The recently enacted Construction Contracts Act 2013 will for the first time in Ireland introduce a statutory dispute resolution mechanism for construction contract disputes, through adjudication by an independent third party.

Scope of the Act

The Act will apply irrespective of whether parties to a construction contract attempt to limit or exclude its application and/or where the applicable law is Irish or otherwise.

The Act applies to agreements to carry out or procure construction operations.  Broadly defined, this includes a comprehensive list of works or advices on construction, alteration, repair, maintenance, extension, demolition or dismantling of works ranging from buildings, road-works and utilities, to scaffolding and landscaping and painting.  

The Act also applies to agreements to carry out professional services ancillary to construction including architectural, design, surveying, engineering or project management services.

Exclusions from Act

The Act excludes contracts:

• With a value below €10,000
• Relating to a residential dwelling with a floor area not greater than 200 sqm and where one of the parties will occupy the property as their residence
• Of employment nature
• Between a State Authority and its partner in a PPP arrangement
• Relating to manufacture or delivery of building or engineering components or equipment, materials, plant or machinery (except where the contract also provides for their installation)

Payment Provisions

• Interim and final payment mechanisms set out will apply to construction contracts including payment claim notices (unless already specified in the construction contract).
• “Paid when paid” clauses will no longer be acceptable.
• Parties to construction contracts cannot withhold payment of money due unless they have responded in writing within 21 days to a payment claim notice.
• Work may be suspended for non-payment, until payment is made in full (subject to certain statutory requirements including the service of notice on the defaulting party).

Adjudication

• Parties can refer payment disputes to adjudication following 7 days notice.
• Adjudicator’s decisions must be reached within 28 days of referral, or 42 days with the referring party’s consent.
• An adjudicator’s decision is binding on both parties until the dispute is resolved through agreement, arbitration or litigation.
• Parties must therefore comply with an adjudicator’s decision even if they object to it while continuing to pursue the matter through arbitration or litigation.
• Adjudicators must act in good faith and impartially and can be appointed by agreement of the parties or from a Panel selected by the Minister for Public Expenditure and Reform.
• Parties bear their own legal and other costs in connection with the adjudication.The ambit of the Act is likely to be far reaching within the construction industry and parties should familiarise themselves with the Act and seek legal advice on both drafting and applying the provisions of construction contracts, particularly in relation to payment and dispute resolution issues.

Contributed by Jarleth Heneghan and Cassandra Byrne.

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