What is the Construction Act?

So what is the Construction Act?

The Construction Act is the name commonly used to describe the Housing Grants, Construction and Regeneration Act 1996 and amended by the Local Democracy, Economic Development and Construction Act 2009.

Within the Act, it contains a number of Sections (or headings); these cover the following:

(Section 104) Construction Contracts

In summary, this section sets out what is meant by a Construction Contract.

(Section 105) Meaning of 'Construction operations'

This section identifies descriptions of works which are classified as ‘construction operations’, which include many of the usual activities examples of which include:

Demolition;

Construction, as well as repair and maintenance;

Civil engineering activities such as earth moving, piling, tunnelling, structures and sea defences;

This section does include some exclusions such as operations associated with:

Drilling for oil or natural gas;

Extraction of minerals;

Steelwork associated with nuclear processing, power generation or water/effluent treatment; or processing of chemicals, food and drink;

Manufacture and delivery of building or engineering components and equipment.

(Section 106) Provisions not applicable to contract with residential occupier

Where construction work is carried out to an occupiers dwelling house or flat, the provisions of this Act do not apply.

(Section 107 is no longer included) (Section 108) Right to refer disputes to adjudication

This gives a Party to a Construction Contract the right to refer a dispute under the contract to adjudication and sets out the provisions that must be included within the Construction Contract.

If these provisions are not included or have not been complied with, then the adjudication provisions of the Scheme for Construction Contracts will apply.

(Section 109) Entitlement to stage payments

Where the work is estimated to be 45 days or more, payment by instalments, stage payments or other periodic payments shall be made.

(Section 110) Dates for Payment

This requires the Construction Contract to include a mechanism for determining what payment is due and when. This section mentions the ‘due date’ but this not when payment is made and funds paid, these are to be made by the Final Date for Payment.

Again, if the Construction Contract does not include the provisions required, then the relevant provisions of the Scheme for Construction Contracts will apply.

(Section 110A & 110B) Payment Notices

These sections place a requirement on each Party to give a notice which details their payment breakdown and the basis of how it is calculated, these requirements should be included within the Construction Contract. In a similar manner, if the Construction Contract does not comply with these provisions, then the relevant provisions of the Scheme for Construction Contracts will apply.

(Section 111) Requirement to pay notified sum

This section requires the payer to make payment by the final date for payment. There is a provision to give a notice to pay less than the sum in the payment notice.

(Section 112) Right to suspend performance for non-payment

Where a payment has not been made, this section sets out the notice requirements to be given before suspending any work. Care needs to be taken when considering suspending work.

(Section 113) Prohibition of conditional payment provisions

This section removes the payment term referred to as ‘paid when paid’ when payment if required from a third person before payment is made between the Parties. There a very limited number of occasions when this is still allowed, namely where the third person becomes insolvent.