Construction Law: using Adjudication to get paid
23rd July 2012
In our experience, Adjudication is still used surprisingly infrequently by rank and file contractors and sub-contractors. Hopefully this is because you are dealing with tried and tested contacts and you are resolving any problems amicably. However, always bear in mind that Adjudication is a mechanism that is intended to provide interim payment awards to keep cash flowing within the construction industry.
Adjudication is a statutory right that cannot be excluded. It applies to “Construction Contracts” which can be further defined to mean construction operations. This will include, the engagement of professionals providing design advice in relation to construction operations, the supply of building products provided there is installation by the supplier, or even landscaping and decorating in connection with a building project. Adjudication does not apply to a contract with a residential occupier unless expressly agreed by the contract (which most standard forms of contract do).
Under the old construction Act “HGCRA” the contract had to be in writing to create the ability to Adjudicate. This was amended by the Local Democracy, Economic Development and Construction Act 2009 (the “new” Construction Act) so that a contract being capable of being Adjudicated can now be wholly in writing, partly in writing or wholly oral. The aim is that Adjudication will apply to a lot more rough and ready contracts rather than those just made on neatly filled-out JCT forms. As an aside, we should mention that if you are a main contractor it is important to ensure that you have an entire agreement clause within your contract to try to avoid sub contractors claiming that oral terms were introduced into the contract.
If you do become involved in an Adjudication it is important that you do not fall foul of some common legal traps relating to “jurisdiction”. Do not raise more than one dispute at a time (e.g. do not mix up claims relating to payment, extensions of time and damages in respect of defects). If you are a sub contractor seeking payment then do not limit the extent of the Adjudication to a specific sum; claim in the alternative “such other sum as the Adjudicator sees fit”.
Although Adjudication was meant to be quick and dirty summary justice, we acknowledge that it will be very difficult for most contractors to conduct their own Adjudication without taking advice from a lawyer or construction consultancy. However, one thing you can easily do is at least make the threat of an Adjudication. In our experience this tends to wake-up a defaulting main contractor. This is even more relevant now we are in the realms of “Pay Less” Notices under the new Act. In the absence of a pay less notice from a main contractor there is a positive obligation to pay the amount due and an abatement is not available i.e. the main contractor cannot simply say that the certificate amount/payment notice was wrong.
For information on how Holmes & Hills can help you deal with a legal dispte within the construction industry, click here.
Managing Partner & Head of Civil Litigation Team
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