THE CONSTRUCTION CONTRACTS ACT 2002 - A BRIEF INTRODUCTION

On 1 April 2003, the Construction Contracts Act 2002 (the Act) came into force and in doing so reformed the law relating to construction contracts and dramatically changed the face of dispute resolution in the construction industry in New Zealand.

Generally the Act applies to every construction contract entered into after 1 April 2003 whether or not governed by New Zealand law and whether the construction contract is written, oral, or partly written and partly oral (s9).

Most importantly, it is not possible to contract out of the Act. The Act has effect despite any provision to the contrary in any agreement or contract (s12). Section 12 was upheld as unambiguous in Willis Trust Co Ltd v Green 25.5.06, Harrison J, HC Auckland CIV-2006-404-809. The court held (in a judicial review application of the adjudicator’s determination) that the Act applied to the second respondent’s final claim notwithstanding the parties agreement to refer disputes to arbitration.

The purpose of the Act is stated in section 3, to be:

To reform the law relating to construction contracts and in particular-

• to facilitate regular and timely payments between the parties to construction contracts; and

• to provide for the speedy resolution of disputes arising under a construction contract; and

• to provide remedies for the recovery of payments under a construction contract.

In essence the Act introduced two separate regimes. The first, for making and responding to progress claims under a construction contract. The second, for resolving disputes that arise under building and construction contracts.