Bpe Presentation On Changes To The Construction Act 2010 V7 1 Final Read Only


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Overview of a seminar my colleagues did last month with Hill International

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Bpe Presentation On Changes To The Construction Act 2010 V7 1 Final Read Only

  1. 1. BPE Solicitors LLP Fraser Chambers & Adam Hiscox on Changes to The Construction Act 2010 St James’ House St James’ Square Cheltenham GL50 3PR 24th September 2010 © BPE 2010
  2. 2. s.107 Contract in Writing • Current law is all the material terms of the contract, which must be in writing or evidenced in writing. • Removal of s.107 contract in writing requirement means that more construction contracts can benefit from the right to refer to adjudication and the payment rules. • BUT, new Act still requires a provision in writing as to the right to adjudicate. • Why? Adjudication is a summary procedure i.e. obtained without trial. It only works if there is a contract which appoints the adjudicator (which is not disputed). © BPE 2010
  3. 3. What this means in practice? • If an entirely oral contract, then no written provision to appoint the adjudicator is needed. • If oral variations then Adjudication will need to include witness statements. • Adjudication still largely taken on written submissions. But if cross-examination of witnesses is required, adjudication becomes a mini-trial. • Avoid the scenario of one person's word against another’s - ensure that all the contract terms (including variations) are agreed and evidenced in writing. • Be prepared to have witness statements ready before the 28-day period begins. © BPE 2010
  4. 4. S.108 Ban on ‘Tolent’ Clauses • ‘Tolent’ clause – the referring party undertakes to pay the other party’s legal costs, irrespective of the outcome of adjudication. • The new s.108A provides that any term which allocates the payment of adjudication costs will be ineffective. • But, agreements which allocate costs entered into after the notice of intention to refer will not flout the new law. Remote possibility of such agreements. • Cases will decide upon whether any such side agreements flout the new law. © BPE 2010
  5. 5. Prohibition of ‘pay-when-certified’ clauses • Prohibition on ‘pay-when-paid’ clauses being circumvented by ‘pay-when-certified’ provisions. • New Act says payment may not be linked to or conditional upon performance of another contract. • Creates an inherent problem for PFI projects and Management Contracts (rise in use of Project Bank Accounts). • But possible avoidance devices: a) Parallel loan agreement b) Clawback provisions c) Restrict the contractual remedies • Payment of retention to sub-contractor cannot be contingent upon main contract Certificate of Making Good Defects / payment of main contractor’s retention. © BPE 2010
  6. 6. PAYMENT TERMS CONTINUED… By Adam Hiscox, Solicitor BPE Solicitors LLP © BPE 2010
  7. 7. S.110A & 110B - Failure by employer (or specified person) to issue then… 1. Amount in contractor’s application stands (s110B(3)), or 2. Contractor Notice under s110B(2)… Section 111- Notice of intention to pay less “sum due” now “notified sum” New “Notice of intention to pay less” © BPE 2010
  8. 8. For the first time there is the potential for the employer to be bound by contractor’s assessment of what it considers is due… Major implications for the employer: • contractors claiming more than they should • draw downs under funding arrangements • LADs Given the potential for the payee to decide what is due to it, s111 is vital • defects and abatement, LADs all need to be stated • case law resolved? • more case law over form and timing of notices? © BPE 2010
  9. 9. Notices and adjudication • Employer’s notified sum or notice of intention to pay less can be adjudicated • And if MORE is due to the contractor (as decided by the adjudicator) then: additional amount due 7 days after date of decision, or the date which would have been the final date for payment but for the notice …whichever is later Contractor can adjudicate if it disagrees with the notices. If employer fails to issue its notices then it can adjudicate but the act makes it clear the amount due under the contractor’s notice must be paid. No more arguments over “sums due” and need to withhold. Contractor’s notice has the effect of being final and binding on employer. © BPE 2010
  10. 10. Section 112 – suspension for non-payment • Costs, expenses, and EOTs • Partial suspension Implications: • Suspension as a tool will increase – delays on projects • Seemingly, the effect on contractor’s cash flow mitigated, however: arguments over which “parts” the contractor is allowed to suspend © BPE 2010
  11. 11. Are construction consultants and lawyers now redundant? Short term Long term • Amend contracts • Employers be aware and issue prompt and effective notices • Train staff • Conflicts will still arise • If you are still tempted to use it… remove that bottom drawer! • Adjudication • Delay claims • Vigilance still needed (by all) © BPE 2010
  12. 12. Thank you. Any questions? Adam Hiscox Adam.hiscox@bpe.co.uk 01242 248215 Fraser Chambers 01242 248296 Fraser.chambers@bpe.co.uk © BPE 2010