Under section 14 of the Construction Contracts Act 2002, parties to construction contracts may agree to any terms and conditions regarding the number of payments, the interval between those payments, the amount of each of those payments and the dates when each of those payments become due. Parties may also expressly agree to a single payment on completion.
If the parties fail to agree on a mechanism for determining any of those matters. The Construction Contracts Act 2002 established a statutory right to progress payments and a mechanism for determining the number of payments under the contract, the interval between those payments, the amount of each of those payments and the date when each of those payments becomes due in respect of commercial construction contracts only. With the amendments to the Act which came into force in December 2015, that right has now been extended to all construction contracts entered into after 1 December 2015.
The default provisions are set out in sections 16-18 of the Act and include the following:
a party who has agreed to carry out construction work under the construction contract is entitled to claim for work performed each month;
the amount to be claimed is to be calculated having regard to the relevant period, the value of the work carried out during that period, the contract price, the rates or prices set out in the contract or the reasonable value of the work, the cost of any variations and the cost of rectifying any defective work, and provisions relating to retentions or liquidated damages; and,
the default date for payment is 20 working days after the payment claim is served.
Most of the standard forms of contract such as NZS3910:2013, BuildRight® BCC:2016 and Registered Master Builders Contracts incorporate a mechanism for determining the timing and quantification of payments. In those cases, the express terms of the contract will supersede and replace the default provisions of the Act for payments.
To view the progress payment provisions under the Construction Contracts Act as a flow chart, click here.