Construction Payments

All construction contracts and sub-contract general conditions should be compliant with the requirements of the Construction Contracts Act 2013, if in doubt call us 01 906 6348.

The Act defines what is a “construction contract“, what are “construction operations” and what are the exceptions not covered by the Act.

construction contract” means an agreement (whether or not in writing) between an executing party and another party, where the executing party is engaged for any one or more of the following activities:

(a) carrying out construction operations by the executing party;

(b) arranging for the carrying out of construction operations by one or more other persons, whether under subcontract to the executing party or otherwise;

(c) providing the executing party’s own labour, or the labour of others, for the carrying out of construction operations.

“construction operation” means subject to subsections (3) and (4), any activity associated with construction, including operations of any one or more of the following descriptions:

(a) construction, alteration, repair, maintenance, extension, demolition or dismantling of buildings, or structures forming, or to form, part of the land (whether permanent or not);

(b) construction, alteration, repair, maintenance, extension, demolition or dismantling of works forming, or to form, part of the land, including (without prejudice to the foregoing) walls, roadworks, power-lines, telecommunications apparatus, aircraft runways, docks and harbours, railways, inland waterways, pipe-lines, reservoirs, water-mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defence;

(c) installation in any building or structure of fittings forming part of the land, including (without prejudice to the foregoing) systems of heating, lighting, air-conditioning, thermal insulation, ventilation, power supply, drainage, sanitation, water supply or fire protection, or security or communications systems;

(d) external or internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension or restoration;

(e) Operations which form an integral part of, or are preparatory to, or are for rendering complete, such operations as are previously described in this subsection, including site clearance, earth-moving, excavation, tunnelling andboring, laying of foundations, erection, maintenance or dismantling of scaffolding, site restoration, landscaping and the provision of roadways and other access works and traffic management;

(f) painting or decorating the internal or external surfaces of any building or structure;

(g) making, installing or repairing sculptures, murals and other artistic works that are attached to real property.

The exceptions

2.— (1) A contract is not a construction contract—

(a) if the value of the contract is not more than €10,000, or

(b) if—

(i) the contract relates only to a dwelling, and

(ii) the dwelling has a floor area not greater than 200 square metres, and

(iii) one of the parties to the contract is a person who occupies, or intends to occupy, the dwelling as his or her residence.

(2) A contract of employment (within the meaning of the Organisation of Working Time Act 1997 ) is not a construction contract.

(3) A contract between a State authority and its partner in a public private partnership arrangement, as those terms are defined in the State Authorities (Public Private Partnership Arrangements) Act 2002 , is not a construction contract.

(4) Where a contract contains provisions in relation to activities other than those referred to in the definition of a construction contract and section 1 (2), it is a construction contract only so far as it relates to those activities.

(5) This Act applies to a construction contract whether or not—

(a) the law of the State is otherwise the applicable law in relation to the construction contract, or 

(b) the parties to the construction contract purport to limit or exclude its application.

 

Having established that the Act applies, what does it mean to

The Act introduces a number of terms, these being:

(a) payment claim date;

(b) payment due date;

(c) payment claim notice; and

(d) payment claim response.

Item (a) and (b) are defined terms but need to be agreed in the construction contract. A further term, namely commencement date, is referred to within the Act but it is not defined, therefore, it will be for the parties to agree on the commencement date, from which the Payment Claim Date and therefore when a Payment becomes due is calculated.

The Act actually treats contractors and subcontractors differently. In essence, the Contractor can agree to any payment terms with its employer. To the extent that the [main] Contract does not contain the Payment Claim Date or Due Date, the Schedule then kicks in. 

Notwithstanding what the contractor agrees to in their contract, the sub-contractor terms can be no less favourable than the period set out the “schedule” which is annexed to the Act. This is effectively a 30-day cycle.

In order to comply with the Act, the sub-contractor must issue a payment claim notice not more than 5 days after the payment claim date.

If the contract does not provide for the above dates (or the terms are particularly onerous, you should review the Schedule which is included in the Act.

Payment Claim Notice

4.— (1) This section applies where, not later than 5 days after the payment claim date, an executing party to a construction contract delivers a payment claim notice relating to a payment claim to the other party or another person specified under the construction contract.

(2) A payment claim notice is a notice specifying—

(a) the amount claimed (even if the amount is zero),

(b) the period, stage of work or activity to which the payment claim relates,

(c) the subject matter of the payment claim, and

(d) the basis of the calculation of the amount claimed.

Payment Response

If the sub-contractor has issued a payment claim notice within 5 days of the payment claim date, then if the Contractor does not think that all the money claimed is due, they must issue a payment claim response within 21 Days of the payment claim date.

(3) If the other party or specified person referred to in subsection (1) contests that the amount is due and payable, then the other party or specified person—

(a) shall deliver a response to the payment claim notice to the executing party, not later than 21 days after the payment claim date, specifying—

(i) the amount proposed to be paid,
(ii) the reason or reasons for the difference between the amount in the payment claim notice and the amount referred to in subparagraph (i), and
(iii) the basis on which the amount referred to in subparagraph (i) is calculated,

and

(b) if the matter has not been settled by the day on which the amount is due, shall pay the amount referred to in paragraph (a) to the executing party not later than on that day.

Remedies if the payment is not made in time.

Suspension of works

If you are a sub-contractor and you have not been paid what is due by the Payment Due date you can, by following the procedure set out in the Act, issue a notice to suspend works.

5.—(1) Where any amount due under a construction contract is not paid in full by the day on which the amount is due, the executing party may suspend work under the construction contract by giving notice in writing under subsection (2).

(2) Notice under this subsection shall specify the grounds on which it is intended to suspend work and shall be delivered to the other party—

(a) not earlier than the day after the day on which the amount concerned is due, and

(b) at least 7 days before the proposed suspension is to begin.

(3) Work may not be suspended under subsection (1)—

(a) after payment by the other party of the amount due, or

(b) after notice has been served by a party to the construction contract under section 6(2) in relation to a dispute relating to payment of the amount concerned.

Remedies if you disagree with the calculation of the payment

Adjudication

The parties have the right to refer a “payment dispute” to adjudication at any time.