REUTERS | Yves Herman

Construction Act 1996 changes: a second coming

Like many, I was keen to see what the Government would do once the consultation period for the Construction Contracts Bill ended earlier this year. After all, they didn’t draft a Bill the industry wanted the first time around – it was universally criticised – and were said to be having a second attempt at it.

I found out last week, when the latest amendments had their first reading in the House of Lords.

As far as adjudication is concerned, the proposed changes are thankfully short and easy to understand.

I’ve always thought the “in writing” constraint worked to exclude the very people that the Construction Act 1996 was meant to assist. Now the adjudication net will be cast wider. Inevitably there will be disputes (and potentially whole adjudications) about what the terms of a contract are, but experienced adjudicators should be able to deal with those.

The slip rule codifies what practitioners thought the position was in any event, although I note that the rule doesn’t expressly include slips and errors, merely clerical or typographical errors. I assume there will need to be an amendment to the Scheme to bring it in line. It’s good that the express slip-rule applies to England, Wales and Scotland, rather than just Scotland as proposed in the July 2008 Bill.

The prohibition on “Tolent” type clauses is also welcome and, again, this should widen the adjudication net.

On balance, I like the proposed amendments to adjudication. Now the payment provisions, well that’s another story…

One thought on “Construction Act 1996 changes: a second coming

  1. Some brief thoughts on the payment provisions included in the LDEDC Bill 2008:

    It’s a shame that the proposed section preventing interim payment decisions from being final and binding (section 5 of the July 2008 Bill) has not been included. I suspect it was because DBERR couldn’t resolve how to do this without it also applying to final payment decisions. Although the problem is not endemic, I think DBERR have missed a trick.

    Section 110(1A) of the LDEDC Bill 2008 is trying to prevent the use of “pay what certified” clauses. However, would the caveat in section 110(1B) not allow “pay what paid” clauses to still be effective? (I appreciate that some would argue that this is already covered by existing section 113). It is arguable that section 110(1A) may also prevent cross contract set-off by a main contractor or employer.

    Section 110(1C) has been included to prevent sections 110(1A) and (1B) being relied on by a main contractor to prevent an employer requiring work to have been properly carried out under a sub-contract as a pre-requisite to the main contractor’s entitlement to payment. This is necessary, although it makes s.110 rather cumbersome.

    The purpose of section 110(1D) is explained in the guidance notes: this provision was not included in the July 2008 Bill and I wasn’t aware that it was a major problem. Some will object to this, no doubt claiming further evidence of the “nanny state” that DBERR is imposing on the construction industry. However, I believe that anything which aids cash-flow and prevents the unscrupulous from circumventing the provisions of the Construction Act 1996 must be welcomed, particularly in the current economic climate.

    The remaining proposed amendments to sections 110 and 111 are, subject to a few minor tweaks and changes, the same as in the July 2008 Bill. This comes as rather a surprise considering that the RICS stated “the whole regime is now extremely complicated and as such is unlikely to be understood by users in the industry” and TeCSA stated “…the logic and the drafting of these proposed amendments are flawed and fail to take account of important points made in earlier consultations.”

    The point is not that the amendments won’t work, but rather that they are too complex. If one adds to this complexity the potential difficulties that will be faced by the industry by trying to operate two different payment regimes once the amendments come into force, only one sector is likely to benefit… the lawyers.

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