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Construction Update: Construction Contract Act Amendments Imminent

Written by Mark Sullivan, PARTNER on August 4th, 2016.    

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Round 1 - Residential vs Commercial

The Construction Contracts Amendment Act came into force on 1 December 2015.  The first round of amendments are already in force and largely do away with the distinction between residential and commercial construction.  The changes include:

  • All payment claims (including those for large commercial projects) are required to include a prescribed notice with details about the process of responding to the payment claim; and

  • The Act no longer prevents residential builders from suspending work when payment is not forthcoming, using default provisions under payment claims, and enforcing adjudicators’ determinations.

Round 2 – Consultants get benefits and burdens

The next round of changes are due to come into force on 1 September 2016. The Act now covers “design or engineering work” and “quantity surveying work” as well as the construction itself. 

This means that adjudication claims will be able to be brought against consultants who provide those services.  It is unclear whether the Engineer to a NZS3910 contract will be covered by the amendment.  Project management or administration type work has not been specifically included in the definition.  We expect to see some testing of the limits of this coverage in the courts.
 
Consultants may not be familiar with the “quick and dirty” nature of adjudication under the Act.  The goal of the process is to quickly sort out issues which arise in the middle of a construction project to avoid lengthy hold-ups.  The process is very different to ordinary court proceedings and responses are strictly due within a matter of days rather than months.  For consultants, the tight timeframes could make it difficult to notify your insurer (or get a response from them as to whether the matter is covered).  If you are not covered, there is further time pressure if you need to engage your own expert to provide evidence on the matter being adjudicated.  The advice we give any party who receives a Notice of Adjudication is to urgently contact a specialist construction lawyer – time is of the essence!

Designers, engineers and quantity surveyors will also be able to use the payment claim regime to claim (and recover) payments for their work.  Principals and project managers should be aware of this and carefully note the contractual timeframes for payment schedules (if any) when engaging consultants.  We recommend that consultants amend their terms and conditions and their invoicing system to take advantage of the benefits of the payment claim process.  We can help with providing payment claim templates and bespoke T&Cs which make the payment regime work for you.

The third and final round of amendments relates to retentions and will come into force on 31 March 2017.  We will put out a further update summarising the changes and what those affected need to do to get ready. 

How we can help

Jackson Russell is experienced in dealing with all aspects of construction law.  We regularly assist principals, consultants and contractors with the legal issues which arise before, during and after a project.
 
If you would like further information about the upcoming changes to the Construction Contracts Act, or a specific construction issue, please contact our Construction Law specialists.  

 

Disclaimer
The information contained in this publication is of a general nature and is not intended as legal advice.  It is important that you seek legal advice that is specific to your circumstances.
 
All rights reserved © Jackson Russell 2016
Key Contacts
Mark Sullivan 167
Mark Sullivan, PARTNER
 

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