Before section 3 of the CPILPA 1998 insert—

“Part 1A Payment terms

2B Payment terms

(1)

A contract to which this subsection applies must make provision for
a relevant payment under the contract to become due before the end of a specified period beginning with one of the following days—

(a)

the day on which the obligation of the supplier to which the
payment relates is performed;

(b)

in the case of a payment that relates to a period of hire of
goods, the last day of that period of hire;

(c)

the day on which the purchaser has notice of the amount of
the payment or (where that amount is unascertained) the sum which the supplier claims is the amount of the payment;

(d)

the day after the day on which an acceptance or verification
procedure is completed (see section 2C ).

(2)

The maximum length of the period that may be specified in the
contract is—

(a)

where the purchaser is a public authority, 30 days;

(b)

where the purchaser is not a public authority, 60 days.

(3)

A term of the contract is void so far as it purports to provide for
payment terms for a relevant payment that differ (in all cases or in specified circumstances) from those stipulated by subsections (1) and (2) .

(4)

Subsection (5) applies in relation to the contract where—

(a)

the contract does not provide for payment terms for a relevant
payment, or

(b)

the contract includes a term relating to a relevant payment that
is void as a result of subsection (3) .

(5)

It is an implied term of the contract that a relevant payment becomes
due at the end of the period of 30 days beginning with the latest of the days specified in subsection (1) .

(6)

But nothing in subsection (5) prohibits the parties from agreeing
payment terms for a relevant payment under the contract that are consistent with subsections (1) and (2) (and any such agreed terms override the implied term described in subsection (5) ).

(7)

Subsection (8) applies to any other contract binding the parties (or
either of them) which—

(a)

relates to a contract to which subsection (1) applies (“the main
contract”), and

(b)

is not a contract of a description specified in regulations made
by the Secretary of State.

(8)

A term of a contract to which this subsection applies, including a
contract settling a dispute arising under the main contract or a contract by which the supplier under the main contract waives their right to be paid in accordance with the terms of that contract, is void so far as it purports to vary or override a term of the main contract that provides for when a relevant payment under that contract becomes due, in a way that is not consistent with subsections (1) and (2) .

(9)

Subsection (1) applies to a contract to which this Act applies, other
than—

(a)

a contract to which section 2E applies, or

(b)

a contract to which section 68 or 88 of the Procurement Act
2023 applies.

(10)

In this Act “relevant payment” means a payment of the whole or any
part of the contract price that is not—

(a)

an advance payment, or

(b)

a construction payment (see section 2D for payment terms for
relevant construction payments).

2C Acceptance or verification procedure

(1)

This section applies in relation to a contract specifying payment terms
for a relevant payment by reference to the completion of an acceptance or verification procedure (see section 2B (1) (d) ).

(2)

In section 2B and this section, “acceptance or verification procedure”
means a procedure of acceptance or verification (whether provided for by an enactment or by a contract) under which the conforming of goods or services with the contract is to be ascertained.

(3)

It is an implied term of the contract that the acceptance or verification
procedure, if not completed before the end of the period of 30 days beginning with the day on which the obligation of the supplier to which the payment in question relates is performed, is to be treated as being completed immediately after the end of that period, unless the contract creating the obligation to make the relevant payment contains a long acceptance or verification term (but see subsection (5) ).

(4)

A “long acceptance or verification term” means a term of a contract
providing for a period for completion of an acceptance or verification procedure that is longer than the period specified in subsection (3) .

(5)

A long acceptance or verification term is void unless the term is a fair
and reasonable one to be included in the contract having regard, in particular, to the matters specified in Schedule 2 to the Unfair Contract Terms Act 1977 (having regard only to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made).

(6)

It is for the purchaser to show that a long acceptance or verification
term satisfies the test in subsection (5) .

(7)

A term of the contract specifying the payment terms, or a term of any
other contract term binding the parties (or either of them), is void so far as it purports to vary or override the implied term described in subsection (3) .”

After section 2D of the CPILPA 1998 (inserted by section 2 ), insert—

“2E Contracts exempted from the restrictions on payment terms in section 2B or 2D

(1)

This section applies to a contract if—

(a)

the condition in subsection (2) , (3) or (4) is met in relation to
the contract, and

(b)

the conditions in subsection (5) are met in relation to the
contract.

