The Scheme - the Scheme for Construction Contracts
The Scheme under the HGCRA 1996 and modified by the LDEDCA 2009
This section concerns the Scheme for Construction Contracts (England and Wales) Regulations 1998 as amended by the Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) Regulations 2011 (“the Scheme”).
The Scheme was enacted under the HGCRA. The impact of the scheme is that where a contract is non-compliant with the HGCRA, or where there are weaknesses in the terms of a contract, the Scheme implies terms into the Contract for its continuing performance.
The Scheme is formed of two parts.
Part 1: Adjudication
Part 1 of the Scheme will apply in its entirety when a construction contract does not comply with the following requirements:
- A party shall be able to give notice of its intention to refer a dispute to adjudication at any time.
- A Contract shall provide a timetable for the adjudication with the object of securing the appointment of the adjudicator and referral of the dispute to him within 7 days of such notice.
- The Contract shall require the adjudicator to inform all parties on receipt of the Referral document.
- The Contract shall require the adjudicator to extend the period of 28 days by up to 14 days with the consent of the referring party.
- The adjudicator has a duty to act impartially.
- The Contract shall enable the adjudicator to take the initiative in ascertaining the facts of law.
- The adjudicator can correct typographical or computational errors within 5 days of the decision being delivered to the parties, those corrections becoming part of the decision.
The Scheme provides that the decision of an adjudicator is binding until such time as the matter is finally decided by legal proceedings or arbitration or agreement. The parties retain the power to agree to accept the decision of the adjudicator as finally determining the dispute.
Section 105 of the HGCRA defined what constitutes a “construction operation” you can find this here.
Part 2: Payment
Part 2 of the scheme replaces any payment provisions of a construction contract which do not comply with the following sections of the HGCRA.
- entitlement to stage payments Section 109
- Section 110 providing for dates of payment in an adequate framework for determining such amounts
- Notices which specifies amount of payment
- Section 111 provides for the issue of a notice of an intention to pay less than the notified sum
Where terms of a contract exist and the intent and operation of those terms meet what the HGCRA intended, those terms survive. Where there are gaps or where there is a conflict between the terms of the contract and the provisions of the HGCRA, those terms of the contract will not survive, with the Scheme supplementing or replacing any such terms.
Furthermore, Part II of the Scheme provides that if any of the timings of the stage payments due under a contract have not been agreed, then paragraphs 2-4 of the scheme will apply:
- The amount of the stage payment shall be the value of work completed less the amount of payments made previously,
If such a mechanism does not exist then paragraphs 4-7 will apply:
- The payment date shall become due on the date that is later of either the receipt of the application for payment or seven days after the period provided for in the contract.
The default period of payment in which a payment shall become due is twenty eight days after the previous payment was due.