Construction Act amendments become law

On 12 November last year amendments to the ‘Construction Act’  became law as Part 8 of the Local Democracy, Economic Development and Construction Act.

Once these changes come into force, the amended Act will apply to all construction contracts, not only those wholly in writing.  There are major changes to the payment system making it easier for a debt to be defined, with consequential changes to what are currently called withholding notices.

Pay when certified clauses will be banned, meaning that it will no longer be possible to tie release of subcontractor retention to issue of a certificate under the main contract, and parties will be able to choose whether to suspend some or all obligations for late payment and will be entitled to their reasonable costs, as well as time (as at present).

There are also changes to costs in adjudication to get rid of the abuse whereby contracts specify that the party starting the adjudication must pay all costs irrespective of the outcome of the adjudication.  Contracts will now be obliged to give adjudicators the right to correct minor ‘slips’.

The Scottish Parliament and Welsh Assembly are given powers to exclude certain contracts from the Act, whereas this power was previously reserved to the Secretary of State.

To allow contract writing bodies time to update their contracts as well as allowing time for the Scheme for Construction Contracts to be reviewed, it is likely that the new law will not be brought into effect until 2011.