The meaning of construction work in the Construction Contracts Act 2002 was extended by section 6 of the Construction Contracts Amendment Act 2015 to include design and engineering work and quantity surveying work in respect of all contracts entered into or renewed after 1 September 2016.
Design, engineering and quantity surveying consultants now have the benefit of the payment protections under the Act, including the right to suspend work for non-payment. They are also able to use the adjudication procedures under the Act to resolve payment disputes, but will also be subject to claims for breach of contract and breach of requirements of reasonable care and skill in relation to their work. These changes will have an impact on professional indemnity insurance policies and liability claim procedures, particularly in the context of the short timeframe for adjudication under the Act.
While only a few cases have been dealt with so far involving professional services, there are essentially two types of disputes that we deal with:
- technical (in the legal sense) disputes – ie disputes that arise out of non-compliance with the technical requirements for making and responding to payment claims under the Construction Contracts Act 2002 (the Act); and
- merits based disputes – ie disputes about the merits of the parties’ arguments in terms of the construction contract that governs their relationship, or in the case of a contract with a residential occupier, the statutory warranties that are implied into every residential building contract under s362I of the Building Act regardless of whether there is a written building contract. Typical merits based plumbing disputes include disputes in relation to:
- non-payment for services;
- contract interpretation – what the parties actually agreed;
- scope of work;
- incomplete or deficient work;
- time for completion;
- payment – the value of the work undertaken in the absence of express agreement as to price;
- estimates v actual cost;
- variations – whether certain work is in fact a variation to the agreed scope of work and the value of that varied work;
- repudiation/cancellation of the contract for design work; and
- claims for damages for breach of contract.