The Construction ACT

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Examines the implications of the Housing Grants, Construction and Regeneration Act ('The Construction Act') - one of the most important pieces of construction legislation in the UK in recent years. The book provides practical guidance to help construction practitioners rise to the challenge of getting to grips with the implications of the Act. The book is written by a lawyer who works with one of the leading law firms engaged in this area. The book is aimed at all of the professions engaged in the construction industry. Contents: Foreword - by Sir Michael Latham Introduction Are you covered by the Act? How the Act affects your payment terms? What can you do if the new rules are broken? How has the Act changed the standard forms? What do you need to do to comply with the Act? Appendices: Housing Grants, Construction and Regeneration Act - Part 2. Scheme for Construction Contracts. Construction Contracts Exclusion Order Table of statutes and cases

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1.  Why was the Act introduced?

ePub

Chapter 1

Introduction

1.     Why was the Act introduced?

2.     Outline of the Structure and Operation of the Act

(a)     Statutory Framework

(b)     Freedom to Negotiate Terms.

1.   Why was the Act introduced?

The reason why the Government was so determined to implement Sir Michael Latham’s recommendations has its origins in the recession of the early 1990’s. After the economic boom in the late 1980s the construction industry suffered a catastrophic downturn in the early 1990s. No one involved in the industry at that time needs to be convinced of the extent of the problems that arose and there is an abundance of statistical evidence1. For example:

•     500,000 jobs were lost in the industry between 1989 and 1994.

•     Construction output was 39% down between 1990 and 1993.

•     Over 35,000 small businesses and companies became insolvent between 1989 and 1994.

The statistics and the anecdotal evidence available from the time indicate the extent of the crisis across a wide part of the construction industry. It was against this background that in July 1993 the Government and industry commissioned Sir Michael Latham to prepare a report with the objectives of making recommendations to reduce conflict and litigation and encourage the industry’s productivity and competitiveness2.

 

(a)  Statutory Framework

ePub

Chapter 1

Introduction

1.     Why was the Act introduced?

2.     Outline of the Structure and Operation of the Act

(a)     Statutory Framework

(b)     Freedom to Negotiate Terms.

1.   Why was the Act introduced?

The reason why the Government was so determined to implement Sir Michael Latham’s recommendations has its origins in the recession of the early 1990’s. After the economic boom in the late 1980s the construction industry suffered a catastrophic downturn in the early 1990s. No one involved in the industry at that time needs to be convinced of the extent of the problems that arose and there is an abundance of statistical evidence1. For example:

•     500,000 jobs were lost in the industry between 1989 and 1994.

•     Construction output was 39% down between 1990 and 1993.

•     Over 35,000 small businesses and companies became insolvent between 1989 and 1994.

The statistics and the anecdotal evidence available from the time indicate the extent of the crisis across a wide part of the construction industry. It was against this background that in July 1993 the Government and industry commissioned Sir Michael Latham to prepare a report with the objectives of making recommendations to reduce conflict and litigation and encourage the industry’s productivity and competitiveness2.

 

(b)  Freedom to Negotiate Terms

ePub

Chapter 1

Introduction

1.     Why was the Act introduced?

2.     Outline of the Structure and Operation of the Act

(a)     Statutory Framework

(b)     Freedom to Negotiate Terms.

1.   Why was the Act introduced?

The reason why the Government was so determined to implement Sir Michael Latham’s recommendations has its origins in the recession of the early 1990’s. After the economic boom in the late 1980s the construction industry suffered a catastrophic downturn in the early 1990s. No one involved in the industry at that time needs to be convinced of the extent of the problems that arose and there is an abundance of statistical evidence1. For example:

•     500,000 jobs were lost in the industry between 1989 and 1994.

•     Construction output was 39% down between 1990 and 1993.

•     Over 35,000 small businesses and companies became insolvent between 1989 and 1994.

The statistics and the anecdotal evidence available from the time indicate the extent of the crisis across a wide part of the construction industry. It was against this background that in July 1993 the Government and industry commissioned Sir Michael Latham to prepare a report with the objectives of making recommendations to reduce conflict and litigation and encourage the industry’s productivity and competitiveness2.

 

1.  Introduction

ePub

Chapter 2

Are you covered by the Act?

1.     Introduction

2.     Is the agreement a Construction Contract?

(a)     What types of agreements can be Construction Contracts?

