Construction contracts act: your rights under UK construction law

You’ve completed the work. Now you’re chasing payment. Sound familiar? The Construction Contracts Act exists for one reason: to stop you being pushed around in the payment chain. Whether you’re waiting on overdue invoices or facing unfair contract terms, this legislation gives you powerful statutory rights, from guaranteed payment timescales to fast-track dispute resolution. For specialist advice on construction & building disputes, consult a solicitor who knows how to enforce your rights.

Discover how the Construction Contracts Act gives you powerful payment rights and fast dispute resolution.

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What is the Construction Contracts Act?

The Construction Contracts Act (Housing Grants, Construction and Regeneration Act 1996) is the primary legislation that governs payment and dispute resolution in UK construction, giving you statutory rights that override unfair contract terms:

• Legislative purpose: The Act was introduced to tackle endemic payment abuse in the construction industry, where contractors and subcontractors faced routine exploitation through delayed payments and one-sided contract terms.
• Statutory override: These provisions cannot be contracted out of; even if you sign a contract that attempts to remove your rights, the Act’s protections still apply.
• Applies to England, Wales and Scotland: The UK’s Construction Contracts Act differs from the Construction Contracts Act 2002 (New Zealand) and Construction Contract Act 2013 (Ireland).
• Covers oral and written agreements: Your construction contract doesn’t need to be in writing for the Act to protect you; verbal agreements are equally covered.

Construction Contracts Act: Your four essential rights

The Construction Contracts Act grants you four non-negotiable statutory rights that form the backbone of fair payment and dispute resolution in every construction contract:

1. Your right to adjudication: Resolve disputes in 28 days

Adjudication gives you access to rapid, binding dispute resolution without the expense and delay of court proceedings.

• 28-day decision timeline: Once appointed, an adjudicator must reach a decision within 28 days, extendable to 42 days with your agreement.
• Any party can trigger it: Either party can refer a dispute to adjudication at any time, and the other party cannot refuse to participate.
• Enforced by courts: If the losing party refuses to comply, you can obtain a court order enforcing the decision, typically granted swiftly.

2. Your right to fair payment terms

The Construction Act imposes mandatory requirements on how and when you must be paid.

• Construction Act payment terms: Your contract must specify when payments become due and the final date for payment; typically 30 days from the payment due date.
• Stage payments for long projects: For contracts exceeding 45 days, you’re entitled to periodic payments unless the parties agree otherwise in writing.
• Right to suspend work: If payment is not made by the final date and proper notices have been served, you can suspend work after giving seven days’ notice.

3. Your protection against pay-when-paid clauses

Pay-when-paid clauses that make your payment conditional on the payer receiving money from someone else are prohibited.

• Absolute ban: Any clause stating “we’ll pay you when we get paid” is void and unenforceable, with one narrow exception for insolvency situations.
• Applies to all tiers: This protection extends throughout the supply chain, preventing main contractors from pushing payment risk down to subcontractors and suppliers.

4. Your right to payment notices

The notice regime ensures transparency by requiring formal notifications about payment amounts and timing.

• Payment notices required: The paying party must issue a notice specifying the sum they consider due, no later than five days after the payment due date.
• Pay less notices: If the payer intends to pay less than the notified sum, they must serve a “pay less notice” specifying the reduced amount, typically seven days before the final payment date.
• Default payment rule: If no payment notice or pay less notice is properly served, the full amount claimed in your application becomes due and payable; this is known as the “smash and grab” provision.

Does the Construction Contracts Act cover your contract?

Not every agreement in the construction industry benefits from the Construction Contracts Act protections; the legislation has specific inclusion and exclusion criteria.

Contracts protected by the Construction Act

• Construction operations definition: Your contract must relate to “construction operations” as defined in the Act, which includes building work, civil engineering, installation of systems (heating, lighting, power), and decorating.
• All supply chain tiers: Protection extends from main contracts between employers and contractors down through multiple subcontracting tiers to suppliers.
• Professional services included: Contracts for architectural, design, surveying, and engineering services are covered when they relate to construction operations.

