Scheme for Construction Contracts

This article is all about the Scheme for Construction Contracts, a set of regulations which affects how Adjudication is run in the UK.

Stravelles run a course in Adjudication which aims to allow the student to run their own adjudication as the referring or responding party without paying for legal representation.

We support legal representation in more complex cases but we want to encourage especially smaller companies to feel more confident fighting for their contractual rights.

Introduction to the 1998 Scheme for Construction Contracts

The Scheme for Construction Contracts or ‘The Scheme for Construction Contracts (England and Wales) Regulations’ was a set of regulations introduced in 1998 to essentially close down some loop-holes or ambiguities in The Housing Grants, Construction and Regeneration Act.

This scheme applies when a construction contract does not fulfil the requirements of The Housing Grants, Construction and Regeneration act 1996

The end result of the introduction of the scheme is that almost all construction contracts are capable of being referred to Construction Adjudication.

So, to explain it really simply, if your construction dispute cannot be referred to adjudication using the construction act, you may well be able to refer the contract to adjudication using the scheme.

Two parts of the 1998 Scheme for Construction Contracts

There are two parts of the Scheme for Construction Contracts:

Part 1 makes provision for adjudication to apply where the existing contract does not or where the contract does not fulfil the requirements of the Construction Act.

Part 2 replaces any specific provisions in relation to payment that do not fulfil the requirements of the Housing Grants Construction and Regeneration act.

This means that the contract is still valid and capable of performance.

However now the contract can avail of Adjudication and the scheme provides detailed procedures that override any contractual provisions regarding payment.

Major impacts of the 1998 Scheme for Construction Contracts

The scheme is essentially just a quick fix of any small issues that were faced by Adjudication in the preceding decade.

2011 Amendments to the Construction Act and The Scheme

In October of 2011 several amendments were made to The Construction act and to the Scheme to eliminate some additional loopholes that had made themselves known since 2009.

These amendments not included:

• All contracts in construction that are not in writing are now covered by the act
• No clause asserting one party will be liable for the costs of adjudication will be allowed -although these is still some uncertainty with the drafting of this legislation and how it will be actioned in the courts
• When an Adjudicator issues a decision and notices a mistake they can correct that mistake within 5 days of issuing the decision
• Regarding payment the contract must layout the payment dates
• When a payment date approaches the Client must issue a payment notice within 5 days of that payment notice even if the payment notice amount is zero
• Should the Client wish to withhold money they muse issue a payless notice explaining the proposed deduction and issuing their calculations of how they came to this figure
• In the event of a Client not issuing a payment notice the contractor can issue a default payment notice. If the Client does not issue a payless notice then the Client will have to pay the amount in the payless notice.
• Regarding retention fifty per cent of retention must be released at practical completion
• The Client cannot deduct or withhold payment using the excuse that work is not yet certified
• A contractor can legally suspend work for non payment and possible claim loss and expense costs and an extension of time