(i)          Need for an agreement

(ii)         Nature of the agreement

(iii)        Value or size

(iv)        Mixed activities

(v)         Project location

(vi)        Commencement date

(vii)       Crown application

(b)     What are Construction Operations?

(i)          Construction Operations - In

(ii)         Construction Operations - Out

(iii)        Construction Operations - Practical problems

3.     Is the Construction Contract excluded from the Act?

(a)     Residential Occupiers

(b)     Contracts in writing

(c)     The Exclusion Order

(i)          Agreements under Statute

(ii)         Private Finance Initiative

(iii)        Finance Agreements

(iv)        Development Agreements

4.     Key Points Summary

1.   Introduction

The Act provides a set of rules defining those activities that are Or are not covered by the Act. It is unusual for a piece of legislation to be targeted at one sector of commerce. Concern was expressed that the Act would extend into other commercial sectors such as property. Those concerns led to a regime defining relevant construction contracts which are set out in the first four clauses of the Act. In addition, the Secretary of State has exercised the power to exclude various agreements from the Act by an Exclusion Order which came into force on 1 May 199819. In considering any particular contract therefore, there are two questions:

 

(a)  What types of agreements can be Construction Contracts?

ePub

Chapter 2

Are you covered by the Act?

1.     Introduction

2.     Is the agreement a Construction Contract?

(a)     What types of agreements can be Construction Contracts?

(i)          Need for an agreement

(ii)         Nature of the agreement

(iii)        Value or size

(iv)        Mixed activities

(v)         Project location

(vi)        Commencement date

(vii)       Crown application

(b)     What are Construction Operations?

(i)          Construction Operations - In

(ii)         Construction Operations - Out

(iii)        Construction Operations - Practical problems

3.     Is the Construction Contract excluded from the Act?

(a)     Residential Occupiers

(b)     Contracts in writing

(c)     The Exclusion Order

(i)          Agreements under Statute

(ii)         Private Finance Initiative

(iii)        Finance Agreements

(iv)        Development Agreements

4.     Key Points Summary

1.   Introduction

The Act provides a set of rules defining those activities that are Or are not covered by the Act. It is unusual for a piece of legislation to be targeted at one sector of commerce. Concern was expressed that the Act would extend into other commercial sectors such as property. Those concerns led to a regime defining relevant construction contracts which are set out in the first four clauses of the Act. In addition, the Secretary of State has exercised the power to exclude various agreements from the Act by an Exclusion Order which came into force on 1 May 199819. In considering any particular contract therefore, there are two questions:

 

(b)  What are Construction Operations?

ePub

Chapter 2

Are you covered by the Act?

1.     Introduction

2.     Is the agreement a Construction Contract?

(a)     What types of agreements can be Construction Contracts?

(i)          Need for an agreement

(ii)         Nature of the agreement

(iii)        Value or size

(iv)        Mixed activities

(v)         Project location

(vi)        Commencement date

(vii)       Crown application

(b)     What are Construction Operations?

(i)          Construction Operations - In

(ii)         Construction Operations - Out

(iii)        Construction Operations - Practical problems

3.     Is the Construction Contract excluded from the Act?

(a)     Residential Occupiers

(b)     Contracts in writing

(c)     The Exclusion Order

(i)          Agreements under Statute

(ii)         Private Finance Initiative

(iii)        Finance Agreements

(iv)        Development Agreements

4.     Key Points Summary

1.   Introduction

The Act provides a set of rules defining those activities that are Or are not covered by the Act. It is unusual for a piece of legislation to be targeted at one sector of commerce. Concern was expressed that the Act would extend into other commercial sectors such as property. Those concerns led to a regime defining relevant construction contracts which are set out in the first four clauses of the Act. In addition, the Secretary of State has exercised the power to exclude various agreements from the Act by an Exclusion Order which came into force on 1 May 199819. In considering any particular contract therefore, there are two questions:

 

(a)  Residential Occupiers

ePub

Chapter 2

Are you covered by the Act?

1.     Introduction

2.     Is the agreement a Construction Contract?

(a)     What types of agreements can be Construction Contracts?

(i)          Need for an agreement

(ii)         Nature of the agreement

(iii)        Value or size

(iv)        Mixed activities

(v)         Project location

(vi)        Commencement date

(vii)       Crown application

(b)     What are Construction Operations?

