Construction Act draft clauses published

Construction firms locked in payment disputes could see their rights strengthened, following the publication of a set of draft clauses to be inserted into the Act.

The Department for Business published details of its draft bill clauses to amend part 2 of the Housing Grants, Construction and Regeneration Act 1996 today.

It claimed that the changes could save the industry up to £1bn by improving firms' ability to manage cash flow more effectively.

If enacted, the clauses would:

• Remove the requirement for the construction contract to be in writing in order for the Act to apply.
• Introduce a statutory framework relating to costs of adjudication (currently a stronger party may contractually oblige a weaker party to bear all costs, regardless of the outcome).
• Prohibit agreements that interim or stage payment decisions are conclusive.
• Give the payee a clear idea of what will be paid and when by introducing more certainty into the statutory payment framework.
• Improve the right to suspend performance, allowing the suspending party to recoup more of its costs.
• Limit the decision of the House of Lords in Melvill Dundas (in receivership) vs George Wimpey UK Limited to insolvency situations, removing uncertainty about the scope of the ruling.

The draft clauses have been produced following a review of the Act announced in the 2004 Budget and a series of formal and informal consultations.

The clauses will be ready for inclusion in the Housing Grants, Construction and Regeneration Act 1996 in the next Parliamentary session.