The Construction Contracts (Northern Ireland) Order 1997

The Construction Contracts (Northern Ireland) Order 1997 This Order may be cited as the Construction Contracts (Northern Ireland) Order 1997. This Order shall come into operation on such day as the Head of the Department may by order appoint. The Interpretation Act (Northern Ireland) 1954 shall apply to Article 1 and the following provisions of this Order as it applies to a Measure of the Northern Ireland Assembly. In this Order— the Department means the Department of the Environment; the Scheme means the Scheme for Construction Contracts in Northern Ireland, made under Article 13(1). In this Order a construction contract means an agreement with a person for any of the following— the carrying out of construction operations; arranging for the carrying out of construction operations by others, whether under sub-contract to him or otherwise; providing his own labour, or the labour of others, for the carrying out of construction operations. References in this Order to a construction contract include an agreement— to do architectural, design, or surveying work, or to provide advice on building, engineering, interior or exterior decoration or on the laying-out of landscape, in relation to construction operations. References in this Order to a construction contract do not include a contract of employment (within the meaning of the Employment Rights (Northern Ireland) Order 1996). The Department may by order add to, amend or repeal any of the provisions of paragraph (1), (2) or (3) as to the agreements which are construction contracts for the purposes of this Order or are to be taken or not to be taken as included in references to such contracts. Where an agreement relates to construction operations and other matters, this Order applies to it only so far as it relates to construction operations. An agreement relates to construction operations so far as it makes provision of any kind within paragraph (1) or (2). This Order applies only to construction contracts which— are entered into after the coming into operation of this Order, and relate to the carrying out of construction operations in Northern Ireland. This Order applies whether or not the law of Northern Ireland is otherwise the applicable law in relation to the contract. In this Order construction operations means, subject as follows, operations of any of the following descriptions— construction, alteration, repair, maintenance, extension, demolition or dismantling of buildings, or structures forming, or to form, part of the land (whether permanent or not); construction, alteration, repair, maintenance, extension, demolition or dismantling of any works forming, or to form, part of the land, including (without prejudice to the foregoing) walls, roadworks, power-lines, electronic communications 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; 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, ventilation, power supply, drainage, sanitation, water supply or fire protection, or security or communications systems; external or internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension or restoration; operations which form an integral part of, or are preparatory to, or are for rendering complete, such operations as are previously described in this paragraph, including site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection, maintenance or dismantling of scaffolding, site restoration, landscaping and the provision of roadways and other access works; painting or decorating the internal or external surfaces of any building or structure. The following operations are not construction operations within the meaning of this Order— drilling for, or extraction of, oil or natural gas; extraction (whether by underground or surface working) of minerals; tunnelling or boring, or construction of underground works, for this purpose; assembly, installation or demolition of plant or machinery, or erection or demolition of steelwork for the purposes of supporting or providing access to plant or machinery, on a site where the primary activity is— nuclear processing, power generation, or water or effluent treatment, or the production, transmission, processing or bulk storage (other than warehousing) of chemicals, pharmaceuticals, oil, gas, steel or food and drink; manufacture or delivery to site of— building or engineering components or equipment, materials, plant or machinery, or components for systems of heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection, or for security or communications systems, except under a contract which also provides for their installation; the making, installation and repair of artistic works, being sculptures, murals and other works which are wholly artistic in nature. The Department may by order add to, amend or repeal any of the provisions of paragraph (1) or (2) as to the operations and work to be treated as construction operations for the purposes of this Order. This Order does not apply to a construction contract with a residential occupier (see paragraph (2)). The Department may by order provide that all or any of the provisions of this Order shall not apply to any other description of construction contract which is specified in the order. A construction contract with a residential occupier means a construction contract which principally relates to operations on a dwelling which one of the parties to the contract occupies, or intends to occupy, as his residence. In this paragraph dwelling means a dwelling-house or a flat; and for this purpose— dwelling-house does not include a building containing a flat; and flat means separate and self-contained premises constructed or adapted for use for residential purposes and forming part of a building from some other part of which the premises are divided horizontally. The Department may by order amend paragraph (2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A party to a construction contract has the right to refer a dispute arising under the contract for adjudication under a procedure complying with this Article. For this purpose dispute includes any difference. The contract shallinclude provision in writing so as to— enable a party to give notice at any time of his intention to refer a dispute to adjudication; provide a timetable with the object of securing the appointment of the adjudicator and referral of the dispute to him within 7 days of such notice; require the adjudicator to reach a decision within 28 days of referral or such longer period as is agreed by the parties after the dispute has been referred; allow the adjudicator to extend the period of 28 days by up to 14 days, with the consent of the party by whom the dispute was referred; impose a duty on the adjudicator to act impartially; and enable the adjudicator to take the initiative in ascertaining the facts and the law. The contract shall providein writing that the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement. The parties may agree to accept the decision of the adjudicator as finally determining the dispute. The contract shall include provision in writing permitting the adjudicator to correct his decision so as to remove a clerical or typographical error arising by accident or omission. The contract shall also providein writing that the adjudicator is not liable for anything done or omitted in the discharge or purported discharge of his functions as adjudicator unless the act or omission is in bad faith, and that any employee or agent of the adjudicator is similarly protected from liability. If the contract does not comply with the requirements of paragraphs (1) to (4), the adjudication provisions of the Scheme apply. The Scheme may apply the provisions of the Arbitration Act 1996 with such adaptations and modifications as appear to the Department to be appropriate. This Article applies in relation to any contractual provision made between the parties to a construction contract which concerns the allocation as between those parties of costs relating to the adjudication of a dispute arising under the construction contract. It is immaterial whether or not the contractual provision is contained in the construction contract. The contractual provision referred to in paragraph (1) is ineffective unless— it is made in writing, is contained in the construction contract and confers power on the adjudicator to allocate his fees and expenses as between the parties, or it is made in writing after the giving of notice of intention to refer the dispute to adjudication. A party to a construction contract is entitled to payment by instalments, stage payments or other periodic payments for any work under the contract unless— it is specified in the contract that the duration of the work is to be less than 45 days, or it is agreed between the parties that the duration of the work is estimated to be less than 45 days. The parties are free to agree the amounts of the payments and the intervals at which, or circumstances in which, they become due. In the absence of such agreement, the relevant provisions of the Scheme apply. References in the following Articles to a payment provided for by the contract include a payment by virtue of this Article. Every construction contract shall— provide an adequate mechanism for determining what payments become due under the contract, and when, and provide for a final date for payment in relation to any sum which becomes due. The parties are free to agree how long the period is to be between the date on which a sum becomes due and the final date for payment. The requirement in paragraph (1)(a) to provide an adequate mechanism for determining what payments become due under the contract, or when, is not satisfied where a construction contract makes payment conditional on— the performance of obligations under another contract, or a decision by any person as to whether obligations under another contract have been performed. In paragraph (1A)(a) and (b) the references to obligations do not include obligations to make payments (but see Article 12). Paragraph (1A) does not apply