Jonathan Nugent, Managing Director at Arbicon, explains after almost 25 years how many contractors are still unaware of adjudication and the right to adjudicate in construction contracts, losing out on an effective way to obtain payment. A big surprise, but not a shock to Arbicon!
What briefly does the Construction Act do?
The Construction Act has been in force for over 25 years, providing rights to payment and adjudication and yet incredibly so many firms still know nothing about their payment rights and adjudication. The Construction Act is designed to protect the rights of the payee and provide many rules that all commercial construction contracts must comply with otherwise non-compliant clauses will be void.
In the absence of payment and adjudication clauses, the Construction Act imports them through the Scheme for Construction Contracts. Written contract or not, there is an absolute right to adjudicate and to have the payment process properly managed. The Construction Act is the reason why Payment, Default Payment or Pay Less Notices exist, these dictate the payment process.
There must be a written notified payment sum, served properly and timely. Failure to comply will result in the payee getting all of what they ask for. There is an incumbent problem with firms not understanding the process enough, so it is not unusual to see notices flying between the parties.
Understanding How the Construction Act Works – An Example
Arbicon are fully acquainted with the Construction Act and are both Quantity Surveying Experts, claims consultants and adjudication advocates. We are the one stop shop for any commercial construction dispute.
A roofing contractor recently asked us for help, having had his invoice underpaid by an unsubstantiated £20,000, that would deserve a strikethrough with the adjudicator’s black pen. The roofer was simply told the deduction was for delay costs and defects without any detail or Payment/Payless Notice. There was no signed contract or any written terms.
The roofer had already spent four years trying to get paid, unfortunately, they were ill advised by others including a no hope failed attempt with a Statutory Demand in Court, resulting in the roofer having to pay the other parties’ costs of £5,000. The previous advisor told the roofer he only had the option of litigation. Given the value involved the roofer all but wrote off the debt.
The roofer found out about Arbicon and asked how we might recover contra charges without going to court. We advised that we could adjudicate the case and claim payment in days. The questions came… “What is Adjudication?”, “Am I too late to claim after four years?”, “I don’t have any contract terms, have I got any rights?”. A perfect example of what I regularly hear!
Adjudication rights and the process were explained, enforceable rights determined in 28 days and no contract terms makes it easier as the Scheme was imported on payment and adjudication. No Payment or Payless Notice meant Payment was in default. Also, there are six years under the Statute of Limitations to make a claim so any debts should not be written off before then!
The bonus of no written terms in this scenario was then added as the Late Payment of Commercial Debts Act kicked in too, so that was 8% over base going back 4 years plus debt recovery costs (Arbicon fees).
Arbicon wrote a letter firmly setting out the position with the threat of adjudication and soon thereafter, full payment was made without proceeding to adjudication. The contractor was totally unaware of the Construction Act, adjudication and payment rights, he will not make the wrong turn again!
Arbicon
Tel: 01733 233737
