Construction Contracts Amendment Bill

The Construction Contracts Amendment Bill (‘Bill’) proposes some significant changes to the Construction Contracts Act 2002 (‘Act’). The Act’s purpose was to reform the law relating to construction contracts, particularly with regard to how and when payments are made by a party to a construction contract, dispute resolution, and remedies for recovery of payments under a construction contract. The Bill now seeks to deal with new issues that have arisen since the Act was passed, and 3 of the proposed changes are summarised in this article.

Removal of the distinction between residential and commercial construction contracts

This change would mean ‘residential construction’ contractors could also require progress payments, and suspend work where payments are not made.

Removal of the existing distinction between ‘residential construction’ & ‘commercial construction’ contracts would also give any successful party in an adjudication relating to a ‘residential construction’ contract the right to apply to have the adjudication determination entered as a judgment in the District Court. Under the current Act enforcement in this situation can be difficult.

When sending a payment claim, relating to a progress payment to any consumer, a contractor would have to provide a notice outlining the process for responding to a payment claim, and the effect of not doing so. At present this is only required where the consumer is a residential occupier. The New Zealand Law Society submissions on the Bill supported such an approach for payment claims, and noted the general lack of knowledge within the construction industry about a contractor’s notice obligations.

Reduced timeframe for opposing adjudication determinations

At present, a party to a construction contract has 15 working days to make an objection to an adjudicator’s determination being entered in the District Court as a judgment. In order to improve cashflow efficiency in the construction industry, the Bill proposes to reduce this time period to 5 working days, to provide parties with faster access to enforcement and relief.

Extension of the definition of “Construction Work”

The Bill proposes that the definition of ’construction work‘ be extended to include design, architectural, engineering and quantity surveying work. In the past there have been issues relating to some ‘construction work’ falling outside of the scope of the Act. Some submissions on the Bill have called for greater clarity around this change, with suggestions that the Bill go further and define ’design, architectural, engineering and quantity surveying work‘. There has also been concern as to whether the new definition would actually avoid the issues it is looking to prevent.

Summary

It will be interesting to see the conclusions reached in the Select Committee report on the Bill due on 11 December 2013, and what amendments are suggested in light of submissions. In any case, it is apparent that contractors need to be aware of their obligations, and consumers and contractors alike need to be aware of their rights, as well as any restrictions on these, when it comes to entering into a construction contract.