Demystifying the Construction Act: A Sub-Contractor's Guide
Posted on 13th October 2023 at 13:09
At Subport we are Quantity Surveying and Commercial Experts, our specialism lies with Sub-contractors although, our unique understanding of how main contractors work will benefit your business with better outcomes. All of our Staff have considerable experience in working for Tier One Main Contractors and Consultancies which we use to support your business.
If you're a sub-contractor in the construction industry, understanding the Construction Act could be crucial for your business. This Act, officially known as the Housing Grants, Construction and Regeneration Act 1996, has gone through significant amendments, and we're here to demystify it for you
Definition of a Construction Contract
First things first, the The Housing Grants, Construction and Regeneration Act 1996 (Construction Act) defines what a construction contract is. In essence, it encompasses design and construction contracts, including professional appointments, as long as they relate to "construction operations." This term covers a wide range of activities in construction, with a few exceptions for specific engineering projects and residential occupiers.
The Role of 'The Scheme'
To supplement the Construction Act, 'The Scheme for Construction Contracts' provides fall-back provisions when a contract lacks necessary payment and adjudication provisions. This scheme is your safety net, ensuring you're protected when contracts don't specify payment rules.
Contracts in Writing
The Housing Grants, Construction and Regeneration Act 1996 (Construction Act) was amended by Part 8 of the Local Democracy, Economic Development and Construction Act 2009 (LDEDC Act 2009).
One significant change in the Construction Act is the removal of the requirement for construction contracts to be in writing. It applies to all construction contracts, whether they're fully written, partly written, or completely oral. This change simplifies the process and makes it even more critical to document agreements clearly.
Main Changes to the Payment Regime
Here are the key changes that affect payment processes:
Notice Regime: There's now a more explicit requirement for the paying party to pay the notified sum. Payment and withholding notices have specific rules to ensure clarity in payment disputes.
Conditional Payment Clauses: The Act invalidates clauses that make payments conditional on obligations in other contracts, ensuring you receive payments without unnecessary delays
Payment Notices and Suspension
Payment notices are a vital part of the process. These are issued for every payment provided for in the contract. Whether you're the payer, a specified person, or the payee, issuing these notices is crucial to ensure prompt and fair payment.
Requirement to Pay Notified Sum or Less
The Act creates a positive obligation on the payer to pay the 'notified sum' by the final date for payment. This 'notified sum' is the amount stated in the payment notice, and it must be paid unless a valid notice of intention to pay less is served.
Suspension for Non-Payment
If the notified sum isn't paid, you have the right to suspend performance of your contractual obligations. This right extends beyond just construction work, allowing you to suspend insurance-related obligations or work with specific subcontractors.
What you need to know?
Understanding the Construction Act is essential to ensure you receive fair and timely payments for your work. It simplifies payment processes and protects your rights as a sub-contractor. Here's what you need to remember:
The Act applies to construction contracts related to "construction operations."
'The Scheme' provides fallback provisions for payment and adjudication rules.
The removal of the written contract requirement streamlines the process.
Payment notices are essential for clarity in payment disputes.
The Act obligates the payer to pay the 'notified sum' unless a valid notice of intention to pay less is served.
You have the right to suspend performance for non-payment, even beyond construction work.
At subport we believe the Construction Act is your ally. Knowing its provisions can help you navigate payment processes and protect your rights as a sub-contractor.
The above information is intended to provide a general overview of the Construction Act and its implications for sub-contractors. Please note that the application of the Act can vary based on the specifics of your individual contracts and legal advice. For guidance tailored to your unique circumstances, we strongly recommend seeking professional legal advice.
Contact our team of commercial consultants today, telephone us on 0333 200 7205 or email at email@example.com
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Tagged as: Construction Act, Subcontractors
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