The introduction of the Construction Contracts Act 2013, which commences for all Construction Contracts entered into after the 25th July 2016, has for the first time, removed the ability for a party to a Construction Contract, to make a payment conditional on the making of a payment by a third party.
Section 3 (5) of the Act, has been introduced to remove this element from Construction Contracts.
Long the bane of sub-contractors, the pay when paid clause of many current Contracts, has effectively resulted in sub-contractors acting as part financiers of projects long after their works are completed. Coupled with the inability of parties to contract out of the provisions of the Construction Contracts Act, under section 2(5), these charges will mark a significant shift in the movement of cash-flow in Construction Projects.
The Act, under section 4 (3) also for the first time places a requirement on the paying party, who disagrees with an amount claimed in a payment claim notice, to provide a response not later than 21 days after the payment claim date specifying, the amount they propose to pay, the reason for the difference and the method of calculation of their proposed value. This differs greatly from the current Contract provisions where, like the RIAI articles of agreement 2012 edition, under section 35, an explanation for any difference must be requested. In addition the inclusion of clause 4 (3b), means that even where an agreement has not been reached in respect to the difference between the parties, the amount that the paying party has agreed to in their payment response, must be paid by the payment due date. This again goes to the heart of the purpose of the Construction Contracts Act, which was to facilitate the positive flow of cash in a project.
Section 4(4) of the Act, is an attempt to formalise the issue of contra charges, which are regularly a form of contention in the current final account process. This section allows for the paying party to formally identify contra charges for breach of contractual or other obligations within a contract and to make adjustment for same from a payment claim notice. They place a requirement on the paying party to detail the contra charge in terms of when and how the claim arose, the particulars of the loss, damage or claim and the apportionment of any claim. The wording of the Act, has however, not placed an obligation on the timing of the contra charge adjustment, and it is therefore likely, and unfortunate, that the issue of contra charges arriving late in the final account process is still very much alive.
Keith Kelliher is an Accredited Adjudicator, who has completed the Diploma in Adjudication in University College Dublin, specifically on the Construction Contracts Act 2013, and has represented Main Contractors and Sub-Contractors in payment disputes for over 15 years in the Irish construction industry. Contact Keith at [email protected] for any assistance with the requirements of the ACT.
Section 3 (5) of the Act, has been introduced to remove this element from Construction Contracts.
Long the bane of sub-contractors, the pay when paid clause of many current Contracts, has effectively resulted in sub-contractors acting as part financiers of projects long after their works are completed. Coupled with the inability of parties to contract out of the provisions of the Construction Contracts Act, under section 2(5), these charges will mark a significant shift in the movement of cash-flow in Construction Projects.
The Act, under section 4 (3) also for the first time places a requirement on the paying party, who disagrees with an amount claimed in a payment claim notice, to provide a response not later than 21 days after the payment claim date specifying, the amount they propose to pay, the reason for the difference and the method of calculation of their proposed value. This differs greatly from the current Contract provisions where, like the RIAI articles of agreement 2012 edition, under section 35, an explanation for any difference must be requested. In addition the inclusion of clause 4 (3b), means that even where an agreement has not been reached in respect to the difference between the parties, the amount that the paying party has agreed to in their payment response, must be paid by the payment due date. This again goes to the heart of the purpose of the Construction Contracts Act, which was to facilitate the positive flow of cash in a project.
Section 4(4) of the Act, is an attempt to formalise the issue of contra charges, which are regularly a form of contention in the current final account process. This section allows for the paying party to formally identify contra charges for breach of contractual or other obligations within a contract and to make adjustment for same from a payment claim notice. They place a requirement on the paying party to detail the contra charge in terms of when and how the claim arose, the particulars of the loss, damage or claim and the apportionment of any claim. The wording of the Act, has however, not placed an obligation on the timing of the contra charge adjustment, and it is therefore likely, and unfortunate, that the issue of contra charges arriving late in the final account process is still very much alive.
Keith Kelliher is an Accredited Adjudicator, who has completed the Diploma in Adjudication in University College Dublin, specifically on the Construction Contracts Act 2013, and has represented Main Contractors and Sub-Contractors in payment disputes for over 15 years in the Irish construction industry. Contact Keith at [email protected] for any assistance with the requirements of the ACT.
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