Do I have a construction contract?

The answer to this question is somewhat complicated but vitally important.

Identifying whether an agreement is a “construction contract” for the purposes of the Housing Grants, Construction and Regeneration Act 1998 (as Amended) (“the Construction Act”) is essential. As we explain below, failure to adhere to the payment provisions can be fatal regardless of whether you are the paying or receiving party.

Defining a Construction Contract

The definition of a construction contract is set out in section 104 of the Construction Act as an agreement with a person for any of the following:-

• The carrying out of “construction operations”;
• Arranging for construction operations to be carried out, whether under a sub-contract or otherwise;
• Providing labour (either his own or others’ labour) for the carrying out of construction operations.

The definition of a construction contract does not only relate to the physical construction itself and will even apply to agreements relating to the carrying out of architectural, design or surveying work; and providing advice on building, engineering, interior or exterior decoration or on the laying-out of the landscape.

The definition of “construction operations” can be found in section 105 of the Construction Act and is pretty wide-ranging.  A general view would be, if you are carrying out any construction work of any kind, even the installation of ventilation systems, then you probably have a construction contract.

Are there any exclusions?

Most importantly, contracts with residential occupiers are specifically excluded from the Construction Act by way of section 106.  There are also some exceptions to the definition of construction operations in section 105, which are set out in list form.  Examples of such exceptions are the drilling for oil or extraction of minerals.

Why is it important?

The provisions contained in the Construction Act apply to all relevant construction contracts and, in particular, ensure that the agreement contains the following:-

• An adequate payment mechanism – this sets out the steps that both parties must take to ensure that they are either entitled to payment or entitled to challenge the amount claimed by the receiving party; and

• The right for any party to the contract to adjudicate “at any time” – this is a speedy dispute resolution process that is designed to resolve contractual disputes in 28 days.

In the event a contract between parties do not contain an adequate payment mechanism and/or the ability to adjudicate, the Construction Act, in conjunction with the Construction Scheme, imply terms into it.

When a party fails to adhere to the strict payment mechanism set out in the construction contract, and coupled with the other party’s right to adjudicate at any time, they can find themselves on the wrong end of a court order in a very short space of time.

What if I am unsure?

If you are unsure as to whether your contract meets the definition of a “construction contract” or you require help with any dispute that has arisen with one of your contracts, we here at Nexa are able to assist.

Contact Daniel Jenkins for an initial telephone call free of charge to understand whether our involvement is going to be needed.