The Construction Contracts Act 2013: Improved Cashflow And Statutory Adjudication For The Irish Construction Industry

Author:Ms Niav O'Higgins and Tim Kinney
Profession:Arthur Cox
 
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The Construction Contracts Act, 2013 was enacted by Dail Eireann on 29 July 2013, over three years since Senator Feargal Quinn initiated the legislation by introducing a private members bill to Seanad Eireann in 2010. The Act will apply to all construction contracts entered into after a date specified by the Minister for Public Expenditure and Reform, which is yet to be announced1.

The term 'construction contract' is defined widely; the Act will apply not only to traditional building contracts and subcontracts, but also to professional appointments for architects and engineers etc. and contracts for landscaping, repair and maintenance.

The key aim of the legislation, which parties cannot contract out of, is to ensure prompt payment practices throughout the construction industry, which has suffered markedly throughout the latest economic recession. The Act seeks to achieve this in three main ways.

Mandatory payment provisions

The Act requires that all construction contracts (subject to limited exceptions, such as contracts with a value less than euro 10,000) include an adequate mechanism for determining the amount to be paid to a contractor; the period for interim payments; and when payments will fall due. Standard forms of construction contract used in Ireland generally set out payment provisions which, by and large, will comply with this requirement. However where a construction contract is silent on minimum payment provisions (or, in the case of subcontracts, includes longer payment periods than those set out in the Schedule to the Act) then the minimum terms included in the Schedule will be deemed to form part of the contract. It is worth noting that main contracts may include payment periods which exceed those periods included in the Schedule.

The Act also provides that where a payment claim notice is submitted and the amount is contested by the employer, the employer (or main contractor, in the case of a sub-contract) has 21 days to respond, setting out the amount that it proposes to pay and the reason/s why it differs from the amount claimed in a 'payment claim notice'. This notice must also set out the basis of the calculations used to arrive at the amount proposed to be paid. Where the parties cannot agree the payment amount by the payment due date, the employer must pay the amount stated in the response or withholding notice. In the meantime, the contractor may dispute the withholding notice by referring the matter to adjudication.

The Act also...

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