where— the construction contract is an agreement between the parties for the carrying out of construction operations by another person, whether under sub-contract or otherwise, and the obligations referred to in that paragraph are obligations on that other person to carry out those operations. The requirement in paragraph (1)(a) to provide an adequate mechanism for determining when payments become due under the contract is not satisfied where a construction contract provides for the date on which a payment becomes due to be determined by reference to the giving to the person to whom the payment is due of a notice which relates to what payments are due under the contract. If or to the extent that a contract does not contain such provision as is mentioned in paragraph (1) ..., the relevant provisions of the Scheme apply. A construction contract shall, in relation to every payment provided for by the contract— require the payer or a specified person to give a notice complying with paragraph (2) to the payee not later than 5 days after the payment due date, or require the payee to give a notice complying with paragraph (3) to the payer or a specified person not later than 5 days after the payment due date. A notice complies with this paragraph if it specifies— in a case where the notice is given by the payer— the sum that the payer considers to be or to have been due at the payment due date in respect of the payment, and the basis on which that sum is calculated; in a case where the notice is given by a specified person— the sum that the payer or the specified person considers to be or to have been due at the payment due date in respect of the payment, and the basis on which that sum is calculated. the sum that the payee considers to be or to have been due at the payment due date in respect of the payment, and For the purposes of this Article, it is immaterial that the sum referred to in paragraph (2)(a) or (b) or (3)(a) may be zero. If, or to the extent that, a contract does not comply with paragraph (1), the relevant provisions of the Scheme apply. In this and the following Articles, in relation to any payment provided for by a construction contract— “ payee ” means the person to whom the payment is due; “ payer ” means the person from whom the payment is due; “ payment due date ” means the date provided for by the contract as the date on which the payment is due; “ specified person ” means a person specified in or determined in accordance with the provisions of the contract. This Article applies in a case where, in relation to any payment provided for by a construction contract— the contract requires the payer or a specified person to give the payee a notice complying with Article 9A(2) not later than 5 days after the payment due date, but notice is not given as so required. Subject to paragraph (4), the payee may give to the payer a notice complying with Article 9A(3) at any time after the date on which the notice referred to in paragraph (1)(a) was required by the contract to be given. Where, pursuant to paragraph (2), the payee gives a notice complying with Article 9A(3), the final date for payment of the sum specified in the notice shall for all purposes be regarded as postponed by the same number of days as the number of days after the date referred to in paragraph (2) that the notice was given. If— the contract permits or requires the payee, before the date on which the notice referred to in paragraph (1)(a) is required by the contract to be given, to notify the payer or a specified person of— the sum that the payee considers will become due on the payment due date in respect of the payment, and the basis on which that sum is calculated, and the payee gives such notification in accordance with the contract, that notification is to be regarded as a notice complying with Article 9A(3) given pursuant to paragraph (2) (and the payee may not give another such notice pursuant to that paragraph). Subject as follows, where a payment is provided for by a construction contract, the payer must pay the notified sum (to the extent not already paid) on or before the final date for payment. For the purposes of this Article, the “ notified sum ” in relation to any payment provided for by a construction contract means— in a case where a notice complying with Article 9A(2) has been given pursuant to and in accordance with a requirement of the contract, the amount specified in that notice; in a case where a notice complying with Article 9A(3) has been given pursuant to and in accordance with a requirement of the contract, the amount specified in that notice; in a case where a notice complying with Article 9A(3) has been given pursuant to and in accordance with Article 9B(2), the amount specified in that notice. The payer or a specified person may in accordance with this Article give to the payee a notice of the payer's intention to pay less than the notified sum. A notice under paragraph (3) must specify— the sum that the payer considers to be due on the date the notice is served, and It is immaterial