Not sure what the payment arrangements of the Construction Act are? You're not alone. They're confusing, that's what, and it's time for reform
Call me an old fuddy-duddy – and that's not meant to be an invitation, by the way, as I get enough of that from my other half and the kids – but I have a real problem with all the newfangled stuff about payment that was introduced in the Construction Act.

When I say "newfangled", the act applies to contracts entered into since 1998, so in theory we ought to be up to speed with what it all means by now. The reality is somewhat different. I have just carried out a straw poll of a few fellow professionals – people who are administering payments on construction contracts on a daily basis. They ought to know what they are doing. Sorry everyone, but you don't have a clue. Admittedly, the sample was small, but most people only knew that the act contained provisions on payment, found them complicated or didn't know what they were.

They took refuge in the fact that the JCT contracts must have been amended to accommodate the act.

This is not a criticism of the practitioners.

When you are working on projects, normally everything goes smoothly. If there are problems, that is when you reach for the contract or talk to the experts.

Time for a brief recap on payment. This is Hemsley's Hitchhiker's Guide to the Act.

We have a well-intentioned act that was meant to sort out payment but which adopted a vocabulary and system that simply did not exist in contracts

It introduced:

  • A strict regime for payments under construction contracts. By strict, I mean that the parties are free to agree the amounts, the intervals, whether it is in instalments or stage payments, and the timing of the dates when they are due. Not very strict then.
  • A new concept of a "due date for payment". Just to complicate life, this is not actually when the payment is due to be made.
  • A mandatory notice from the client advising what is going to be paid to the contractor. To spice things up a bit, although this is mandatory, it does not actually have to be sent.
  • A "withholding notice" that must be issued if the client does not intend to pay the amount that they advised in the "due for payment" notice. For added interest, the withholding notice can be the same as the due for payment notice, but in this case really does have to be sent.
  • The concept of a "final date for payment". This, among other things, is the date by which the client does not have to pay anything if they have issued a withholding notice for the full amount due to be paid. Not very final then.

Are you following this so far, or have I confused you? I have gone out of my way to make it baffling but the point is this: you are not alone in being confused, judging by the results of my poll.

Perhaps we need to examine what is wrong.

When the act was introduced, it was against a backdrop of the Latham report and moves within the industry to address excesses and abuses relating to payment. However, there was a strangely detached feeling at the time. You would have been hard pressed to find people who were against reform, but the industry did not seem to grab the issue and sort it out; instead it left it to the drafters of the act to work out the solutions. We may have had reservations about the result but did not shout too loudly – perhaps because we did not want to be seen to be resistant to change.

So we have a well-intentioned act that was meant to sort out non-payment and late payment but which adopted a vocabulary and system that simply did not exist in construction contracts. The rush to amend contracts to comply with the act left many of the rotten bits of the old contract payment mechanisms in place. They were simply decorated over with the new regimes of the act. If you look hard, you can see both at once.