Adjudication is a way of resolving disputes in construction contracts. Section 108 of the Act provides parties to construction contracts with a right to refer disputes arising under the contract to adjudication. It sets out certain minimum procedural requirements which enable either party to a dispute to refer the matter to an independant party who is then required to make a decision within 28 days of the matter being referred.
If a construction contract does not comply with these requirements, a statutory default scheme, called the Scheme for Construction Contracts (referred to on this site as the 'Scheme') will apply. This section specifically relates to adjudications conducted under the Scheme, although the general principles will apply to all adjudications. Sometimes it has been necessary to specify whether a section relates only to a Scheme or to all Adjudications.
Adjudication does not necessarily achieve final settlement of a dispute because either of the parties has the right to have the same dispute heard afresh in Court (or where the contract specifies arbitration, in arbitration proceedings). Nevertheless, recent experience shows that the majority of adjudication decisions are accepted by the parties as the final result.
The legislation provides that Adjudication can be used at any time. For example, provided that the parties have a contractual relationship it can be used to decide contractual disputes with and between designers, contractors and subcontractors during construction; and with or between them after completion.
Once a dispute has arisen between the parties either party may seek Adjudication. The Adjudicator is selected within a week and must decide the dispute within a further four weeks (subject to any agreed extension). Once the Adjudicator has made his decision, the other party must comply with it; if he does not, a Court hearing to compel compliance can usually be obtained in a matter of days.
Adjudication is thus very quick in comparison with other methods of dispute resolution such as arbitration or litigation and it can also be used during the currency of a contract. Adjudication can be a simple procedure, so in many cases there is no need to involve lawyers or other advisers. It is usually more cost effective than arbitration or litigation.
Most (not all) Adjudications on construction contracts resolve around a redress requiring payment by the Referring Party to the Responding Party.
Further, the parties may not have entered into a formal contract with payment and Adjudication provisions. In these circumstances the Adjudication provisions default to the Housing Grants Construction & Regeneration Act 1996.
We set out below, the abbreviated but key timetable for payment provisions of The Act:
1 Commencement day of the works by . This is a key date from which all other dates are calculated. It is important to
the Trade Contractor or the Sub .set the timetable to a fixed day in the tender and contract. If you do not do
Contractor. this you will end up with obligations to varying contractors falling on different
dates. If you set the timetable carefully it will not matter when the contractor
commences, all dates will be set from the timetable. If your contract is
deficient, the scheme will apply, but only those items in the payment regime
which are deficient will be substituted by payment controls in the scheme.
28 This is the end of each period for Our documents should specify a fixed day each month. If you do not do this
which a valuation must be done. .then the end of the period will move forward each month.
Note it is acceptable up front to set a payment timetable which contemplates
no payment to Subcontractors in December.
35 (Day 28 + 7 Days) This is the "Due Date to when Contractors can be paid on this day. It is not expected that many Clients will
the money for the contractor pay on this day for administrative reasons.
is notionally due. No breach is occasioned by not paying on this day.
40 (Day 35 + 5 Days) This is the last date to provide This can be our payment certificate. It communicates to the Contractor the
a "Payment Notice". amount we or the Client intend to pay. No sanction under the Act exists for
not issuing this notice.
45 (Day 52 less 7 days) Last date for the issue of the ...Key date calculated back from the final date for payment. This notice must
"Notice to Withold Payment". be issued if sum to be paid is different from the amount applied for, and must
.give reasons. Only if this is not issued does a Contractor have a right to
suspend. Note that these notices are required even if the payment is zero.
52 (Day 35 + 17 Days) The Final Date for Payment. Failure to pay by the Final date puts the Client in breach. The contractor
can Adjudicate, but cannot suspend if a "Notice to Withhold Payment" has
been issued.