Disclaimer

These questions and answers are for general information and guidance only. They should not be relied on in particular situations without contacting Quigg Golden and receiving detailed advice.

The introduction of adjudication

Any construction contract under the Order, with very few exceptions, may go to adjudication. If you are not paid on time and paid in full, use it! Adjudication is a faster and cheaper dispute resolution method that arbitration or litigation. Make sure that you have a dispute or difference and give notice of your intention to refer a dispute to adjudication under Article 7 of the Order. This right may be exercised at any time. When forming the Contract, it is worth thinking about naming a "good adjudicator". This will satisfy you that you have somebody capable at the helm if a dispute does get this far.

What to do about pay when paid clauses?

Pay when paid clauses

In the UK, if the Construction Act or Order applies, then it has rendered pay when paid clauses ineffective.

Article 12 (1) states as follows:

"A provision making payment under a construction contract conditional on the payer receiving payment from a third person is ineffective, unless that third person, or any other person payment by whom is under the contract (directly or indirectly) a condition of payment by that third person, is insolvent."

The exceptional protection main contractors have from having to pay sub-contractors is if the employer becomes insolvent. The same is true for sub-sub-contractors and so on down the chain. The policy reason must be to spread the risk associated with insolvency as widely as possible. In relation to pay when paid clauses, the Scheme only applies where there is a pay when paid clause in the contract and the parties have agreed no other conditions. In that case all the provisions of the Scheme, payment by instalments, valuation of instalments, due date for payment and the final date for payment detailed above will apply. Some main contractors try to circumvent the "pay when paid" rules by inserting "pay when certified" clauses into the contract. There is little or nothing that can be done about these. They need to be forcibly objected to before a contract is agreed.

What is adjudication?

Adjudication has certainly come to the aid of the sub-contractor, putting pressure on main contractors who suddenly have to deal with applications before they may have got their own money. The saving in time can prevent major disputes. In arbitration or litigation, parties argue about various unimportant side issues and delays and costs escalate. The speed of adjudication will make sure that this almost never happens.

Adjudication is a very quick process. Under the Scheme for Construction Contracts a decision will be made by the adjudicator in 28 days subject to agreed extensions. Adjudication certainly works in this way as the short response period for the respondent means that settlements are often reached quickly. There are obvious correlating problems. As the Adjudicator has only 28 days within which to make a decision, mistakes can easily be made. Adjudication is clearly unsuitable for very complex disputes. Courts are now enforcing awards given under adjudication. Even to the degree where following the case of Bouygues - v- Dahl Jensen courts are enforcing decisions in which a mistake has been made. Adjudication will certainly help you to get a final or an interim settlement even if this subsequently goes to arbitration or litigation.

Will you get money out of adjudication?

The consensus is that 95% of adjudications result in payment to the claiming party. What is essential is taking the first step towards adjudication. In all the cases that we have been involved with, there was no other effective way of getting the money. There might be some problems in actually getting the payment from the loser, but it is still worth pursuing your claim through adjudication. There is a good chance of getting some money and there is no other way which is as fast.

When should we use adjudication or arbitration?

Adjudication is useful for non-complex issues that require a quick decision. If an adjudication is issued against you, you have no choice but to defend it. If you are initiating proceedings yourself adjudication is extremely valuable if you have a well prepared claim and a non-complex case. You should particularly consider using it if you need speedy payment as it can be enforced as an interim measure even if it is not a final end to the dispute. Adjudications may also be commenced once other proceedings have been started, be they Court or arbitration. Again this is worth considering if you think you will need an interim payment. Both adjudication and arbitration have the benefit of speed and privacy.

So what is the meaning of "dispute"?

The term "dispute arising under the contract" effectively means that disputes as to whether there is a contract in existence or a right to sue for misrepresentation relating to the Contract are outside the jurisdiction of an adjudicator appointed under Article 7 (1) of the Order.

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