Payment disputes in the construction industry are inevitable. How these disputes are managed is critical. Dispute clauses and payment clauses in construction contracts, to a limited extent, provide guidance to the contracting parties to manage these disputes, but there are many other practical steps for claimant contractors to consider beyond the terms of their construction contract.
This guide summarises these steps with the aim of assisting contractors to better prepare payment claims and better manage payment disputes, including by taking steps before those disputes arise.
Troy Legal specialises in advising contractors on how to navigate the contractual and legal hurdles faced in the complex world of construction payment disputes.
Having a construction contract reviewed and adopting amendments to minimise risk at the time of contracting is an invaluable step to managing payment disputes long before a dispute arises.
For example, aligning payment clauses in the construction contract to applicable SOP laws and other relevant legislation. Also adopting an appropriate dispute resolution clause. See the discussion below on dispute clauses.
Ensuring a contract review is undertaken and critical risk management amendments are adopted is dispute management 101.
In general terms, payment clauses prescribe how and when progress claims or milestone payment claims (staged claims) are made, assessed and paid. Contractors should ensure each of these elements are clearly addressed by the payment clause in their construction contract.
For example - if milestone or staged payments are agreed, the contract should specify when these milestones or stages are complete and whether the contractor has an entitlement to payment progressively or only upon completion.
Contractors should ensure that they understand how construction specific legislation in their state or territory impacts the payment clause in their construction contract.
For example, in QLD, payment clauses are deemed void by the operation of certain provisions in Part 4A QBCC Act (which provide for maximum payment terms), and by operation of s200 BIF Act (to the extent payment terms exclude or limit the operation of the BIF Act).
Understanding how state and territory specific SOP and other legislation intersects with the payment clause in your construction contract allows contractors to better understand their payment rights.
Also understanding which state or territory construction related legislation applies to a project can be tricky. If a contractor is performing off-site work in one state to ultimately deliver prefabricated elements for incorporation into a structure in another state, the state in which the structure is located is the relevant legislation that applies to the contractor’s construction contract, despite that the work was performed in a different state.
Maintaining complete and accurate site records of daily attendances and work undertaken, including plant and equipment mobilised to the site (preferrably signed off by a site supervisor of the other part) provide contemporaneous and readily available evidence to verify resources deployed, the progress of work and/or achievement of milestones, which support payment rights under the construction contract. Inclusion of detailed site records to support payment claims is a significant step to minimise payment disputes.
Establishing protocols for regular site meetings, documenting minutes of these meetings recording all events on site, including joint inspections, hold points, unresolved variations, delay events and issues in dispute assist to maintain a separate (from other site records) contemporaneous record of the project.
Circulating site meeting minutes is also a useful way to share and communicate points of difference which also serves as a record as to the status of resolution of issues in dispute.
Including in the construction contract a regular reporting regime as to the status and progress of the works against costs and project budget, aligned with a current construction program, incorporating up to date adjustments to the program for any delays and variations is also a useful way of monitoring the project and keeping a contemporaneous as-built record.
These records can ultimately be relied upon and submitted with progress or milestone claims as evidence of the progress or completion of stages of work.
Dispute resolution clauses in Australian Standard construction constructs typically require amendment because the unamended version in standard contracts (AS2124, AS4300 & AS4000) was deemed void by the Victorian Courts back in 2014. These unamended clauses are often also binding arbitration agreements under the Commercial Arbitration Acts legislated by the states, which often prevent parties from having access to the Courts, except in a few excluded instances.
Having a suitably amended dispute resolution mechanism provides the flexibility of options to be applied depending on the nature of the issues in dispute (eg. mediation or expert determination), which when applied tactfully, are powerful tools in managing a payment dispute.
Record the nature and extent of the dispute by the relevant contractual dispute process, supported by the contemporaneous records discussed above, and upscale record keeping on all issues relevant to the dispute moving forward.
Brief the details of the dispute as outlined above to your construction lawyer and develop a strategy for resolution.
Often the lawyer's role is to explore and develop potential compromise solutions to be raised as formal or informal offers without the need for Court proceedings.
Key takeaways:
- Have your Contract Reviewed and understand how the key clauses operate and intersect with relevant legislation.
- A large part of dispute management is undertaken before the dispute arises.
- A focus on maintaining effective site records and regular project reporting paves the way for the preservation of documentary evidence to ultimately support your position.
Troy Legal’s experienced building and construction lawyers regularly provide specialist advice to contractors, manufacturers, suppliers and consultants at all levels of the contractual chain to minimise the risk of payment disputes and ensure recovery of payment.
Tackling a payment dispute? Get on the front foot. Contact Troy Legal’s experienced construction lawyers in Brisbane for a consultation and protect your business.
