The Construction Contracts Amendment Bill (‘the Bill’) proposes some useful changes to the Construction Contracts Act 2002 (‘the Act’). The Act’s purpose was to reform the law relating to construction contracts, in particular to improve cashflow by having a mechanism for obtaining payment more quickly. This Bill now seeks to iron out a number of wrinkles that have prevented the Act from being more effective in allowing contractors to efficiently recover outstanding payments. Three of the proposed changes are summarised in this article.
Removal of the distinction between residential and commercial construction contracts - this change would mean contractors party to a residential construction contract could also require progress payments, and suspend work where payments are not made.
Removal of this distinction would also give any successful party in an adjudication relating to a residential construction contract the right to apply to have the adjudication determination entered as a judgment in the District Court. Under the current Act, enforcement in this situation can be difficult.
When sending a payment claim, relating to a progress payment to any consumer, a contractor has to provide a notice outlining the process for responding to a payment claim, and the effect of not doing so. At present this is only required where the consumer is a residential occupier. Law Society submissions on the Bill supported such an approach for payment claims, and noted the general lack of knowledge within the construction industry about a contractor’s notice obligations. For ease of reference, attached to this link is a copy of that required notice.
Reduced timeframe for opposing adjudication determinations - at present, a party to a construction contract has 15 working days to make an objection to an adjudicator’s determination being entered in the District Court as a judgment. In order to improve cashflow efficiency in the construction industry, the Bill proposes to reduce this time period to five working days, to provide parties with faster access to enforcement and relief.
Extension of the definition of “Construction Work” - the Bill proposes that the definition of “construction work” be extended to include design, architectural, engineering and quantity surveying work. In the past there have been issues relating to some construction work falling outside of the scope of the Act. This will have the effect of principal’s being able to more quickly resolve disputes with their consultants. However, of significant benefit to architects, engineers and quantity surveyors, is the fact that they will have the ability to now use the payment regime under the Act to recover outstanding fees from their clients.
In any case, it is apparent that contractors who want to ensure prompt payment from their principals, and consumers and contractors alike need to be aware of their rights, as well as any restrictions on these when issuing or responding to payment claims.