Part II of the Housing Grants, Construction and Regeneration Act 1996 (the Construction Act), together with the Scheme for Construction Contracts 1998 (England and Wales) Regulations 1998 (the Scheme), regulates the conditions of construction contracts. The Construction Act and the Scheme introduced statutory adjudication as the initial method of resolving disputes, subject to final determination by arbitration or the courts if the parties have allowed for this and wish to pursue it. The Construction Act and the Scheme also regulate the payment terms in construction contracts by providing for stage payments, payment notices and withholding notices, due dates and final dates for payment and the suspension of performance for non-payment.
The Construction Act is to be amended by Part 8 of the Local Democracy, Economic Development and Construction Act 2009 (the LDEDC Act).
The Scheme implies into construction contracts compliant adjudication and payment terms where the original terms do not comply with the Construction Act. The Scheme needs to be changed to correspond with the changes to the Construction Act. It is expected that the changes to the Scheme will have been finalised in time for the changes to the Construction Act to come into force on 1 October 2011 as planned.
For adjudication, the main changes will be:
- the removal of the requirement for construction contracts to be "in writing", except for adjudication provisions which must still be "in writing";
- the introduction of a statutory "slip rule" to allow an adjudicator to correct clerical or typographical errors; and
- changes to the prohibition on the parties agreeing who will pay the costs of an adjudication.
For payment, the main changes will be:
- to tie in with the existing prohibition on "pay-when-paid" clauses, the elimination of "pay-when-certified" clauses that link to other contracts;
- new payment notices and the replacement of withholding notices; and
- enhancements to the statutory right to suspend performance for non-payment.
There is also a change to the way "Exclusion Orders", that exclude certain categories of construction contracts from the Construction Act, may be made in the future.
These changes to the Construction Act and the Scheme mean that all current standard form building and engineering contracts will need to be amended so that they comply with the Construction Act and the Scheme as amended. Joint Contracts Tribunal (JCT) contracts tend to be used on more construction and engineering projects in the UK than the contracts published by the other relevant bodies, such as the Institution of Civil Engineers. As mentioned in Hot topics, the JCT has indicated that it will publish 2011 editions of its contracts to ensure that they comply with the Construction Act and the Scheme as amended, although it has not confirmed exactly when this will be. If it is after the changes come into force, JCT contracts entered into after the changes come into force and before the JCT publishes its 2011 editions will have to be amended with bespoke amendments to make them comply with the changes.
It is to be assumed that the other publishers of standard form building and engineering contracts will also publish either amendments to the current editions of their contracts or new editions of them to comply with the changes to the legislation, and the same timing issues will apply to their contracts as well.