for the purposes of this paragraph that the sum referred to in sub-paragraph (a) or (b) may be zero. A notice under paragraph (3)— must be given not later than the prescribed period before the final date for payment, and in a case referred to in paragraph (2)(b) or (c), may not be given before the notice by reference to which the notified sum is determined. Where a notice is given under paragraph (3), paragraph (1) applies only in respect of the sum specified pursuant to paragraph (4)(a). In paragraph (5) “ prescribed period ” means— such period as the parties may agree, or in the absence of such agreement, the period provided by the Scheme. Paragraph (9) applies where in respect of a payment— a notice complying with Article 9A(2) has been given pursuant to and in accordance with a requirement of the contract (and no notice under paragraph (3) is given), or a notice under paragraph (3) is given in accordance with this Article, but on the matter being referred to adjudication the adjudicator decides that more than the sum specified in the notice should be paid. In a case where this paragraph applies, the decision of the adjudicator referred to in paragraph (8) shall be construed as requiring payment of the additional amount not later than— 7 days from the date of the decision, or the date which apart from the notice would have been the final date for payment, whichever is the later. Paragraph (1) does not apply in relation to a payment provided for by a construction contract where— the contract provides that, if the payee becomes insolvent the payer need not pay any sum due in respect of the payment, and the payee has become insolvent after the prescribed period referred to in paragraph (5)(a). Paragraphs (2) to (5) of Article 12 apply for the purposes of paragraph (10) of this Article as they apply for the purposes of that Article. Where the requirement in Article 10(1) applies in relation to any sum but is not complied with, the person to whom the sum is due has the right (without prejudice to any other right or remedy) to suspend performance ofany or all of his obligations under the contract to the party by whom payment ought to have been made ( the party in default). The right may not be exercised without first giving to the party in default at least 7 days' notice of intention to suspend performance, stating the ground or grounds on which it is intended to suspend performance. The right to suspend performance ceases when the party in default makes payment in full of the sum referred to in paragraph (1). Where the right conferred by this Article is exercised, the party in default shall be liable to pay to the party exercising the right a reasonable amount in respect of costs and expenses reasonably incurred by that party as a result of the exercise of the right. Any period during which performance is suspended in pursuance of, or in consequence of the exercise of, the right conferred by this Article shall be disregarded in computing for the purposes of any contractual time limit the time taken, by the party exercising the right or by a third party, to complete any work directly or indirectly affected by the exercise of the right. Where the contractual time limit is set by reference to a date rather than a period, the date shall be adjusted accordingly. A provision making payment under a construction contract conditional on the payer receiving payment from a third person is ineffective, unless that third person, or any other person payment by whom is under the contract (directly or indirectly) a condition of payment by that third person, is insolvent. For the purposes of this Article a company becomes insolvent— when it enters administration within the meaning of Schedule B1 to the Insolvency (Northern Ireland) Order 1989, on the appointment of an administrative receiver or a receiver or manager of its property under Part IV of that Order, on the passing of a resolution for voluntary winding-up without a declaration of solvency under Article 75 of that Order, or on the making of a winding-up order under Part V or Part VI of that Order. For the purposes of this Article a partnership becomes insolvent on the making of a winding-up order against it under any provision of the Insolvency (Northern Ireland) Order 1989 as applied by an order under Article 364 of that Order. For the purposes of this Article an individual becomes insolvent on the making of a bankruptcy order against him under Part IX of the Insolvency (Northern Ireland) Order 1989. A company, partnership or individual shall also be treated as insolvent on the occurrence of any event corresponding to those specified in paragraph (2), (3) or (4) under the law of England and Wales, or of Scotland, or of a country outside the United Kingdom. Where a provision is rendered ineffective by paragraph (1), the parties are free to agree other terms for payment. The Department shall by regulations make a scheme ( the Scheme for Construction Contracts in Northern Ireland) containing provision about the matters referred to in the preceding provisions of this Order. Before making any regulations under this Article the Department shall consult such persons as it thinks fit. Where any provisions of the Scheme apply by virtue of this Order in default of contractual provision agreed by the parties, they have effect as implied terms of the contract concerned. The parties are free to agree on the manner of service of any notice or other document required or authorised to be served in pursuance of the construction contract or for any of the purposes of this Order. If or to the extent that there is no such agreement the following provisions apply. A notice or other document may be served on a person by any effective means. Section 24 of the Interpretation Act (Northern Ireland) 1954 (service of documents), as it applies to the service by post of such a notice or other document, shall have effect with the omission of the word registering in subsection (1). This Article does not apply to the service of documents for the purposes of legal proceedings, for which provision is made by rules of court. References in this Order to a notice or other document include any form of communication in writing and references to service shall be construed accordingly. This Order applies to a construction contract entered into by or on behalf of the Crown otherwise than by or on behalf of Her Majesty in her private capacity. Orders and regulations under this Order may contain such incidental, supplementary or transitional provisions and savings as the Department considers appropriate. Subject to paragraph (3), orders and regulations made under this Order shall be subject to affirmative resolution. Paragraph (2) does not apply to an order made under Article 1(2). 1954 c. 33 (N.I.). 1996 NI 16. 1996 c. 23. 1989 NI 19. fully exercised by SR 1999/34 2003 c. 21 Art. 12(2)(a) substituted (27.3.2006) by Insolvency (Northern Ireland) Order 2005 (S.I. 2005/1455 (N.I. 10)), arts. 1(3), 3(3), Sch. 2 para. 55; S.R. 2006/21, art. 2 (subject to transitional provisions in S.R. 2006/22, arts. 2-7) functions transf. by SR 1999/481 Art. 7A inserted (14.11.2012) by Construction Contracts (Amendment) Act (Northern Ireland) 2011 (c. 4), ss. 4, 9(2) (with s. 9(4)); S.R. 2012/367, art. 2 Art. 9A - Art. 9B inserted (14.11.2012) by Construction Contracts (Amendment) Act (Northern Ireland) 2011 (c. 4), ss. 6(4), 9(2) (with s. 9(4)); S.R. 2012/367, art. 2 Art. 10 substituted (14.11.2012) by Construction Contracts (Amendment) Act (Northern Ireland) 2011 (c. 4), ss. 7(1), 9(2) (with s. 9(4)); S.R. 2012/367, art. 2 Art. 5(1)(1A) and heading substituted for art. 5(1) and heading (14.11.2012) by Construction Contracts (Amendment) Act (Northern Ireland) 2011 (c. 4), ss. 2(2), 9(2) (with s. 9(4)); S.R. 2012/367, art. 2 Art. 6 repealed (14.11.2012) by Construction Contracts (Amendment) Act (Northern Ireland) 2011 (c. 4), ss. 1(1), 9(2) (with s. 9(4)); S.R. 2012/367, art. 2 Words in art. 7(2) inserted (14.11.2012) by Construction Contracts (Amendment) Act (Northern Ireland) 2011 (c. 4), ss. 1(2)(a), 9(2) (with s. 9(4)); S.R. 2012/367, art. 2 Words in art. 7(3)(4) inserted (14.11.2012) by Construction Contracts (Amendment) Act (Northern Ireland) 2011 (c. 4), ss. 1(2)(b), 9(2) (with s. 9(4)); S.R. 2012/367, art. 2 Art. 7(3A) inserted (14.11.2012) by Construction Contracts (Amendment) Act (Northern Ireland) 2011 (c. 4), ss. 3, 9(2) (with s. 9(4)); S.R. 2012/367, art. 2 Words in art. 8(4) substituted (14.11.2012) by Construction Contracts (Amendment) Act (Northern Ireland) 2011 (c. 4), ss. 6(2), 9(2) (with s. 9(4)); S.R. 2012/367, art. 2 Art. 9(1A)-(1D) inserted (14.11.2012) by Construction Contracts (Amendment) Act (Northern Ireland) 2011 (c. 4), ss. 5, 9(2) (with s. 9(4)); S.R. 2012/367, art. 2 Art. 9(2) repealed (14.11.2012) by Construction Contracts (Amendment) Act (Northern Ireland) 2011 (c. 4), ss. 6(3)(a), 9(2) (with s. 9(4)); S.R. 2012/367, art. 2 Words in art. 9(3) repealed (14.11.2012) by Construction Contracts (Amendment) Act (Northern Ireland) 2011 (c. 4), ss. 6(3)(b), 9(2) (with s. 9(4)); S.R. 2012/367, art. 2 Words in art. 11(1) substituted (14.11.2012) by Construction Contracts (Amendment) Act (Northern Ireland) 2011 (c. 4), ss. 7(2)(a), 9(2) (with s. 9(4)); S.R. 2012/367, art. 2 Words in art. 11(3) substituted (14.11.2012) by Construction Contracts (Amendment) Act (Northern Ireland) 2011 (c. 4), ss. 7(2)(b), 9(2) (with s. 9(4)); S.R. 2012/367, art. 2 Words in art. 11(1) inserted (14.11.2012) by Construction Contracts (Amendment) Act (Northern Ireland) 2011 (c. 4), ss. 8(a), 9(2) (with s. 9(4)); S.R. 2012/367, art. 2 Art. 11(3A) inserted (14.11.2012) by Construction Contracts (Amendment) Act (Northern Ireland) 2011 (c. 4), ss. 8(b), 9(2) (with s. 9(4)); S.R. 2012/367, art. 2 Words in art. 11(4) inserted (14.11.2012) by Construction Contracts (Amendment) Act (Northern Ireland) 2011 (c. 4), ss. 8(c), 9(2) (with s. 9(4)); S.R. 2012/367, art. 2 Art. 9(1A) excluded (14.11.2012) by The Construction Contracts Exclusion Order (Northern Ireland) 2012 (S.R. 2012/366), arts. 1, 3