What are deposits?
The parties to a construction contract will commonly come to an
arrangement where the principal will need to make a payment to the
contractor before any work is undertaken. That is, the principal
must pay a deposit or security. The same is also true as between
contractor and subcontractor.
These deposits allow the contractor to immediately cover the
cost of whatever is being produced, including any payment it has to
make to subcontractors or suppliers. They also provide some
protection in the event of the principal failing to make payment
upon delivery.
Does the Construction Contracts Act 2002 (Act) apply?
The Act provides a system of making and responding to payment
claims in construction contracts. There are unforgiving
consequences for failing to respond to a payment claim under the
Act because the claimed amount becomes payable immediately and no
disputes can be raised. However, does the payment claim regime
under the Construction
