Mandatory Payment Terms

Table of Contents

Scope

The Construction Contracts Act 2013 introduced provisions in Ireland, similar to those in force in England since 1996. Construction contracts covered by the Act are contracts for the carrying out of construction operations, arranging for the carrying out of construction operations by others whether under sub-contract or otherwise, or providing his own labour or labour of others for the carrying out of construction operation.

A construction contract includes an agreement to do architectural, design, or surveying work, providing advice on building, engineering, interior or exterior decoration or the laying out of landscape in relation to construction operations.

Where an agreement relates to construction operations and other matters, the Act only applies to it in relation to construction operations. An agreement is deemed to relate to construction operations insofar as it makes provision for the kinds mentioned above.

The Act applies to construction works, construction contracts entered after the commencement of the Act and which relate to the carrying out of construction operations in the State. The Minister may vary the categories of agreements which are deemed construction contracts for the purpose of the legislation.

Excluded Contracts

The Act does not apply to certain residential construction contracts. This covers a contract

if the value of the contract is not more than €10,000, or
if the contract relates only to a dwelling, and ) the dwelling has a floor area not greater than 200 square metres, and one of the parties to the contract is a person who occupies, or intends to occupy, the dwelling as his or her residence.

A contract of employment is not a construction contract.

A contract between a State authority and its partner in a public private partnership arrangement, is not a construction contract.

The legislation applies to a construction contract whether or not—

the law of the State is otherwise the applicable law in relation to the construction contract, or
the parties to the construction contract purport to limit or exclude its application.

Construction Operations

Construction operations means

operations for the construction, alteration, repair, maintenance, extension, demolition or dismantling of buildings or structures forming or to form part of land whether or not permanent.
construction, alteration, repair, maintenance, extension, demolition and dismantling works including walls, road works, power lines, telecommunication apparatus, aircraft runways, railways, pipelines, reservoirs, water mains, sewage, industrial plant and installations for the purpose of land, drainage, coast protection or defence.
external or internal cleaning of buildings and structures insofar as they are carried out in the course of construction, alteration, repair or extension or alteration.
installation in any building or structure, fittings forming part of the land including systems of heating, lighting, air conditioning, ventilation, power supply, drainage, sanitation, fire protection, water supply, security or communication systems.

It covers operations which form an integral part of or are preparatory to such operations above including

site clearance, moving, excavation, tunnelling, boring, laying of foundations, erections and scaffolding, site restoration, landscaping.
painting or decorating the interior, tile or external surfaces of any buildings.

The manufacture or delivery to site of following do not constitute construction operations.

Building or engineering components or equipment, material, plants or equipment.
Components for systems of heating, ventilation, air conditioning, drainage, sanitation, water, security communication system, except under a contract which also provides for their installation.

Payment under Construction Contracts.

A construction contract shall provide for the amount of each interim payment to be made under the construction contract, and the amount of the final payment to be made under the construction contract. Alternatively it shall provide for an adequate mechanism for determining those amounts.

A construction contract shall provide for—

the payment claim date, or an adequate mechanism for determining the payment claim date, for each amount due under the construction contract, and
the period between the payment claim date for each such amount and the date on which the amount is so due.

The below minimum terms shall apply to a main contract if and to the extent that it does not provide for the above matters. They shall apply to a subcontract except to the extent that it makes provision which is more favourable to the executing party than that below

Mandatory Payment Times

The payment claim dates under a construction contract shall be as follows:

30 days after the commencement date of the construction contract;
30 days after the last date and every 30 days thereafter up to the date of substantial completion;
30 days after the date of final completion.

Where a construction contract provides, or the parties to a construction contract otherwise agree, that the duration of the work under the construction contract is or is estimated to be less than 45 consecutive days, the payment claim date shall be 14 days following completion of the work under the construction contract.

The date on which payment is due in relation to an amount claimed under a construction contract shall be no later than 30 days after the payment claim date.

Mandatory Payment Amounts

The amount of an interim payment under a construction contract shall be the difference between—

the aggregate of the gross value (determined in accordance with the construction contract) of the work done under the construction contract at the payment claim date concerned together with any additional amounts in the interim payment under the construction contract, less any deductions from payment provided for by the construction contract, and
the aggregate amount of interim payments that have already been made at that payment claim date.

The aggregate of payments made under a construction contract shall not exceed—

the amount provided for in the construction contract as originally concluded, and
amounts provided for by any amendments to that contract agreed between the parties.

Overrides Contract Terms

Except after the occurrence of the below circumstances, a provision in a construction contract is ineffective to the extent that it provides that payment of an amount due under the construction contract, or the timing of such a payment, is conditional on the making of a payment by a person who is not a party to the construction contract.

The circumstances above are where the other party is subject to

the commencement of its winding up where no declaration of solvency
the presentation of a petition to wind it up
the appointment of a receiver to a company in respect of any of its property or assets, or
the presentation of a petition for the appointment of an examiner
an application for adjudication under the Bankruptcy Act
the making of a winding up or similar order by a court in relation to the other person;
the occurrence of any corresponding insolvency proceedings in the EU.

Payment Claim Notices

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, the following applies.

A payment claim notice is a notice specifying—

the amount claimed (even if the amount is zero),
the period, stage of work or activity to which the payment claim relates,
the subject matter of the payment claim, and
the basis of the calculation of the amount claimed.

Payment Contested

If the other party contests that the amount is due and payable, then the other party shall deliver a response to the payment claim notice to the executing party, not later than 21 days after the payment claim date, specifying—

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

If the matter has not been settled by the day on which the amount is due, the other party concerned shall pay the amount so proposed above to the executing party not later than on that day.

Where a reason for the different amount in the response is attributable to a claim for loss or damage arising from an alleged breach of any contractual or other obligation of the executing party (under the construction contract or otherwise), or any other claim that the other person alleges against the executing party, the response shall also specify—

when the loss was incurred or the damage occurred, or how the other claim arose,
the particulars of the loss, damage or claim, and
the portion of the difference that is attributable to each such particular.

These rights and obligations are additional to any conferred or imposed by the terms of the construction contract.

Right to Suspend work for Non-Payment.

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 as follows. The notice shall specify the grounds on which it is intended to suspend work and shall be delivered to the other party—

not earlier than the day after the day on which the amount concerned is due, and
at least 7 days before the proposed suspension is to begin.

Work may not be suspended under this right —

after payment by the other party of the amount due, or
after notice has been served by a party to the construction contract in relation to a dispute relating to payment of the amount concerned.

Suspension Disregarded

Where work is suspended above and the ability of the executing party to complete work within a contractual time limit is affected by the suspension of work, the period of suspension shall be disregarded for the purpose of computing the contractual time limit unless the suspension of work is unjustified in the circumstances.

Where work is suspended and the ability of a subcontractor to complete work within a contractual time limit is affected by the suspension of work, the period of suspension shall be disregarded for the purpose of computing the contractual time limit.

A period of suspension of work is also to be disregarded for the purpose of computing the time taken to complete the work under another construction contract where—

the construction contract the work under which is suspended is a subcontract,
the other construction contract is also a subcontract and the other party to that other subcontract is the same as the other party to the subcontract the work under which is suspended, and
the ability of the executing party under that other subcontract to complete work within a contractual time limit is affected by the suspension of work.

This is without prejudice to the right of the other party to the construction contract under which work is suspended to claim for compensation or damages for any loss due to a suspension of work that is unjustified in the circumstances.