(i)          Construction Operations - In

(ii)         Construction Operations - Out

(iii)        Construction Operations - Practical problems

3.     Is the Construction Contract excluded from the Act?

(a)     Residential Occupiers

(b)     Contracts in writing

(c)     The Exclusion Order

(i)          Agreements under Statute

(ii)         Private Finance Initiative

(iii)        Finance Agreements

(iv)        Development Agreements

4.     Key Points Summary

1.   Introduction

The Act provides a set of rules defining those activities that are Or are not covered by the Act. It is unusual for a piece of legislation to be targeted at one sector of commerce. Concern was expressed that the Act would extend into other commercial sectors such as property. Those concerns led to a regime defining relevant construction contracts which are set out in the first four clauses of the Act. In addition, the Secretary of State has exercised the power to exclude various agreements from the Act by an Exclusion Order which came into force on 1 May 199819. In considering any particular contract therefore, there are two questions:

 

(b)  Contracts in Writing

ePub

Chapter 2

Are you covered by the Act?

1.     Introduction

2.     Is the agreement a Construction Contract?

(a)     What types of agreements can be Construction Contracts?

(i)          Need for an agreement

(ii)         Nature of the agreement

(iii)        Value or size

(iv)        Mixed activities

(v)         Project location

(vi)        Commencement date

(vii)       Crown application

(b)     What are Construction Operations?

(i)          Construction Operations - In

(ii)         Construction Operations - Out

(iii)        Construction Operations - Practical problems

3.     Is the Construction Contract excluded from the Act?

(a)     Residential Occupiers

(b)     Contracts in writing

(c)     The Exclusion Order

(i)          Agreements under Statute

(ii)         Private Finance Initiative

(iii)        Finance Agreements

(iv)        Development Agreements

4.     Key Points Summary

1.   Introduction

The Act provides a set of rules defining those activities that are Or are not covered by the Act. It is unusual for a piece of legislation to be targeted at one sector of commerce. Concern was expressed that the Act would extend into other commercial sectors such as property. Those concerns led to a regime defining relevant construction contracts which are set out in the first four clauses of the Act. In addition, the Secretary of State has exercised the power to exclude various agreements from the Act by an Exclusion Order which came into force on 1 May 199819. In considering any particular contract therefore, there are two questions:

 

(c)  The Exclusion Order

ePub

Chapter 2

Are you covered by the Act?

1.     Introduction

2.     Is the agreement a Construction Contract?

(a)     What types of agreements can be Construction Contracts?

(i)          Need for an agreement

(ii)         Nature of the agreement

(iii)        Value or size

(iv)        Mixed activities

(v)         Project location

(vi)        Commencement date

(vii)       Crown application

(b)     What are Construction Operations?

(i)          Construction Operations - In

(ii)         Construction Operations - Out

(iii)        Construction Operations - Practical problems

3.     Is the Construction Contract excluded from the Act?

(a)     Residential Occupiers

(b)     Contracts in writing

(c)     The Exclusion Order

(i)          Agreements under Statute

(ii)         Private Finance Initiative

(iii)        Finance Agreements

(iv)        Development Agreements

4.     Key Points Summary

1.   Introduction

The Act provides a set of rules defining those activities that are Or are not covered by the Act. It is unusual for a piece of legislation to be targeted at one sector of commerce. Concern was expressed that the Act would extend into other commercial sectors such as property. Those concerns led to a regime defining relevant construction contracts which are set out in the first four clauses of the Act. In addition, the Secretary of State has exercised the power to exclude various agreements from the Act by an Exclusion Order which came into force on 1 May 199819. In considering any particular contract therefore, there are two questions:

 

4.  Key Points Summary

ePub

Chapter 2

Are you covered by the Act?

1.     Introduction

2.     Is the agreement a Construction Contract?

(a)     What types of agreements can be Construction Contracts?

(i)          Need for an agreement

(ii)         Nature of the agreement

(iii)        Value or size

(iv)        Mixed activities

(v)         Project location

(vi)        Commencement date

(vii)       Crown application

(b)     What are Construction Operations?

