Construction law in Ireland sets out obligations in respect of how payment is to be managed under construction contracts.

Those obligations, arising under the Construction Contracts Act 2013 (the Act), are similar to those arising under the equivalent UK regime, which consists of the Housing Grants, Construction and Regeneration Act 1996 (the HGCRA) in force in England and Wales and Scotland, and the Construction Contracts (Northern Ireland) Order 1997 (the NI Order) in Northern Ireland. However, there are some important differences.

This guide aims to give a practical overview of the payment regime in Ireland and explain how it differs from the UK regime.

Construction contracts 

What constitutes a construction contract under the Act is broadly the same as under the UK regimes. It includes, non-exhaustively, contracts for the construction, maintenance and demolition of works, as well as for fit-out installation, preparatory operations, and painting and decorating.

The following types of contracts are excluded under the Act: 

  • contracts valued at less than €10,000; 
  • contracts relating to owner-occupied residential dwellings of less than 200 square metres – unlike the outright exclusion on residential properties in the UK, adjudication on payment disputes will be available in the Ireland if the property is large enough; 
  • contracts for employment; and 
  • contracts between a state authority and its partner in a public private partnership arrangement. 

A number of the exclusions applicable under the UK regime are not, however, present under the Irish regime. 

Payment regime in Ireland 

Similar to the position in the UK, the intention of the Act was to improve cash flow in the industry in Ireland by ensuring timely payments for construction related works. As confirmed by the High Court in the 2021 case of Construgomes & Carlos Gomes SA v Dragados Ireland Limited, BAM Civil Engineering and Banco BPI SA, the payment obligations under the Act become mandatory contractual obligations and parties are precluded from contracting out of the Act.  

In the UK, where a construction contract’s payment terms are deficient, the legislative scheme will act as a fall-back position, the terms of which are implied into the relevant contract to ensure compliance with the HGRCA. In Ireland, the Schedule to the Act supplements and provides a fall-back position for some contractual provisions, such as creating an adequate mechanism for determining when periodic payments are due, the final date for payment and how the amount due is to be calculated. However, reference will also need to be made to the Act itself, which sets out mandatory provisions in respect of the timing of the various notices that need to be served under the Act, which are not replicated in the Schedule. 

Payment notices 

An important difference in the payment regime under an Irish construction contract is in respect of the issue of a payment claim notice. 

Whilst under both the UK and Irish regimes, the relevant payment notice or payment claim notice must be issued within five days of the due date – referred to as the ‘payment claim date’ in the Act – there are important differences over who can issue such a notice.

Under the UK regimes, a payment notice is issued by the payer, typically the employer, a “specified person” such as the architect or contract manager, or the payee itself. 

For example, under the JCT Standard Building Contract, the contractor issues an application for payment on the interim valuation date, as defined in the contract. The due date falls seven days after the interim valuation date and the employer issues an “interim certificate” which constitutes a payment notice under the HGCRA and NI Order.

In Ireland, however, under the Act, a payment claim notice is issued by the payee, typically the contractor, which means the JCT Standard Building Contract position would not be compliant with the Act.

With the contractor issuing the payment notice, and no statutory mechanism for default payment notices in Ireland as confirmed by the High Court in the 2020 case of Principal Construction Limited v Beneavin Contractors Limited, either the contractor’s payment application will need to become the payment claim notice or a contractual mechanism will need to be built into the statutory process to align payment in Ireland with the UK regimes. In contrast, there is a statutory mechanism for default payment notices provided for in the England and Wales and in Northern Ireland, under section 110 of the HGCRA and in the NI Order. 

Pay less notices 

Another main difference between the UK and Irish regimes is in respect of the issue of a pay less notice. 

In Ireland, where a payment claim notice is issued by the contractor and an employer contests the amount applied for, the employer is required to deliver a pay less notice not later than 21 days after the payment claim date. This differs to the position under the HGCRA and NI Order in which the pay less notice is to be issued “not later than the prescribed period” under the contract before the final date for payment or, where the fall-back legislative scheme applies, not later than seven days before the final date for payment. 

This distinction is important, particularly as the employer may only have one opportunity to review and contest a contractor’s application for payment under the Irish regime. It is also important to consider that the 21-day obligation to issue a pay less notice in Ireland is a statutory obligation, not linked to the final date for payment, but rather calculated from the payment claim date.   

What happens when payment is not made by the final date for payment? 

The Construction Act in Ireland, similar to the position under the UK regimes, provides a statutory right to any contractor, or subcontractor, to suspend performance of its services in the event of non-payment. If payment has not been made by the day on which the amount is due, the contractor may give written notice of the proposed suspension at least seven days before it is to begin, but not before the day after the day on which the amount is due.  

However, contractors will not be able to suspend their services if the employer subsequently makes payment or if they receive notice that the dispute has been referred to adjudication.  

In the event that a payment dispute arises between the parties to a construction contract, both parties have a statutory right under the Act to refer any such payment dispute to adjudication.

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