(2)

The condition in this subsection is that—

(a)

regulations under subsection (7) (a) are in force, and

(b)

on the date of the contract, the purchaser and supplier under
the contract are as described in any one of the following sub-paragraphs—

(i)

the purchaser is a sole trader and the supplier is not a
sole trader;

(ii)

the purchaser is a micro undertaking and the supplier
is a small undertaking, a medium-sized undertaking or a large undertaking;

(iii)

the purchaser is a small undertaking and the supplier
is a medium-sized undertaking or a large undertaking;

(iv)

the purchaser is a medium-sized undertaking and the
supplier is a large undertaking.

(3)

The condition in this subsection is that—

(a)

regulations under subsection (7) (b) are in force, and

(b)

on the date of the contract—

(i)

the purchaser is a large undertaking, and

(ii)

the supplier is a large undertaking.

(4)

The condition in this subsection is that the contract is of a description
specified in regulations made by the Secretary of State.

(5)

The conditions in this subsection are that—

(a)

neither the purchaser nor the supplier under the contract is a
public authority;

(b)

the contract is in writing; and

(c)

the contract specifies (as the case may be)—

(i)

the sub-paragraph of subsection (2) (b) that applies in
relation to the contract,

(ii)

that subsection (3) applies in relation to the contract, or

(iii)

the provision of regulations made under subsection (4) that describes the contract.

(6)

In relation to an undertaking that is not a legal person under the law
under which it is formed—

(a)

in subsection (2) (b) , sub-paragraphs (ii) to (iv) are to apply as
if, after the words “purchaser is” or “supplier is” (as the case may be), there were inserted the words “an officer, partner or other member of”;

(b)

in subsection (3) (b) , sub-paragraphs (i) and (ii) are to apply as
if, after the words “purchaser is” or “supplier is” (as the case may be), there were inserted “an officer, partner or other member of”.

(7)

The Secretary of State may make regulations—

(a)

setting out what is meant by references in subsection (2) to a
micro undertaking, a small undertaking, a medium-sized undertaking and a large undertaking for the purposes of the condition in that subsection;

(b)

setting out what is meant by references in subsection (3) to a
large undertaking for the purposes of the condition in that subsection.

(8)

A description of contract may be specified in regulations under
subsection (4) only if the Secretary of State—

(a)

has considered the impact of specifying that description of
contract on all sizes of undertakings, particularly ones that are small, and

(b)

considers that specifying that description of contract strikes a
fair balance between the interests of purchasers and suppliers under contracts of that description.

(9)

Regulations under subsection (7) may, in particular—

(a)

specify criteria some or all of which must be met in order for
an undertaking to count as a micro undertaking, a small undertaking, a medium-sized undertaking or a large undertaking for the purposes of the exemption in subsection (2) or (3) (which may include criteria as to headcount of staff, turnover or balance sheet total);

(b)

make provision as to the meaning of any reference in the
regulations to headcount of staff, turnover or balance sheet total;

(c)

specify the date or period by reference to which it is to be
determined whether specified criteria are met.

(10)

In this section “undertaking” means a person who is acting in the
course of a business.”

After section 2E of the CPILPA 1998 (inserted by section 3 ), insert—

“2F Powers to shorten payment terms

(1)

The Secretary of State may by regulations substitute the number of
days for the time being specified in sections 2B(2)(a) and 2D(3)(a).

(2)

Regulations under subsection (1) —

(a)

may not specify a number of days higher than 30;

(b)

must specify the same number of days in sections 2B(2)(a) and
2D(3)(a).

(3)

The Secretary of State may by regulations substitute the number of
days for the time being specified in sections 2B(2)(b) and 2D(3)(b).

(4)

Regulations under subsection (3) —

(a)

may not specify a number of days higher than 60;

(b)

must specify the same number of days in sections 2B(2)(b) and
2D(3)(b).

(5)

The Secretary of State may by regulations substitute the number of
days for the time being specified in section 2B(5), but the regulations may not specify a number of days higher than 30.

