Proposed changes to Construction Act should save industry millions
Graeme Roberts
Wed 30 July 2008
On 21 July the Department for Business Enterprise and Regulatory Reform (BERR) published a draft Construction Contract Bill to amend Part 2 of the Housing Grants Construction and Regeneration Act 1996 (the Construction Act).
BERR estimates that the clauses, if brought into force, could reduce the burden of adjudication payments by over £5 million and save the construction industry as a whole £1 billion by improving payment structures.
The most significant of the proposed changes would see oral contracts recognised, allowing parties to go to adjudication even if their “contract” is not formalised in writing.
If enacted, the draft clauses would:
• Allow parties to an oral contract to refer disputes to adjudication;
• Prohibit provisions in contracts that interim or stage payment decisions are conclusive, enabling any dispute about stage payments to be referred to adjudication;
• Introduce a statutory framework to calculate which party is to bear the costs of adjudication. Under the current regime a stronger party may contractually oblige a weaker party to bear all of the costs, regardless of the outcome;
• Clarify the existing statutory payment framework, with its references to “due dates” and “final dates” for payment, so that the party being paid has a clear idea of what he will be paid and when; and
• Improve the right to suspend performance under a building contract.
More detail – and reaction – will no doubt follow shortly and we will be updating this article in due course. In the meantime, the proposed clauses can be found at www.berr.gov.uk/files/file47085.pdf or by calling the BERR publications orderline on 0845 015 0010 reference URN 08/1121