payment date.  This tends to be notified to the Receiver by the certifying consultant whether this be the Architect, Contract Administrator or QS.

Pay-less Notice: If the Giver [Employer] thinks the Receiver [Contractor] is due less than the Notified Sum then the Giver will issue this notice and specify the reduced amount which is due and the reasons / detail of how this has been calculated.  This used to be known as the Withholding Notice.

Default Notice: if in the Receiver’s opinion the Giver has not issued the Receiver with a Payment Notice within the specified timescale, then the Receiver can issue a Default Notice.  This notice is to detail the sum the Receiver states is owing and the basis upon which it has been calculated.

Receiver-led Payment Process: If expressly incorporated into the contract, the Receiver can issue a Payment Notice, i.e. the Notified Sum and the Giver can issue a Pay-less Notice.  Under this regime, however, there would be no Deafult Notice as the Receiver has already it.

Pay-when-certified Clauses

These have now been outlawed.  Commonly a contractor would hide behind the fact that the subcontractors work had not yet been certified by the certifier, this now means the contractor is no longer able to rely upon the lack of a certification upstream to prevent payment to the subcontractor.  It is believed that this would also mean that the release of retention to the subcontractor by the contractor is not conditional upon the issue of the Making Good Defects Certificate or Final Certificate.

Disputes

Performance Suspension: The 1996 Act ad inherent provisions within it to suspend entire performance for non payment.  The new Act reinforces such actions in that it now enables partial suspension of their obligations rather than entire.

Adjudication: Historically, the bigger party to a construction contract has been at the forefront of writing contracts to their benefit, particularly with reference to the adjudication clauses.  The new Act now regularises parties obligations in this respect in that:

1. The ability of the Contractor to alter the payment of the adjudicators fees fromthe subcontractor has been outlawed;
2. Adjudication will now apply to oral AND written contracts not just written contracts;
3. Adjudicators will be able to awards costs on the merits of a case;

Adjudicators will be able, now, to correct clerical / typographical errors made by accident or omission in their decision