Exclusions that could leave you unprotected

• Residential occupier exclusion: Contracts with a residential occupier for work on their dwelling are excluded; homeowners hiring contractors for their own homes don’t trigger Act protections.
• Extraction industries: Contracts for extracting oil, natural gas, or minerals are excluded from the Act’s scope.
• Artistic works: Contracts primarily for creating or installing artistic works, such as sculptures or murals, are excluded from protection.

The Scheme for Construction Contracts: What happens when your contract falls short

The Scheme for Construction Contracts is a statutory safety net that automatically fills gaps when your construction contract fails to comply with the Construction Act requirements:

• Automatic application: The Scheme kicks in automatically whenever your contract doesn’t include compliant provisions; you don’t need to invoke it.
• Gap-filling mechanism: Only the non-compliant provisions are replaced by scheme terms; the rest of your contract remains intact.

Common scenarios triggering Scheme provisions:

• No written contract: If you have an oral agreement, the entire Scheme applies to govern payment terms and adjudication procedures.
• Missing payment dates: When your contract fails to specify when payments become due, the Scheme’s default payment timetable applies instead.
• 28-day payment periods: Under the Scheme, payments become due seven days after the relevant period ends, with the final date for payment 17 days later.

Act of prevention in construction contracts: When delays aren’t your fault

The act of prevention doctrine protects you when the employer or another party causes delays that prevent you from completing work by the contract deadline.

What constitutes an act of prevention:

• Employer-caused delays: Any action or omission by the employer that prevents, hinders, or delays your performance; this includes late design information, delayed access to site, or failure to provide necessary approvals.
• Instructed variations: When the employer issues variation orders that make completion by the original deadline impossible.

Legal consequences of prevention:

• Time at large: When prevention occurs and the contract lacks an effective extension of time mechanism, time becomes “at large”; the fixed completion date falls away.
• Liquidated damages unenforceable: Once time is at large, the employer loses the right to deduct liquidated damages for late completion.

How prevention differs from force majeure:

• Party responsibility: Prevention involves actions by one of the contracting parties, whereas force majeure involves external events beyond either party’s control.
• Contractual provisions: While force majeure and act of God clauses in construction contracts require specific contractual wording, the prevention principle operates as a common law doctrine.

FAQs

• What is a construction contract under the Construction Act? A construction contract under the Construction Act is any agreement (written or oral) for carrying out construction operations, including building work, civil engineering, installation of systems, decorating, and demolition. It covers main contracts, subcontracts, and supply agreements, but excludes contracts with residential occupiers for work on their own homes.
• Can I use adjudication if my contract doesn’t mention it? Yes, the right to adjudication applies automatically to all qualifying construction contracts, and the Scheme for Construction Contracts provides procedures if your contract doesn’t include them.
• What happens if I don’t serve a pay less notice on time? You must pay the full notified sum immediately, even if disputed, and the contractor can enforce this through adjudication or court.

The Construction Contracts Act gives you powerful statutory rights to fair payment and rapid dispute resolution. Know your protections, enforce payment deadlines rigorously, and don’t hesitate to use adjudication when payment issues arise; these rights exist to protect your business and cash flow.

Get your payment rights enforced!

Qredible’s network of specialist construction solicitors can enforce your Construction Contracts Act rights, win adjudications, and recover what you’re owed.

KEY TAKEAWAYS:

• The Construction Contracts Act provides automatic statutory protections including mandatory payment timescales, the right to 28-day adjudication, prohibition of pay-when-paid clauses, and strict payment notice requirements that can result in full payment when deadlines are missed.
• The Act covers most construction contracts throughout the supply chain, whether written or oral, though residential occupier contracts are excluded; where contracts fail to comply, the Scheme for Construction Contracts automatically applies.
• Enforcing these rights often requires specialist legal support, particularly for adjudication proceedings and payment notice disputes where technical knowledge and strict deadlines determine success.