(6)

The Secretary of State may by regulations substitute the number of
days for the time being specified in section 2C(3), but the regulations may not specify a number of days higher than 30.

(7)

The Secretary of State must, within the required period, consult such
persons as the Secretary of State considers appropriate about whether to make regulations under subsections (1) , (3) , (5) and (6) and the number of days that might be specified in such regulations.

(8)

In subsection (7) “the required period” means the period of five years
beginning with the day on which sections 2B and 2D come into force (or, if they come into force on different days, the later of those days).”

After section 2F of the CPILPA 1998 (inserted by section 4 ), insert—

“Part 1B Statutory interest

2G Statutory interest

(1)

It is an implied term of a contract to which this Act applies that any
qualifying debt created by the contract carries simple interest subject to and in accordance with this Part.

(2)

Interest carried under that implied term (in this Act referred to as
“statutory interest”) is to be treated, for the purposes of any rule of law or enactment (other than this Act) relating to interest on debts, in the same way as interest carried under an express contract term.”

In the CPILPA 1998, for both versions of section 4 (as it extends to England and Wales and Northern Ireland, and as it extends to Scotland) substitute—

“4 Period for which statutory interest runs

(1)

Statutory interest runs in relation to a qualifying debt in accordance
with this section (unless section 5 applies).

(2)

Statutory interest starts to run on the day after the relevant day for
the debt, at the rate prevailing under section 6 at the end of the relevant day.

(3)

Except where subsection (5) applies, the relevant day for a debt, other
than a construction debt, is the payment day.

(4)

Except where subsection (5) applies, the relevant day for a construction
debt (see section 15A ) is the final date for payment.

(5)

Where the debt relates to an obligation to make an advance payment,
the relevant day is the day on which the debt is treated by section 11 as having been created.

(6)

Except in the case within subsection (7) , the reference in subsection (3) to the payment day, in relation to a debt other than a construction
debt, is to—

(a)

in the case of a debt arising under a contract to which section 2B (1) applies, the day on which payment is due in accordance
with—

(i)

provision consistent with section 2B (1) and (2) that is
agreed by the parties to the contract,

(ii)

a term implied into the contract by section 2B (5) , or

(iii)

provision agreed by the parties to a contract of a
description specified in regulations under section 2B (7) (b) ;

(b)

in the case of a debt arising under a contract to which section 2E applies, the day that is agreed by the parties to the contract
to be the day on which payment is due (and see subsection (10) ).

(7)

In the case of a debt arising under a contract to which section 68 or
88 of the Procurement Act 2023 applies, other than a construction debt, the reference in subsection (3) to the payment day is to—

(a)

the day that has effect under provision agreed by the parties
to the contract as the last day for payment to be made, or

(b)

the day that has effect, in accordance with the implied term
described in (as the case may be) section 68(2) or 88(2) of the Procurement Act 2023, as the last day for payment to be made.

(8)

Except in the case within subsection (9) , the reference in subsection (4) to the final date for payment, in relation to a construction debt, is
to—

(a)

the date that has effect under provision agreed by the parties
to the relevant construction contract as the final date for payment, or

(b)

the date that has effect as the final date for payment in
accordance with the implied term described in (as the case may be)—

(i)

the relevant Construction Scheme provision (see sections
2D(6) and 15A);

(ii)

section 68A (3) of the Procurement Act 2023;

(iii)

section 88A (3) of the Procurement Act 2023.

(9)

In the case of a construction debt that is created by virtue of an
obligation to pay a transitional retained sum within the meaning of section 113B of the HGCRA 1996 (treatment of certain retention deductions), the reference in subsection (4) to the final date for payment is to the final date for payment of such a sum that is given by that section for the purposes of that section.

(10)

In identifying the payment day in relation to a debt for the purposes
of subsection (6) (b) , any postponement of the day on which payment is due that is agreed (for any reason) by the parties to the contract after the supply of goods or services under the contract is to be disregarded.

(11)

For the purposes of subsection (7) (b) —

(a)

the term described in subsection (3) of sections 68 and 88 of
the Procurement Act 2023 (disapplication of payment terms in case of dispute etc) is to be treated as not being an implied term of the contract, and

(b)

any term included in the contract that has the same or a similar
effect as subsection (3) of section 68 or 88 of that Act is to be disregarded.