(i)          Construction Operations - In

(ii)         Construction Operations - Out

(iii)        Construction Operations - Practical problems

3.     Is the Construction Contract excluded from the Act?

(a)     Residential Occupiers

(b)     Contracts in writing

(c)     The Exclusion Order

(i)          Agreements under Statute

(ii)         Private Finance Initiative

(iii)        Finance Agreements

(iv)        Development Agreements

4.     Key Points Summary

1.   Introduction

The Act provides a set of rules defining those activities that are Or are not covered by the Act. It is unusual for a piece of legislation to be targeted at one sector of commerce. Concern was expressed that the Act would extend into other commercial sectors such as property. Those concerns led to a regime defining relevant construction contracts which are set out in the first four clauses of the Act. In addition, the Secretary of State has exercised the power to exclude various agreements from the Act by an Exclusion Order which came into force on 1 May 199819. In considering any particular contract therefore, there are two questions:

 

1.  Introduction

ePub

Chapter 3

How the Act affects your payment terms

1.     Introduction

2.     Payment Terms - the New Rules

(a)      Stage Payments - entitlement

(b)      How much is to be paid?

(i)          The Scheme for Construction Contracts - Interim payments

(ii)         The Scheme for Construction Contracts - Final payments

(c)     When are payments due?

(d)     The final date for payment

(e)     Restrictions on pay when paid

(3)     Notices and Deductions

(a)     Payment Notices

(b)     Notice of Intention to Withhold Payment

4.       Key Points Summary

1.   Introduction

The new rules introduced by the Act in relation to payment are likely to have more day to day impact on the construction industry than any of the other provisions. Whilst the new adjudication rules are a radical change to previous dispute resolution procedures, those procedures are only likely to be used infrequently. The new payment rules will apply to each contract each month. The new rules have resulted in substantial amendments to most standard form contracts and professional appointments. The new rules can conveniently be broken down into:

 

(a)  Stage Payments - entitlement

ePub

Chapter 3

How the Act affects your payment terms

1.     Introduction

2.     Payment Terms - the New Rules

(a)      Stage Payments - entitlement

(b)      How much is to be paid?

(i)          The Scheme for Construction Contracts - Interim payments

(ii)         The Scheme for Construction Contracts - Final payments

(c)     When are payments due?

(d)     The final date for payment

(e)     Restrictions on pay when paid

(3)     Notices and Deductions

(a)     Payment Notices

(b)     Notice of Intention to Withhold Payment

4.       Key Points Summary

1.   Introduction

The new rules introduced by the Act in relation to payment are likely to have more day to day impact on the construction industry than any of the other provisions. Whilst the new adjudication rules are a radical change to previous dispute resolution procedures, those procedures are only likely to be used infrequently. The new payment rules will apply to each contract each month. The new rules have resulted in substantial amendments to most standard form contracts and professional appointments. The new rules can conveniently be broken down into:

 

(b)  How much is to be paid?

ePub

Chapter 3

How the Act affects your payment terms

1.     Introduction

2.     Payment Terms - the New Rules

(a)      Stage Payments - entitlement

(b)      How much is to be paid?

(i)          The Scheme for Construction Contracts - Interim payments

(ii)         The Scheme for Construction Contracts - Final payments

(c)     When are payments due?

(d)     The final date for payment

(e)     Restrictions on pay when paid

(3)     Notices and Deductions

(a)     Payment Notices

(b)     Notice of Intention to Withhold Payment

4.       Key Points Summary

1.   Introduction

The new rules introduced by the Act in relation to payment are likely to have more day to day impact on the construction industry than any of the other provisions. Whilst the new adjudication rules are a radical change to previous dispute resolution procedures, those procedures are only likely to be used infrequently. The new payment rules will apply to each contract each month. The new rules have resulted in substantial amendments to most standard form contracts and professional appointments. The new rules can conveniently be broken down into:

 

(c)  When are payments due?

ePub

Chapter 3

How the Act affects your payment terms

1.     Introduction

2.     Payment Terms - the New Rules

(a)      Stage Payments - entitlement

(b)      How much is to be paid?

(i)          The Scheme for Construction Contracts - Interim payments

(ii)         The Scheme for Construction Contracts - Final payments

(c)     When are payments due?

