Last updated: 12 October 2016
The Construction Contracts Act 2002 provides a process for dealing with payments and disputes under a construction contract. It covers both commercial and residential construction contracts.
The Construction Contracts Amendment Act 2015 amends the Construction Contracts Act 2002 (the Act):
- from 1 December 2015, residential and commercial construction contracts are treated the same under the Act, and adjudication and enforcement processes are improved
- from 1 September 2016, design, engineering and quantity surveying work is included in the Act
- from 31 March 2017 retention money withheld under commercial construction contracts must be held on trust. The Regulatory Systems (Commercial Matters) Amendment Bill will clarify that this requirement will apply only to contracts entered into, or renewed, on or after 31 March 2017.
The Construction Contracts Act 2002 provides a process for dealing with payments under a construction contract. The Act:
- helps to ensure a fair, balanced and appropriate payment regime
- provides a fast and cost-effective adjudication process for people with disputes
- provides enforcement mechanisms to recover any unmade payments
- protects retention money withheld under commercial construction contracts.
If you entered into a construction contract on or after 1 December 2015, you will now need to include a notice (Form 1) with any payment claims you make.
Contracts covered by the Act
If you have entered into a contract for construction work, your contract is covered by the Act.
Construction work includes work on:
- buildings and other structures that form part of land, including temporary structures
- fittings in the building, such as heating, lighting and fire protection
- infrastructure that forms part of land, such as roads, utilities and land drainage.
Construction work includes constructing or installing, altering, maintaining and removing the building, fittings or infrastructure. It includes work integral to the construction work, such as excavation, scaffolding and prefabricating components.
This description of construction work is illustrative only. For the full meaning of ‘construction work’, see section 6 of the Construction Contracts Act 2002.
How the Act applies to your contract
The Act provides you with default payment provisions and bans the use of ‘pay when paid’. The Act also provides fast-track adjudication of disputes about your contract, along with ways to enforce payment.
You can make payments in two ways under the Act:
- over several instalments (known as 'progress payments')
- as a single payment.
You should make the payment obligations clear in your contract. If you don’t, default provisions of the Act will apply, which provide for monthly progress payments.
You can make a payment claim for any amount you believe is due under the contract. You must include a notice (Form 1) with all payment claims you make. The notice outlines:
- the processes for responding to the payment claim
- the consequences of not responding to or paying a claimed or scheduled amount.
Adjudication of disputes
The Act provides you with a fast-track adjudication process for disputes under your construction contract. This includes disputes about:
- rights and obligations.
You should get advice from your lawyer before you begin an adjudication process. They will be able to give you more information about what the process will involve.
If you decide to refer your dispute for adjudication, you must serve a written notice on the other party. Your notice must include information (Form 2) which details:
- the respondent's rights and obligations
- an explanation of the adjudication process.
Once the adjudicator has been chosen, they must confirm their role as adjudicator by giving a notice of acceptance.
The adjudicator will be able to make a timely decision about your dispute because all parties must operate within the tight timeframes set out in the Act. The adjudicator’s decision is binding and is enforceable in court. You must comply with the adjudicator’s decision, even if you are intending to contest that decision in court.
What changes are being made to the Act?
There are three key dates these changes take effect.
- From 1 December 2015 residential and commercial construction are treated the same under the Act, with the exception of charging orders. This gives parties to residential contracts full access to the Act’s dispute resolution and payment regimes. Also, the adjudication process is streamlined, and the enforcement process is strengthened.
- From 1 September 2016 design, engineering and quantity surveying work is included under the scope of the Act. This gives parties to construction contracts for this type of work full access to the Act’s dispute resolution and payment regimes.
You can read more about these two changes in changes relating to adjudication and enforcement on the MBIE Corporate website.
- From 31 March 2017 retentions withheld under commercial construction contracts must be held on trust. The Regulatory Systems (Commercial Matters) Amendment Bill will clarify that this requirement will apply only to contracts entered into, or renewed, on or after 31 March 2017.
You can read more about this change in changes relating to retention money withheld under commercial construction contracts on the MBIE Corporate website.