(12)

In identifying for the purposes of subsection (8) (a) the final date for
payment in relation to a construction debt arising under a contract to which section 2E applies, any postponement of the final date for payment that is agreed (for any reason) by the parties to the relevant construction contract after the supply of goods or services under the contract is to be disregarded.

(13)

Where section 110B(3) of the HGCRA 1996 or Article 9B(3) of the
Northern Ireland Order 1997 operates to postpone the final date for payment in relation to a construction debt, the references in paragraphs (a) and (b) of subsection (8) and in subsection (9) to the final date for payment are to the final date for payment as so postponed.

(14)

Statutory interest ceases to run when the interest would cease to run
if it were carried under an express contract term.”

After section 11 of the CPILPA 1998 insert—

“11A Fixed sum for late raising of disputes

(1)

It is an implied term of a contract to which this Act applies, other
than a construction contract, that (unless subsection (7) applies) the supplier is entitled to recover from the purchaser a fixed sum of the amount specified in subsection (5) if the purchaser—

(a)

notifies the supplier of a relevant dispute after the last dispute
day, or

(b)

notifies the supplier of a relevant dispute on or before the last
dispute day, but does not, by the end of that day, provide the supplier with sufficient information for the supplier to understand what the dispute is about.

(2)

A “relevant dispute” is a dispute which a purchaser relies on to decline
to pay, or postpone payment of, any amount of the contract price, except where the disputed amount is an advance payment.

(3)

The “last dispute day” is the first day of a period of 8 days ending
with the relevant day for the debt (see section 4), unless subsection (4) applies.

(4)

Where the relevant day for the debt is a day falling before the end of
the period of 14 days beginning with the day on which the obligation of the supplier to which the debt relates is performed, the “last dispute day” is the relevant day for the debt.

(5)

The amount of the fixed sum is the higher of—

(a)

£40;

(b)

the sum that is 1% of the contract price or, where only part of
the contract price is disputed, 1% of the disputed amount.

(6)

A contract term is void so far as it purports to exclude or vary the
implied term described in subsection (1) .

(7)

If the interests of justice require it, the fixed sum under this section
may be remitted in whole or part (for example, where the supplier is found to be in breach of contract).

(8)

For the purposes of subsection (1) a dispute may be notified to a
supplier orally or in writing.

(9)

In this section—

“
construction contract” has the same meaning as in Part 2 of the
HGCRA 1996 (see sections 104 and 105 of that Act) or the Northern Ireland Order 1997 (see Articles 3 and 4 of that Order);

“
contract term” means a term of the contract under which the
dispute arises or any other contract term binding the parties (or either of them).”

After section 15 of the CPILPA 1998 insert—

“15A Meaning of terms relating to construction contracts

(1)

This section has effect for the purposes of this Act.

(2)

The “HGCRA 1996” means the Housing Grants, Construction and
Regeneration Act 1996.

(3)

The “Northern Ireland Order 1997” means the Construction Contracts
(Northern Ireland) Order 1997 (S.I. 1997/274 (N.I. 1)).

(4)

“Relevant construction contract” means—

(a)

a construction contract, within the meaning of Part 2 of the
HGCRA 1996, to which that Part (or any provision of that Part) applies, or

(b)

a construction contract, within the meaning of the Northern
Ireland Order 1997, to which that Order (or any provision of that Order) applies.

(5)

“Construction payment” means a payment of the whole or any part
of the contract price under a relevant construction contract, provided that—

(a)

the payment relates to construction operations;

(b)

the payment does not relate to construction operations, but—

(i)

the effect of provision made by the contract is that Part
2 of the HGCRA 1996 or the Northern Ireland Order 1997, or any provision of that Part of that Act or of that Order, applies in relation to payments under the contract that do not relate to construction operations, or

(ii)

the contract makes provision, in relation to payments
under the contract that do not relate to construction operations, that corresponds to provision in Part 2 of the HGCRA 1996 or in the Northern Ireland Order 1997; or

(c)

the payment comprises a sum relating to construction
operations and a sum not relating to construction operations, where—

(i)

the effect of provision made by the contract is that Part
2 of the HGCRA 1996 or the Northern Ireland Order 1997, or any provision of that Part of that Act or of that Order, applies in relation to such composite sums, or

(ii)

the contract makes provision, in relation to such
composite sums, that corresponds to provision in Part 2 of the HGCRA 1996 or in the Northern Ireland Order 1997.

