Construction Contracts Bill

Introduction

It is more than four years since Gordon Brown, the then

Chancellor of the Exchequer, announced the review of the

Construction Act and at last the Department for Business Enterprise

and Regulatory Reform ("BERR") has issued for

consultation a draft Bill to amend Part II of the Housing Grants,

Construction and Regeneration Act 1996.

It appears that, on the assumption that the draft Bill can be

taken forward following the consultation in whatever form it may

then take, the intention is to present the draft legislation to

Parliament in the Queen's Speech in early December this year

but that, all things being equal, the amendments are only likely to

take effect in 2012 given the legislative process and the need to

overhaul the Scheme for Construction Contracts in advance.

The draft Bill is accompanied by detailed Explanatory Notes from

BERR designed to assist and inform the consultation process. The

stated objective of the process is to obtain comments on the

"precise drafting" of the legislation due to the

technical nature of the subject matter. Nevertheless, BERR does

leave the door open to "general points on the overall

policy direction".

Repeal of Section 107: Scope of the legislation

One of the more controversial aspects of the Bill involves the

sweeping aside of the existing requirement that for the

Construction Act to apply to a Construction Contract the agreement

itself must be in writing. This requirement has generated a

considerable body of caselaw since May 1998 ? when the

Construction Act came into force ? and is still doing so.

The central problem with which the Courts have had to wrestle is

whether, to comply with Section 107, it is sufficient for there

simply to be written evidence of the existence of the agreement, or

whether it is actually necessary for the material terms, or even

the entirety, of the agreement to have been reduced to writing.

In RJT Consulting Engineers Ltd v DM Engineering

(Northern Ireland) Ltd [2002] EWCA Civ 270 the

majority of the Court of Appeal held that, for Section 107 to

apply, the whole of the agreement must be in writing although Auld

LJ's view was that it should be sufficient that all the

material terms should be in written form.

Who knows whether the Court of Appeal's interpretation of

section 107 actually reflects Parliament's intentions back in

1996. What is clear is that the Construction Umbrella Bodies

Adjudicator Task Group, established at the outset of the review to

assist Sir Michael Latham in shaping the nature and scope of the

amendments to the legislation, favoured repeal of section 107 and

that view has been reflected by the industry at large through the

two-stage consultation process.

Clause 2(1) of the draft Bill repeals section 107. Clause 2(2)

then goes on to insert wording into section 108 the effect of which

would nevertheless be to require complaint adjudication provisions

to be in writing and a lengthy definition of what that means

? in fact the same definition as currently exists in

section 107 ? is set out at clause 2(3). Is this really

necessary? Surely section 108(5) would operate to ensure that in

all cases the principles underlying the legislation would be

reflected in the agreement between the parties. In any event,

surely there is a simple definition of "in

writing" than what is being proposed.

A Slip Rule for Correction of Errors

The draft Bill proceeds on the assumption that the position

regarding correction of errors in their decisions...