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General Contract Please note that Part II of the Housing Grants, Construction & Regeneration Act 1996 ( the "Construction Act") is likely to affect Construction Contracts that take place in the United Kingdom. If purchasers of this contract wish to use it within the UK then please note that these documents are arranged for international use and not all of them cover necessities, which are compatible, or entirely compatible, with the Construction Act. All UK contracts involving building operations, whether they are creating new structures, maintaining existing structures or working on heritage buildings, are covered under the Construction Act, the main exception to this rule is when construction work is carried out for residential occupiers. As a legal stipulation the Construction Act contains specific mandatory provisions, which concern the details surrounding payment and adjudication with regards to resolving any disagreements or disputes. Language: Where he or his is used in this document text it will also pertain to she or hers and vice versa. This document concerns equally across gender. PAYMENT The segments of the Construction Act that relate to payment are 109 to 113. 1. Payment An adequate clause or process needs to be put in place to determine the payment method under the contract. This payment method is a mandatory aspect of the contract if the construction works that are undertaken are going to last for longer than 45 days. The payment section of the contract will detail; what payments will become due, when they become due and the final payment date for each sum that is due. Below is an example of some wording, which may be used in a contract payment clause: "At the end of each month the Contractor will submit an application to the Employer for payment regarding the work carried out during that month. During the 5 days following the submission of the payment application the Employer will issue certificate to the Contractor detailing the total amount due and the final date for payment; which will be 21 days from the date of the Contractors application.” 2. Withholding of payment Within the payment section of the Construction Act, segment 111 details that it illegal for a Party (generally the Employer) to withhold any amount from a payment which has become due, unless this is detailed in writing within a particular specified period before the conclusive date for payment and that the Party has given an effective written notification of its intention to withhold payment. The notification must stipulate the reason for withholding the payment and the sum that will be withheld. Below is an example of some wording, which may be used in the withholding payment section of the contract payment clause: "If a payment that has become due under the Contract is to be withheld by the Employer, he shall give written notification, to that effect, to the Contractor in no less than 5 days before the final date for payment of that sum. In the said notification the Employer shall specify the grounds for withholding payment and details of each amount to be withheld." 3. Pay when paid Within the payment section of the Construction Act, segment 113 details that it is illegal for a Contract to include a "pay when paid" clause - i.e. a prearrangement that makes payment under the Contract conditional until the payer receives payment from a third party. Essentially, under the Contract, a Main Contractor cannot stipulate that a payment to a Subcontractor is conditional and dependent upon a payment first being received from the Employer to the Contractor. 4. Suspension Within the payment section of the Construction Act, segment 112 details the right that a Party can suspend performance/works on a Contract if they have not received payment, i.e. the said failed payment amount has become due by the final date for payment and no written notification of withholding payment has been given by the payer. In these circumstances, the payee is required to submit a written notification of its intentions to cease work at least 7 days before the works are suspended. If payment is made within that notification period, the right to suspend works is obsolete. It is not always necessary to explicitly detail this right of a suspension in a Contract as the Construction Act wording of the said legislation covers it. ADJUDICATION The Construction Act details adjudication clauses in section 108 of the legislation. Section 108 contains necessities that give any Party to a Construction Contract the right to refer an arising Contract dispute or disagreement to adjudication. Section 108 details that a party can provide written notification at any time of his intent to refer a dispute or disagreement to adjudication, the time scale of the adjudication appointment must be designed to secure the adjudicator's nomination and it must also allow time for the referral of the dispute or disagreement details to be forwarded onto the appointed adjudicator; this must happen within 7 days of the referral notification, and the adjudicator's decision will follow within 28 days from the date of the referral. This said 28 day period may be further prolonged by 14 days with the agreement of the referring Party, or for any other period of time by mutual consent between both/all contract Parties. The appointed adjudicator shall use his ingenuity to ascertain the facts and the law from an impartial standpoint. The Contract may state the adjudicator's decision can be final and conclusively binding or that the adjudicators decision shall be binding, and therefore shall be implemented, until the said dispute or disagreement is finally determined by legal proceedings, arbitration or agreement. If adjudication is not mentionable in the Contract the statutory method, the Scheme for Construction, will apply. It is not permitted to contract out of the dispute referral provisions. Thus, even if the adjudication is not mentionable in the Contract, a Contract Party, to which the Act applies, can request that the said dispute or disagreement is directed to adjudication. Many Construction related Professional Bodies and Organisations, such as the Institute of Civil Engineers (ICE), Chartered Institute of Building (CIOB), Royal Institute of British Architects (RIBA), Institute of Mechanical Engineers (IMechE) or the Home Builders Federation (HBF), can appoint an adjudicator and have adjudication rules which are compliant with the Construction Act. Below is an example of a suggested clause that references one of the above mentioned Professional Bodies: "A dispute or disagreement arising from this Contract Agreement may be referred, by either Party, to adjudication. Referral to adjudication shall be done through written notification to the other party. If both Parties cannot meet an agreement on the appointment of the adjudicator then the President of the Royal Institution of British Architects shall appoint an adjudicator on behalf of either Party. The appointed adjudicator shall use his ingenuity to ascertain the facts and the law whilst acting impartially. The adjudicator shall be instructed to come to a decision within 28 days from the date of the dispute referral or a longer period as agreed in writing by both/all Parties. [The adjudicator's decision shall be final and conclusively binding on both Parties. Both Parties must implement the adjudicators final decision and it will be final and binding on the parties and shall not be referred to any additional legal proceedings, unless either party gives written notification to the other within 30 days from the date of the adjudicators decision.]” If a Construction Contract Agreement or any of its clauses does not conform to the Construction Act it will be supplemented for the statutory method, the Scheme for Construction Contracts. The scheme sets out specifics of necessities with regards to payment by instalments and adjudication, which will take effect in the said circumstances.
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