(6)

“Construction debt” means a debt created by virtue of an obligation
to make a construction payment.

(7)

“Construction operations” has the same meaning in this section as in
Part 2 of the HGCRA 1996 or the Northern Ireland Order 1997.

(8)

“Relevant Construction Scheme provision” means (as the case may
be)—

(a)

the provision of the Scheme for Construction Contracts or the
Scheme for Construction Contracts (Scotland) that provides for a final date for payment (for a sum payable under a construction contract) in the circumstances mentioned in section 110(4) of the HGCRA 1996, or

(b)

the provision of the Scheme for Construction Contracts in
Northern Ireland that provides for a final date for payment (for a sum payable under a construction contract) in the circumstances mentioned in Article 9(4) of the Northern Ireland Order 1997.”

An amendment made to the CPILPA 1998, the HGCRA 1996 or the Northern Ireland Construction Order 1997 by any provision of sections 1 to 9 or Schedule 1 does not affect contracts entered into before the date on which the provision making the amendment comes into force.

In the HGCRA 1996, in Part 2 (construction contracts), after section 113 insert—

“Retentions

113A Retention practices

(1)

Sections 113B to 113E concern the practice by which one party to a
construction contract (“A”) deducts or retains sums of money equating to a percentage of—

(a)

the amount payable to another party to the construction
contract (“B”) for any goods, services or works supplied by B, in accordance with the terms of the construction contract between A and B,

(b)

an interim payment payable to B in accordance with the terms
of the construction contract between A and B, or

(c)

the contract total of the construction contract,

until any condition for release or partial release of the sums to B (whether included in the construction contract or in an agreement relating to sums payable under that contract) is met.

(2)

In subsection (1) —

“
condition” includes a condition that some or all of the sums are
not to be released until one or more of the following occur—

(a)

B has met all of its obligations under the construction
contract;

(b)

B has met specified conditions under the construction
contract;

(c)

a period set aside for making good any defects has
expired;

“
contract total” means the total of—

(a)

the amount payable to B for any goods, services or
works supplied by B, in accordance with the terms of the construction contract, and

(b)

any additional sums of money payable to B in
accordance with the terms of the construction contract.”

In the HGCRA 1996, after section 113A (inserted by section 12 ), insert—

“113B Ineffective retention clauses

(1)

In this section “retention clause” means a term of a construction
contract or related agreement (whether or not in writing) that permits one party to the construction contract to deduct or retain sums of money as described in section 113A (1) .

(2)

This section applies in relation to—

(a)

a retention clause which the parties to a construction contract
agree during the transition period (including where the construction contract or related agreement was entered into before the beginning of that period);

(b)

a retention clause—

(i)

that was entered into by the parties to a construction
contract before the beginning of the transition period, and

(ii)

to which the parties agree a variation during that
period.

(3)

On and after the day after the last retention day—

(a)

a retention clause in relation to which this section applies is
ineffective, and

(b)

a term of a construction contract or related agreement is
ineffective so far as it provides for the treatment of sums deducted or retained under a retention clause that is ineffective as a result of paragraph (a) (including, but not limited to, a term providing for a mechanism or process for release of such sums, the timing of any such release or conditions to be met before any such release).

(4)

Subsections (5) to (9) provide for the treatment, after the last retention
day, of any sum which—

(a)

was deducted or retained during the period beginning with
the first day of the transition period and ending with the last retention day in reliance on a retention clause in relation to which this section applies, and

(b)

has not been paid to the payee by the end of the last retention
day.

In subsections (5) to (9) such a sum is referred to as a “transitional retained sum”.

(5)

The following apply after the last retention day in relation to a
transitional retained sum as they apply in relation to any payment provided for by the relevant construction contract—

(a)

provision included in that construction contract in compliance
with section 110A(1), or (if or to the extent that the contract does not comply with section 110A(1)) the relevant provisions of the Scheme for Construction Contracts (see section 110A(5)),

(b)

section 110B, and

(c)

section 111.

