Does a construction contract require a final account process or mechanism?

Not all construction contracts contain a final account process. Section 110 of the Construction Act requires a mechanism determining when payments fall due and the final payment date. However, a recent court case indicates that not all construction contracts need to include a final account procedure to be considered compliant with the provisions of the Construction Act.

In 2020, JSM Construction Limited v Western Power Distribution (West Midlands) PLC, the court had to rule on whether a contract without a final account mechanism should have a provision implied via The Scheme for Construction Contracts (England and Wales) Regulations 1998, also known as ‘The Scheme’.

Despite the provisions of The Scheme, the Court reached the view that the Construction Act does not require parties to include a separate provision for the final account in their contract. However, if the contract is not compliant with the minimum requirements of the Construction Act, then the terms of The Scheme will be implied.