Communique July 2003
Reviewed June 2009. Updated Feb 2016, Feb 2017The Construction Contracts Act 2002 (CCA) has been updated by the Construction Contracts Amendment Act 2015 and the Construction Contracts Amendment Regulations 2015.The original Act:In general terms, the original Act provided default terms of payment in construction contracts, and a process of adjudication in the event of a dispute. The default terms of payment are a minimum provision to be met in every construction contract, but a contract could include additional or alternate terms so long as they do not reduce the effect of the default terms. The process of adjudication is mandatory. There is no provision to contract out of the terms of the Act other than those (if any) which are explicitly written for that purpose.The CCA provides “teeth” to enforce payment provisions, and the consequences of dilatory or poor procedures, or the attempt to vary provisions of the Act could be significant to both consultant and clients.In order to minimise liability exposure, members need to process Payment Claims and issue Payment Schedules within the time frames of the Act, and be sure to give adequate reasons whenever the amounts certified do not match the Contractor’s claim.Members should educate Clients about the consequences of slow payment or short-payment so that the client may accommodate the risks as they see fit. They may otherwise seek retribution – on the basis of a latent but un-notified risk - when the Contractor walks off the job or stymies on-sale (or financing arrangements) by exercising their rights under the Act.Members should encourage Contractors to adequately document their claims, and advise them of the specific documentation including the required forms to accompany Payment Claims. There is a clear mandate to reject an inadequate claim, and in addition, the Contractor may be denied the opportunity of enforcement. But a rejected claim easily leads into a spiral of dispute, sucking in others along the way.Any matter in dispute at any level of the contract chain can be put to adjudication. The adjudicator carries no liability (unless acting in bad faith) and is under time pressure to make a decision.An adjudicator’s determination is binding, but not necessarily final, and may later be overtaken by a later payment, or by changed project circumstances, and/or be proven to be wrong, or supplanted by an arbitration on the same issues. Therefore, if it varies from the member’s professional view, that difference should be made known both before and after the determination, so that the member’s performance can be judged on its own merits. This would extend to annotating subsequent payment documentation if – for the immediate purpose – it is dependent on the determination, but may later be varied.As with all contract administration issues - and particularly those related to a dispute – the documentation and audit trail should anticipate the determination being revisited in mediation, arbitration, or the Courts.The 2015 amendments:Amongst the changes are the following which are of relevance to architects: