REUTERS | Aly Song

Impact of Limitation Act reforms on construction industry: consultation

We understand that the Ministry of Justice is carrying out an informal pre-consultation with members of the construction industry over the Law Commission’s proposals to reform the Limitation Act 1980. It has asked for responses by 20 September 2009.

This is not a full public consultation. Once the draft Civil Law Reform Bill (the Bill) is published, setting out the proposals on the changes to the law on limitation, there will be an opportunity for a full public consultation. The questions currently being asked are targeted to specific industries and will help those drafting the Bill to prepare the impact assessment that accompanies it.

What are the proposed reforms?

The proposed reforms include:

  • Claims in contract and tort to have the same limitation period.
  • Claims in negligence (other than personal injury) to have a 3-year limitation period from the date of knowledge, with a long-stop of 10 years from the date the cause of action accrued.
  • Introduction of a statutory definition of “date of knowledge”.
  • Future owners of property to retain a right to claim in negligence.
  • Parties to be able to modify the limitation period and the long-stop date by agreement.
  • Abolishing the 12-year limitation rule for contracts under seal.

What questions is the construction industry being asked?

Some of the concerns expressed by the construction industry have centred on the potential ability to vary limitation periods, particularly where there is unequal bargaining power between the parties. It is envisaged that weaker commercial parties may be forced to accept longer limitation periods. The knock-on effect through the supply chain could be considerable.

As a result, the industry has been asked a number of questions:

  • What effect will the changes have in general terms?
  • Will the changes increase or decrease the cost of legal advice and proceedings?
  • What effect will the express right to agree a limitation period have on costs to business?
  • What effect will the reforms have on the provision or cost of insurance in the construction sector?

The industry has also been asked to provide any other information regarding the effect of the reforms that may be helpful in assessing their overall impact.

What should you do, if you wish to respond to this informal consultation?

Email your comments to Angela Wright at the Ministry of Justice.

3 thoughts on “Impact of Limitation Act reforms on construction industry: consultation

  1. The proposals set out in this “informal pre-consultation” have prompted strong opposition, with fears that insurance premiums may rise and that clients will have an opportunity to “play companies off against each other” to incorporate longer limitation periods.

  2. The proposals set out in this “informal pre-consultation” have prompted strong opposition, with fears that insurance premiums may rise and that clients will have an opportunity to “play companies off against each other” to incorporate longer limitation periods.

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