Construction Contracts Act 2013 – Ensuring Parties to a Construction Contract are Paid Promptly
05 January 2015
Getting paid for construction work is often not straightforward. Getting paid promptly is even more challenging. The introduction of adjudication as a dispute resolution mechanism in Ireland is a major step towards improving efficiency of payment and cash flow.
The best means of ensuring prompt payment in the construction industry has been a matter of discussion in Ireland for many years. Through the Construction Contracts Act 2013 (the "2013 Act”), the Irish legislature endeavours to improve matters by introducing mandatory payment provisions into construction contracts, statutory adjudication for payment disputes and the right to stop work for non-payment.
What Types of Disputes can be Referred?
The 2013 Act provides a statutory entitlement to refer 'payment disputes' arising under a construction contract to adjudication. Each party has a right to adjudication but there is no mandatory requirement to use it. Irish law allows multiple disputes to be referred to adjudication under related construction contracts.
What is the Process for Commencing Adjudication?
A party can seek adjudication at any time through issuing a notice of intention, whether at practical completion stage or whilst works are ongoing. The parties can agree on an adjudicator or select one from a panel. The format is flexible in that the process can be based solely on written evidence. This will keeps costs down.
What is the Procedure When Adjudication Commences?
The process intends to ensure swift payment for works and so naturally operates under tight deadlines; an adjudicator must reach a decision within 28 days of referral, or 42 days with the referring party’s consent. The Code of Practice for the 2013 Act states that the adjudicator must give written reasons for their decision.
How Do I Enforce the Decision?
The adjudicator’s award is binding on an interim basis and is enforceable until a court or arbitrator decides otherwise or the parties settle the dispute.
Who Pays for the Costs of the Process?
Each party is responsible for their own costs and the costs of the adjudicator on a joint and several basis. However the adjudicator may direct that one party pays the costs and expenses of the adjudicator.
The 2013 Act aims to provide a swift and cost efficient mechanism for resolving payment disputes arising in construction contracts. The adjudication process is intended to enable the parties to avoid protracted disputes which commonly arise during a project in order to ensure that cash flow is improved. A commencement order is still needed before the 2013 Act becomes operative. It is anticipated that one will be issued in spring 2015.
Those involved in the construction industry wait with interest to see how the process will work in practice.
For more information, please contact our Construction team.
The content of this article is provided for information purposes only and does not constitute legal or other advice. Mason Hayes & Curran (www.mhc.ie) is a leading business law firm with offices in Dublin, London and New York.