Adjudication: Construction Adjudication
Any party to a Construction Contract in the UK has a right to seek an adjudication of disputes under the contract. This note explains what adjudication is, what types of construction disputes it is appropriate for and gives guidance on what to do if you receive a notice of adjudication.
What is adjudication?
Statutory adjudication was introduced by the Housing Grants, Construction and Regeneration Act 1996 (Construction Act 1996). It:
- Applies to parties to a “construction contract”, who cannot contract out of it.
- Is a 28-day procedure (although the parties can agree to extend this period).
- Is often described as a “pay first, argue later” mechanism for resolving disputes in the construction industry.
- Is designed to protect cash-flow during construction.
What is adjudication appropriate for?
Adjudication is appropriate for resolving claims relating to:
- Interim payments.
- Delay and disruption of the works.
- Extensions of time for completion of the works.
- The final account.
Although not originally designed for complex claims, an adjudication can relate to:
- Breach of contract.
- Termination of a contract.
- Professional negligence.
What does the Construction Act 1996 do?
The Construction Act 1996 gives a party to a construction contract the right to refer a dispute to adjudication.
What does the Scheme for Construction Contracts 1998 do?
The Scheme for Construction Contracts (England and Wales) Regulations 1998 (SI 1998/649) (Scheme for Construction Contracts 1998) provides a fall-back position where a construction contract does not include all the adjudication provisions in section 108 of the Construction Act 1996. The Scheme’s adjudication provisions take effect as implied terms.
What is the effect of an adjudicator’s decision?
Adjudicator’s decisions are:
- Interim-binding, that is, they are binding until the dispute is finally determined by legal proceedings, arbitration or by agreement.
- Usually enforced by the Technology and Construction Court (TCC).
- Rarely successfully challenged.
What should I consider before starting an adjudication?
Before starting an adjudication, a party should:
- Ensure the dispute has been aired between the parties so that it has “crystallised”.
- Define the dispute in the notice. Unless the contract allows more, include only one dispute.
- Comply with the contract’s time limits.
What do I need to consider if I receive a notice of adjudication?
If a party receives a notice of adjudication, it should consider whether:
- There is a construction contract.
- If the construction contract was entered into before the effective date, it is in writing.
- There is a dispute and whether it has crystallised.
- The dispute referred to in the notice the same as the dispute that has crystallised.
- A single dispute been referred to adjudication.
- The dispute was the subject of a previous adjudication.
- The adjudicator has been validly appointed.
- The adjudicator’s appointment or jurisdiction should be challenged.
What do I need to consider once the adjudicator has issued the decision?
Once the adjudicator’s decision is issued, both parties should consider whether:
- It was completed and communicated on time.
- There are clerical errors or mistakes that the adjudicator can correct under the slip rule.
- The adjudicator followed the rules of natural justice, that is, avoided conflicts of interest, acted fairly and without bias, not gone beyond his remit or taken secret soundings.
- The adjudicator answered the correct question, even if wrongly? An adjudicator can be wrong, but must answer the questions he was asked.