Partner Article

Construction and Adjudication

With Watson Burton LLP Law Firm

The Draft Construction Contracts Bill 2008 proposes to make some important changes to the current system of adjudication.

Currently, it is only possible to refer construction contracts which are in writing to adjudication. The Draft Construction Contracts Bill 2008 purports to repeal this requirement, meaning that almost all construction contracts could be referred to adjudication. However, the adjudication provisions of the contract must still be in writing even under the proposed new regime. This means that although the whole of the contract may not be in writing i.e. the contract is partly oral and partly written, provided the adjudication provisions are in the written part, any dispute under the contract can be referred to adjudication.

Other important changes that the Bill makes are in relation to cost provisions. Under the current regime, the parties are free to decide how the costs will be apportioned between themselves. The changes include:

1. parties will no longer be able to agree who will pay that parties’ costs or the adjudicator’s costs, before the adjudicator is appointed;
2. parties may agree apportionment relating either to the parties’ or adjudicator’s costs, after the appointment of the adjudicator;
3. adjudicator can review the agreement between the parties to decide whether the cost provisions are reasonable. If the adjudicator does not believe that they are that agreement will be ineffective; and
4. parties would be joint and severally liable to pay the reasonable costs of the adjudicator should the adjudication end before a decision is reached.

It remains to be seen whether the proposed changes will actually be incorporated, following the end of the consultation period. For now, the regime under the Construction Act 1996 remains in place and should be utilised by professionals who are owed money under construction contracts.

If you have any comments or questions about this article or any Construction and Engineering matters, please contact Laura Keegan of Watson Burton LLP at laura.keegan@watsonburton.com.

This was posted in Bdaily's Members' News section by Ruth Mitchell .