Statutory Adjudication was Introduced to Ireland through the Construction Contracts Act 2013
On the 13th of April 2016, the Minister for Business and Employment, Gerald Nash, signed the Construction Contracts Act 2013 (Appointed Day) Order 2016 which gives legal effect to the provisions of the Act. The Act shall apply to all construction contracts entered into after the 25th of July 2016. This is a significant event for the construction industry in Ireland and will transform the landscape in which the construction sector operates.
The Act changes the way applicable construction contracts will now be drafted and seeks to secure payment to contractors and sub-contractors at regular intervals during the life of a contract. The legislation also provides for suspension rights when payment and interim payments are not paid in full and Statutory Adjudication which allows parties involved in a payment dispute to seek to resolve the matter through Adjudication. This will take place over a short time period. The Act envisages 28 days and the decision of an Adjudicator will be binding until finally resolved through Arbitration or Legal Proceedings.
The Act will apply to all contracts for construction operations between a Client and their Contractors or Consultants in addition to contracts with their sub-contractors and sub-consultants. The definition of “construction operations” is very broad and in addition to including traditional site based activities also includes such activities as sculpture, artwork, architecture, design, engineering, archeology, surveying, project management and advice on construction activities. Exemptions are minimal and include such things as the supply of components, contracts under €10,000, houses less than 200 m2, PPP Contracts and contracts of employment.
The Act includes a number of provisions aimed at ensuring that parties to contracts for construction operations are paid in a timely fashion;
If there is no written contract or if a contract does not include payment terms, then the payment terms included in the act and known as “the schedule” which includes 30 days’ credit terms will automatically apply.
The act limits the credit terms that can be imposed on a sub-contractor or sub-consultant to 30 days from the payment claim date,
For all contracts the act provides a strict structure detailing with how valuations are to be submitted, reviewed, responded to and paid, and
- If a contractor is not going to be paid the full amount that is sought, they are entitled to a proper explanation of the difference .
Suspension of the Works
If a party to an applicable construction contract is not paid in full the amount that they are due to be paid they are entitled to suspend the works on the expiry of a seven-day notice period. There is no obligation to resume works until the payment is made in full and a contractor will also be due an extension of time to the agreed contract program for the period of suspension.
However, if a contract is suspended without proper cause a contractor will not be entitled to an extension of time and may have a liability in damages or liquidated damages if they do not complete the works in accordance with the contract program.
Adjudication is generally speaking a quick and relatively inexpensive way of resolving a dispute, whereby an impartial third party Adjudicator decides the issues between the parties. If a dispute arises parties have 5 days to agree on an Adjudicator and we would recommend that you agree one form our list or Adjudicators who are Trained in Adjudication and experienced in Construction Disputes.
The Adjudicator must deliver their decision within 28 days of the referral of the dispute and both parties are responsible for their own costs. In complex disputes the duration can be extended to 42 days with the agreement of the parties.
If the Adjudicator’s decision includes an award of money this must be paid in full within 7 days or the works can be suspended. On the conclusion of the Adjudication an unsatisfied party may refer the dispute to court or arbitration if the contract allows but the party who was ordered to make a payment must make this payment not withstanding that the dispute will be heard again. It is what is described as temporarily binding and meant to protect cash flow and maintain progress on site.