(d)     The final date for payment

(e)     Restrictions on pay when paid

(3)     Notices and Deductions

(a)     Payment Notices

(b)     Notice of Intention to Withhold Payment

4.       Key Points Summary

1.   Introduction

The new rules introduced by the Act in relation to payment are likely to have more day to day impact on the construction industry than any of the other provisions. Whilst the new adjudication rules are a radical change to previous dispute resolution procedures, those procedures are only likely to be used infrequently. The new payment rules will apply to each contract each month. The new rules have resulted in substantial amendments to most standard form contracts and professional appointments. The new rules can conveniently be broken down into:

 

(d)  The final date for payment

ePub

Chapter 3

How the Act affects your payment terms

1.     Introduction

2.     Payment Terms - the New Rules

(a)      Stage Payments - entitlement

(b)      How much is to be paid?

(i)          The Scheme for Construction Contracts - Interim payments

(ii)         The Scheme for Construction Contracts - Final payments

(c)     When are payments due?

(d)     The final date for payment

(e)     Restrictions on pay when paid

(3)     Notices and Deductions

(a)     Payment Notices

(b)     Notice of Intention to Withhold Payment

4.       Key Points Summary

1.   Introduction

The new rules introduced by the Act in relation to payment are likely to have more day to day impact on the construction industry than any of the other provisions. Whilst the new adjudication rules are a radical change to previous dispute resolution procedures, those procedures are only likely to be used infrequently. The new payment rules will apply to each contract each month. The new rules have resulted in substantial amendments to most standard form contracts and professional appointments. The new rules can conveniently be broken down into:

 

(e)  Restrictions on pay when paid

ePub

Chapter 3

How the Act affects your payment terms

1.     Introduction

2.     Payment Terms - the New Rules

(a)      Stage Payments - entitlement

(b)      How much is to be paid?

(i)          The Scheme for Construction Contracts - Interim payments

(ii)         The Scheme for Construction Contracts - Final payments

(c)     When are payments due?

(d)     The final date for payment

(e)     Restrictions on pay when paid

(3)     Notices and Deductions

(a)     Payment Notices

(b)     Notice of Intention to Withhold Payment

4.       Key Points Summary

1.   Introduction

The new rules introduced by the Act in relation to payment are likely to have more day to day impact on the construction industry than any of the other provisions. Whilst the new adjudication rules are a radical change to previous dispute resolution procedures, those procedures are only likely to be used infrequently. The new payment rules will apply to each contract each month. The new rules have resulted in substantial amendments to most standard form contracts and professional appointments. The new rules can conveniently be broken down into:

 

(a)  Payment Notices

ePub

Chapter 3

How the Act affects your payment terms

1.     Introduction

2.     Payment Terms - the New Rules

(a)      Stage Payments - entitlement

(b)      How much is to be paid?

(i)          The Scheme for Construction Contracts - Interim payments

(ii)         The Scheme for Construction Contracts - Final payments

(c)     When are payments due?

(d)     The final date for payment

(e)     Restrictions on pay when paid

(3)     Notices and Deductions

(a)     Payment Notices

(b)     Notice of Intention to Withhold Payment

4.       Key Points Summary

1.   Introduction

The new rules introduced by the Act in relation to payment are likely to have more day to day impact on the construction industry than any of the other provisions. Whilst the new adjudication rules are a radical change to previous dispute resolution procedures, those procedures are only likely to be used infrequently. The new payment rules will apply to each contract each month. The new rules have resulted in substantial amendments to most standard form contracts and professional appointments. The new rules can conveniently be broken down into:

 

(b)  Notice of Intention to Withhold Payment

ePub

Chapter 3

How the Act affects your payment terms

1.     Introduction

2.     Payment Terms - the New Rules

(a)      Stage Payments - entitlement

(b)      How much is to be paid?

(i)          The Scheme for Construction Contracts - Interim payments

(ii)         The Scheme for Construction Contracts - Final payments

(c)     When are payments due?

(d)     The final date for payment

(e)     Restrictions on pay when paid

(3)     Notices and Deductions

(a)     Payment Notices

(b)     Notice of Intention to Withhold Payment

4.       Key Points Summary

1.   Introduction

The new rules introduced by the Act in relation to payment are likely to have more day to day impact on the construction industry than any of the other provisions. Whilst the new adjudication rules are a radical change to previous dispute resolution procedures, those procedures are only likely to be used infrequently. The new payment rules will apply to each contract each month. The new rules have resulted in substantial amendments to most standard form contracts and professional appointments. The new rules can conveniently be broken down into:

 

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