Introduction of a Construction Act in Ireland

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Introduction of a Construction Act in Ireland

September, 2013
Brian Quinn

As some of you will know the introduction of a statutory basis for adjudication in the Republic of Ireland has had a long gestation. Now, the Construction Contracts Act 2013 (“the Construction Contracts Act”) has been enacted in the Republic on the 29 July 2013.

The Construction Contracts Act can be found at http://www.irishstatutebook.ie/pdf/2013/en.act.2013.0034.pdf.

The Construction Contracts Act was first introduced as a Private Members Bill to the Seanad in May 2010, the path to its eventual introduction as legislation has been difficult. As with the British legislation, the overriding objective of the Construction Contracts Act is to ensure prompt cash flow to those within the scope of the Construction Contracts Act and it also provides a statutory right to adjudication. The Construction Contracts Act will apply to all construction contracts entered into after a date as yet undecided but to be designated by the Minister for Public Expenditure and Reform. There is much to be done before that can happen. The Minister must publish a code of practice governing the conduct of adjudicators, ascertain who exactly will appoint an adjudicator (the Irish law does not anticipate a free market in Adjudicator Nominating Bodies like the UK) and, finally, establish a panel of adjudicators.

The legislation has many similarities to the British law but there are important differences. ‘Construction Contracts’ is broadly defined. The Construction Contracts Act will apply to a similar range of contracts as in the UK but slightly wider. However, the law applies financial thresholds and contracts which are not considered within the scope of the Act include;

  1. Construction contracts which have a value of less than €10,000, and;
  2. Where the contract relates to only one dwelling having a floor area not greater than 200 square metres and one of the parties to the contract is a person who occupies, or intends to occupy, the dwelling as his or her residence (so only a partial “Residential Occupier” exception).

The Construction Contracts Act abolishes ‘pay when paid’ clauses. The Construction Contracts Act requires that all construction contracts caught by it include adequate mechanisms for determining the amount of, and periods for, interim payments. Most Irish construction contracts already have such arrangements. However, the Construction Contracts Act provides for default arrangements. The purpose of a payment claim notice, which will be issued within 5 days of the payment claim date, is to provide clarity to the recipient on any payment which is being sought. If the amount within this notice is challenged, the employer will have 21 days from the payment claim date to respond with a detailed explanation as to why the amount is not due. Any undisputed amount must be paid by the employer by the due date. If the parties cannot agree on the payment sum by the due date the employer must pay the amount included within the response or withholding notice.

The Construction Contracts Act has a statutory provision for a contractor to suspend work in the event of non-payment. A party who does not receive payment on the date it falls due will have the right to suspend work provided that a written notice has been sent to the paying party at least seven days before the proposed suspension is to take effect.

While the adjudication provision of the Construction Contracts Act are clearly modelled on the UK law, the Act describes a right to refer a dispute ‘”relating to payment” to adjudication “at any time”. What distinction between this and the UK “any dispute or difference” definition remains to be seen.

Adjudications success in the UK is primarily due to the support that the decision of an adjudicator has received from Courts in England and Wales, Scotland and Northern Ireland. How the Irish courts will deal with statutory adjudication remains to be seen but they have been happy to robustly enforce contractual adjudications which have come before them.

Whether or not the Construction Contracts Act will really help improve the desperate state in which Irish construction remains, it is certainly a step in the right direction and has been widely welcomed in the Republic. It also goes some way to balancing the law in this area with that in Northern Ireland and elsewhere in the UK, where many Irish companies are now trading.

The remaining unknowns of the start date and how adjudicators will be appointed is looked forward to keenly. Some commentators have voiced concerns about the control the government may have over the adjudication process unless the appointees are kept at arms’ length from central control, so the appointing arrangements may well still be much debated.

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