Don’t ignore the Construction Contracts Act

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Be careful to not underestimate the effect and operation of the Construction Contracts Act 2004 (CCA) – otherwise known as the security of payments legislation.

The CCA is designed to ensure the prompt flow of payments to contractors, subcontractors and suppliers in the building and construction industry.

It provides for rapid adjudication of payment disputes, so as to ensure contractors and those further down the contracting chain get timely payment. Certain terms are also prohibited from being included in construction contracts and certain terms are implied into contracts if they are not already dealt with in the contract.

Disputes are usually adjudicated by experienced construction professionals including engineers, quantity surveyors and lawyers.

While the adjudicator’s decision is only an interim decision that is subject to the outcome of more formal dispute resolution processes such as litigation or arbitration, in our experience an adjudication determination can have a significant bearing on the final resolution of a matter. Not only does the third party adjudicator give a considered and independent view on the claim, the determination also determines who controls the money in dispute in the interim.

In my experience in acting in CCA claims for both principals and contractors alike, common practical features that emerge are:

  • the process in relatively cheap and fast;
  • an application for adjudication is often subject to detailed scrutiny from the principal and their lawyers as to whether the various jurisdictional preconditions have been met;
  • claimants are often unaware that the CCA applies not only to the construction project itself, but also to preparatory works, to the mere supply of materials to site for use in construction and also to professional services agreements;
  • while the CCA does not apply to certain types of contract in the mining and oil & gas industries, the restrictions are not as wide as often thought; and
  • the CCA is not only used by small to medium industry players, but is also used by major corporates and JV’s on large infrastructure and project developments.

An understanding of the nuances of the CCA and its application can have a significant effect on the contractual dynamics of those in the construction industry and should not be ignored until it is too late.

Don’t hesitate to contact me if you’re interested in discussing any of these points so far as they may apply to your situation.

Dean Grondal – Managing Principal
Grondal Bruining

Ph: +61 8 6500 4320