From 1 October 2011, all construction contracts will fall under amendments to the Construction Act. Key changes include: 1) oral contracts will now be covered; 2) adjudicators can amend clerical errors in decisions; 3) unenforceable "Tolent clauses" stipulating costs of adjudication; and 4) "pay when paid" clauses extended to "pay when certified". A new payment regime involves payment notices and default notices to establish payment amounts. The right to suspend work has also been widened along with recovering reasonable costs of suspension. All construction contracts should be reviewed for compliance with the new amendments.

1. Construction Act changes
From 1 October 2011 all construction contracts entered into will be subject to Part 8 of
the Local Democracy, Economic Development and Construction Act 2009 which
amends the Housing Grants, Construction and Regeneration Act 1996(the Construction
Act)
The main changes can be summarised as follows:
1. Where previously the statutory provisions only applied to construction contracts in writing,
from 1 October all construction contracts, whether wholly or partly oral, will come within the
statutory regime.
2. Adjudicators have been given the statutory power long enjoyed by Arbitrators to amend
clerical and typographical errors in their decisions.
3. Clauses which stipulate the allocation of costs of an adjudication as between the parties are
not enforceable unless they are agreed in writing after the Notice of Adjudication has been
issued unless such provision relates to the allocation of the adjudicator’s fees in which case it
will be enforceable. Earlier cases have held that such “Tolent Clauses” had the effect of
fettering a party’s right to go to adjudication.
4. Parties will no longer be able tomake payments under a construction contract conditional
on the performance of obligations under another contract or a decision by another person as
to whether such obligations have been performed. The effect of this provision is to extend the
prohibition on “pay when paid” clauses to cover “pay when certified” clauses as well.
5. Withholding notices have been replaced with “pay less” notices under a restructured
payment regime which involves issuing a payment notice from the payer or third party (e.g.
contract administrator) within 5 days from the due date for payment or, failing that, from the
payee via a default payment notice. If the payee serves a default payment notice, the final
date for payment is postponed by the number of days between the date the payment notice
should have been issued and the date the default payment notice was issued. The amount to
be paid is the amount contained in the last notice served (be it either the pay less notice,
default payment notice or payment notice). It is important, therefore, for payers to have
robust systems in place to check any default payment notices served by the payee otherwise
they could end up paying more than they bargained for!
6. The statutory right for a contractor or subcontractor to suspend has been widened to allow
the payee to suspend “any or all of” its obligations under the construction contract. The
Construction Act is also amended to allow the suspending party to recover from the
defaulting party “a reasonable amount in respect of costs and expenses incurred by that
party”.
It is important that all construction contracts are reviewed and amended to ensure that
they will comply with the amendments to the Construction Act. The JCT is publishing a
new suite of 2011 standard form contracts in September 2011.

2. Edwin Coe LLP is offering a fixed fee contract review service to ensure your contracts
and general terms and conditions are Construction Act (as amended) compliant.