Civil Engineering Reference
In-Depth Information
consideration may need to be given to any insurance provisions found in the contract.
Insurance is considered in Chapter 14.
Finally, and most importantly, the contractor may be entitled to claim payment
prior to completing the contract works where the express terms of the building
contract specifically provide for the making of instalment or interim payments.
In modern construction contracts such provisions are almost always included, as
many contractors would be unable to fund the on-going construction costs pending
payment upon completion. Procuring external funding would significantly increase
construction costs.
8.1.3 Payment under the 1996 Act
In respect of building contracts entered into after 1 May 1998, the position in relation
to payment altered dramatically following the coming into force of the 1996 Act. The
1996 Act materially improved the rights of a party to be paid under a construction
contract as compared to the common law position. Part 8 of the Local Democracy
Economic Development and Construction Act 2009 ('the 2009 Act') made amend-
ments to the 1996 Act that apply to construction contracts entered into in Scotland
from 1 November 2011 and in England from 1 October 2011.
In the following sections of this chapter, where reference is made to the 1996 Act,
it is a reference to the 1996 Act as amended by the 2009 Act.
The amendments to the 1996 Act have made sweeping changes to the payment
provisions in the 1996 Act. The amendments have created a notice-driven interim
payment mechanism for construction contracts, seeking to create certainty in respect
of interim payments by prescribing that the payer must pay the payee the 'notified
sum' on or before the final date for payment.
Sections 109 and 110
Section 109 of the 1996 Act deals with payment and provides that a party to a relevant
construction contract is entitled to payment by instalments, stage payments or other
periodic payments in respect of work carried out under the contract. Where the par-
ties are entitled to interim payments under section 109, then the 1996 Act provides
thatthepartiesarefreetoagreetheamountsofsuchpaymentsandtheintervalsor
circumstances in which they will become due.
Section 110(1) of the 1996 Act stipulates that every constructioncontract must pro-
vide an adequate mechanism for determining what payments become due and when
they become due and provide a final date for payment in relation to any sum which
becomes due. The parties can, however, agree the interval between the date on which
a sum becomes due and the final date for payment.
Subsections (1A)-(1D) of section 110 of the 1996 Act provide details of the means
bywhichpartiescan,andcannot,satisfytherequirementthateveryconstructioncon-
tract must provide an adequate mechanism for determining what payment becomes
due and when.