Payment disputes in the construction industry are inevitable. How these disputes are managed is critical. Dispute clauses and payment clauses in construction contracts, to a limited extent, provide guidance to the contracting parties to manage these disputes, but there are many other practical steps for claimant contractors to consider beyond the terms of their construction contract.
This guide summarises these steps with the aim of assisting contractors to better prepare payment claims and better manage payment disputes, including by taking steps before those disputes arise.
Troy Legal specialises in advising contractors on how to navigate the contractual and legal hurdles faced in the complex world of construction payment disputes.
Having a construction contract reviewed and adopting amendments to minimise risk at the time of contracting is an invaluable step to managing payment disputes long before a dispute arises.
For example, aligning payment clauses in the construction contract to applicable SOP laws and other relevant legislation. Also adopting an appropriate dispute resolution clause. See the discussion below on dispute clauses.
Ensuring a contract review is undertaken and critical risk management amendments are adopted is dispute management 101.
In general terms, payment clauses prescribe how and when progress claims or milestone payment claims (staged claims) are made, assessed and paid. Contractors should ensure each of these elements are clearly addressed by the payment clause in their construction contract.
For example - if milestone or staged payments are agreed, the contract should specify when these milestones or stages are complete and whether the contractor has an entitlement to payment progressively or only upon completion.
Contractors should ensure that they understand how construction specific legislation in their state or territory impacts the payment clause in their construction contract.
For example, in QLD, payment clauses are deemed void by the operation of certain provisions in Part 4A QBCC Act (which provide for maximum payment terms), and by operation of s200 BIF Act (to the extent payment terms exclude or limit the operation of the BIF Act).
Understanding how state and territory specific SOP and other legislation intersects with the payment clause in your construction contract allows contractors to better understand their payment rights.
Also understanding which state or territory construction related legislation applies to a project can be tricky. If a contractor is performing off-site work in one state to ultimately deliver prefabricated elements for incorporation into a structure in another state, the state in which the structure is located is the relevant legislation that applies to the contractor’s construction contract, despite that the work was performed in a different state.
Maintaining complete and accurate site records of daily attendances and work undertaken, including plant and equipment mobilised to the site (preferrably signed off by a site supervisor of the other part) provide contemporaneous and readily available evidence to verify resources deployed, the progress of work and/or achievement of milestones, which support payment rights under the construction contract. Inclusion of detailed site records to support payment claims is a significant step to minimise payment disputes.
Establishing protocols for regular site meetings, documenting minutes of these meetings recording all events on site, including joint inspections, hold points, unresolved variations, delay events and issues in dispute assist to maintain a separate (from other site records) contemporaneous record of the project.
Circulating site meeting minutes is also a useful way to share and communicate points of difference which also serves as a record as to the status of resolution of issues in dispute.
Including in the construction contract a regular reporting regime as to the status and progress of the works against costs and project budget, aligned with a current construction program, incorporating up to date adjustments to the program for any delays and variations is also a useful way of monitoring the project and keeping a contemporaneous as-built record.
These records can ultimately be relied upon and submitted with progress or milestone claims as evidence of the progress or completion of stages of work.
Dispute resolution clauses in Australian Standard construction constructs typically require amendment because the unamended version in standard contracts (AS2124, AS4300 & AS4000) was deemed void by the Victorian Courts back in 2014. These unamended clauses are often also binding arbitration agreements under the Commercial Arbitration Acts legislated by the states, which often prevent parties from having access to the Courts, except in a few excluded instances.
Having a suitably amended dispute resolution mechanism provides the flexibility of options to be applied depending on the nature of the issues in dispute (eg. mediation or expert determination), which when applied tactfully, are powerful tools in managing a payment dispute.
Record the nature and extent of the dispute by the relevant contractual dispute process, supported by the contemporaneous records discussed above, and upscale record keeping on all issues relevant to the dispute moving forward.
Brief the details of the dispute as outlined above to your construction lawyer and develop a strategy for resolution.
Often the lawyer's role is to explore and develop potential compromise solutions to be raised as formal or informal offers without the need for Court proceedings.
Key takeaways:
- Have your Contract Reviewed and understand how the key clauses operate and intersect with relevant legislation.
- A large part of dispute management is undertaken before the dispute arises.
- A focus on maintaining effective site records and regular project reporting paves the way for the preservation of documentary evidence to ultimately support your position.
Troy Legal’s experienced building and construction lawyers regularly provide specialist advice to contractors, manufacturers, suppliers and consultants at all levels of the contractual chain to minimise the risk of payment disputes and ensure recovery of payment.
Tackling a payment dispute? Get on the front foot. Contact Troy Legal’s experienced construction lawyers in Brisbane for a consultation and protect your business.
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