REUTERS | Eric Thayer

Were the Construction Act 1996 amendments another Y2K?

This time last year most construction practitioners were preoccupied with the amendments to the Construction Act 1996 (which had just come into force) and the impact of those amendments on their business. One year on, we decided to look at whether, in fact, 2011 was all a bit like Y2K, with the impact far less than was anticipated and with many of the expected problems failing to materialise.

Could have been clearer

We are sure everyone would agree that the relevant sections of the LDEDC Act 2009 could have been drafted in a clearer and more succinct way. As a consequence, there is no doubt that the amendments, especially on payment, take some time to understand. However, as we said at the time:

“For those already familiar with the statutory payment rules, although the language used in some of the amendments suggests there has been a significant change to the payment mechanism under the Construction Act 1996 (as amended), a careful reading of the amendments suggests all is not what it seems. In practice, the impact of the amendments is likely to be less significant that it looks at first glance.”

Things became much clearer from a contractual perspective once revised industry standard forms or amendment sheets were published. You may still need to know your way around new sections 110(1A)-(1D), 110A, 110B and 111, but the drafting is there for you. Now you just have to remember to use the correct standard form or include the relevant amendment sheets in your contract.

The naysayers

Remember all those articles about:

Where are we now?

Payment in practice

We understand that the payment provisions are not exercising people the way some suggested they would. On the whole, parties appear to be coping with the new payment regime and issues surrounding “the basis on which that sum is calculated” do not appear to have surfaced.

However, there may be doubt as to what should happen in certain circumstances. For example, if a contractor fails to issue a payment notice following the sub-contractor’s application for payment and the contract is silent on whether an application is needed. Is there a “due date for payment” in those circumstances and should the contractor issue a default payment notice to ensure there is a one? Although judicial guidance may be welcome by some, it is avoidable with careful contract drafting.

Oral contracts are construction contracts

The main reason for repealing section 107 was to open up adjudication to those parties who never got around to signing their contract, getting it evidenced in writing, or had oral variations. Looking back at some of our blog posts, most of the focus was on the impact of adjudicating oral contracts (for example, see Lynne, Jennie, Paul and Jonathan’s thoughts).

This aim appears to have been achieved, as disputes arising under oral contracts are being adjudicated. However, adjudicators appear to be getting it right too, since none of these cases have made their way to the TCC on enforcement (or, at least, haven’t been reported if they have).

This may be because the arguments in the adjudication now focus on substantive issues, such as the terms of the parties’ contract and the issues in dispute, rather than focusing on the adjudicator’s jurisdiction, or lack of jurisdiction, because they may not have had a contract in writing.

Door closes on Tolent clauses

Regardless of your interpretation of section 108A (and the differing views were captured by Jonathan and Chris), Parliament’s intention was to eradicate Tolent clauses.

The drafting could have been clearer on this one, but this aim also looks to have been achieved, since this issue hasn’t troubled the TCC in the last 12 months. We wonder how much this may be due to the heavy hints dropped by Ramsey J and the other TCC judges about their views on this, as well as Edwards-Stuart J’s judgment in Yuanda (UK) Co Ltd v WW Gear Construction?

What does the future hold?

Building Information Modelling (BIM) is coming to the UK. Some may say it has already arrived. It involves creating an interactive 3D model of the project and forms part of the government’s construction strategy. This means practitioners need to understand what it is, how it will impact on construction contracts and what drafting they need to include to provide for it. There are a number of key areas to watch.

Only time will tell whether BIM is the “next big thing”, or whether we have another Y2K on our hands.

One thought on “Were the Construction Act 1996 amendments another Y2K?

Leave a Reply

Your email address will not be published. Required fields are marked *

Share this post on: