How To Use the Construction Contracts Act To Get Paid

The New Zealand Government enacted the Construction Contracts Act 2002 to help sub-contractors get paid on time and without fuss for construction work and to enable fast resolution to disputes arising under construction contracts. Parry Field Lawyers provides assistance with making and defending claims under the Construct Contracts Act.

Does the Construction Contracts Act apply to me?

The Act applies to a wide range of construction work, namely:

• Construction, installation, alteration, repair, restoration, maintenance, extension, demolition, removal, or dismantling of any building or other structure.
• Installing roadways, pipelines, water mains, sewers, electricity, water, gas, or telephone reticulation.
• Heating , lighting, air conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection, security, and communications systems.
• Any cleaning work carried out as part of the construction work.
• Preparation for construction work such as site clearance, earth-moving, excavation, laying foundations; scaffolding.
• Site restoration and landscaping, painting and decorating.

Making a Payment Claim

The parties to a construction contract are free to agree between themselves on:

1. The number of progress payments under the contract.
2. The gap between those payments.
3. The amount of each of those payments.
4. The date when each of those payments becomes due.

Where the contract does not address these issues, a contractor who carries out construction work for another person is entitled to issue monthly ‘payment claims’ for work done during that month. A payment claim must either be disputed or paid by the customer within the time period agreed for a response in the contract, by default this is 20 working days.

A payment claim must:

1. Be in writing.
2. Contain sufficient details to identify the construction contract to which the progress payment relates
3. Identify the construction work and the relevant period to which the progress payment relates.
4. Indicate a claimed amount and the due date for payment.
5. Indicate the manner in which the payee calculated the claimed amount.
6. State that it is made under the Construction Contracts Act.

If a payment claim is to be given to a residential occupier of a property, it must include a notice in a form prescribed by the Act setting out what the residential customer must do in response to the payment claim.

Payment Schedules

If the customer wants to dispute the payment claim, they must object to the payment claim by giving the contractor a ‘payment schedule’ in writing identifying the payment claim to which it relates and indicating what amount the customer is prepared to pay (which can be nothing). The amount the customer is willing to pay is called the ‘scheduled amount’.

If the scheduled amount is less than the claimed amount, the payment schedule must indicate:

1. How the customer calculated the scheduled amount.
2. The customer’s reason or reasons for the difference between the scheduled amount and the claimed amount.
3. In a case where the difference is because the customer is withholding payment on any basis, the customer’s reason or reasons for withholding payment.

If the customer does not give the contractor a payment schedule by the deadline agreed in the contract, the customer becomes liable to pay the full amount claimed in the payment claim and the contractor may recover it from the customer by court proceedings, which cannot easily be defended by the customer.

Adjudication

If the customer issues a payment schedule within the time limit disputing all or part of the claimed amount, the contractor can refer the matter as a dispute for adjudication under the Construction Contracts Act.

The Act provides an adjudication process that enables a contractor to quickly get a decision on how much is owed by the customer. After the adjudicator is appointed, the contractor has five days to provide information in support of their claim. The customer then has five working days to respond. The Adjudicator must then issue a decision within 30 working days.

An adjudicator’s decision can be enforced in the District or High Court in the same that a judgment of those courts can be enforced.  This means the adjudication process can be an effective way to obtain quick payment for work.

 

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. If we can assist in any way please do not hesitate to contact Paul Cowey at Parry Field Lawyers (348-8480), paulcowey@parryfield.com