Major changes to the way the construction industry works are taking place on 1 October 2011.

At the moment adjudication applies to all construction contracts provided that they are in writing. From 1 October 2011 it will apply to all construction contracts whether they are written or oral.

The other major change is to payment provisions. At the moment if there is a construction contract in writing and if a paying party does not wish to pay money otherwise due, then it must serve a withholding notice. The timeframe for service of a withholding notice is tight.

From 1 October 2011, regardless of whether the construction contract is written or oral, new payment provisions will apply.

The new provisions provide:

  • that the paying party or receiving party (depending on the wording of the contract) may serve a Payment Notice not later than five days after the due date for payment. This must state the sum considered due for payment and the basis on which that sum is calculated;
  • the receiving party may serve a Default Notice if the paying party does not serve a payment notice. Again this must state the sum considered due for payment and the basis on which that sum is calculated;
  • the sum stated in either the Payment Notice or the Default Notice is known as the Notified Sum; and
  • if the paying party does not want to pay the Notified Sum it must serve a Pay Less Notice within a timeframe which will vary from contract to contract.

There are other changes coming into effect on 1 October 2011 which will also affect the way the construction industry works.