Part II of the Housing Grants, Construction and Regeneration Act 1996 came into force on 1 May this year. The Act is of importance to the construction industry and to construction lawyers, as it introduces a statutory right to adjudication in construction contracts entered into after 1 May 1998.
"Construction contracts" are widely defined – most activities normally associated with the construction process are included, but there are grey areas. There are some specific exclusions. For example, work for a residential occupier, the process industry exclusion, and insurance contracts, to name but a few.
A contract caught by the Act must allow each party to refer disputes to adjudication at any time. The act also provides that a contract shall:
provide a timetable which has the object of securing the appointment of the adjudicator within seven days of referral of the dispute;
require the adjudicator to reach a decision within 28 days of referral (although the adjudicator may extend this period by 14 days if the referring party agrees);
require the adjudicator to be impartial and allow him /her to take the initiative in ascertaining facts and law;
provide that the decision is binding until the dispute is determined by legal proceedings, by arbitration or by agreement, but the parties may agree to treat it as determining the dispute; and
provide that the adjudicator is not liable unless he/she acts in bad faith.
If a contract complies with these requirements then the parties may agree supplementary provisions for adjudication as they like.
If the contract does not allow each party the right to refer disputes to adjudication, or does not comply with the basic requirements as set out above, the "Scheme for Construction Contracts" will be implied into the contract.
The scheme contains provisions for adjudication which will suit some, but not all parties.
The purpose of the new right to adjudicate is to provide a quick-fix system for resolving disputes as they arise on-site and to enable cash to flow while the contract is ongoing.
Another aim is to resolve disputes early and thereby encourage the industry to be less confrontational.