(6)

For the purposes of subsection (5) —

(a)

the payment due date for a transitional retained sum is the
date given by subsection (7) ;

(b)

the final date for payment for a transitional retained sum is
the date given by subsection (8) or (9) .

(7)

The payment due date for a transitional retained sum is—

(a)

the date that is the last day of the period of 30 days beginning
with the day after the last retention day, or

(b)

such earlier date (after the last retention day) as is agreed by
the parties in writing to be the payment due date for the sum.

(8)

Where the payer is a public authority, the final date for payment for
a transitional retained sum is—

(a)

the date that is the last day of the period of 30 days beginning
with the day after the payment due date for the sum, or

(b)

such earlier date (after the payment due date) as is agreed by
the parties in writing to be the final date for payment for the sum.

(9)

Where the payer is not a public authority, the final date for payment
for a transitional retained sum is—

(a)

the date that is the last day of the period of 60 days beginning
with the day after the payment due date for the sum, or

(b)

such earlier date (after the payment due date) as is agreed by
the parties in writing to be the final date for payment for the sum.

(10)

In this section—

“
the last retention day” means the last day of the period of three
years beginning with the day on which this section comes into force;

“
public authority” has the same meaning as in the Commercial
Payments and Interest on Late Payment Act 1998 (see section 16 of that Act);

“
related agreement”, in relation to a construction contract, means
an agreement relating to sums payable under that contract;

“
the relevant construction contract”, in relation to a transitional
retained sum, means (as the case may be)—

(a)

the construction contract containing the retention clause
in reliance on which the sum was deducted or retained, or

(b)

the construction contract to which the agreement
containing that retention clause relates;

“
the transition period” means the period of two years beginning
with the day on which this section comes into force.”

In the HGCRA 1996, after section 113B (inserted by section 13 ), insert—

“113C Ban on retention clauses

(1)

In this section “retention clause” means a term of a construction
contract or related agreement (whether or not in writing) that purports to permit one party to the construction contract to deduct or retain sums of money as described in section 113A (1) .

(2)

This section applies in relation to a retention clause which the parties
to a construction contract agree after the end of the transition period (including where the construction contract or related agreement was entered into before that period began or during that period).

(3)

A retention clause in relation to which this section applies is void.

(4)

A term of a construction contract or related agreement is void so far
as it purports to provide for the treatment of sums deducted or retained under a retention clause that is void as a result of subsection (3) (including, but not limited to, a term providing for a mechanism or process for release of such sums, the timing of any such release or conditions to be met before any such release).

(5)

In this section—

“
related agreement”, in relation to a construction contract, means
an agreement relating to sums payable under that contract;

“
the transition period” means the period of two years beginning
with the day on which section 113B comes into force.”

In the HGCRA 1996, after section 113C (inserted by section 14 ), insert—

“113D Ban on variations of pre-existing retention clauses

(1)

The parties to a construction contract may not, after the end of the
transition period, agree a variation of a retention clause or related term that was entered into by the parties before that period began or during that period.

(2)

Any such purported variation is void.

(3)

But subsections (1) and (2) do not apply in relation to a variation that
has the effect of making the retention clause or related term more favourable to the payee than it was before the variation.

(4)

In this section—

“
related term” means a term of a construction contract or related
agreement that provides for the treatment of sums deducted or retained under a retention clause (including, but not limited to, a term providing for a mechanism or process for release of such sums, the timing of any such release or conditions to be met before any such release);

“
retention clause” has the meaning given by section 113B (1) ;

“
the transition period” means the period of two years beginning
with the day on which section 113B comes into force.”

In the HGCRA 1996, after section 113D (inserted by section 15 ), insert—

“113E Unauthorised retentions: sum payable

(1)

For the purposes of this section a “retention debt” arises if or to the
extent that—

(a)

the requirement in section 111(1) applies in relation to a sum
but is not complied with, and

(b)

the sum is deducted or retained as described in section 113A (1) (retentions).

(2)

It is an implied term of a construction contract that, if a retention debt
arises after the end of the transition period, the party to whom the debt is due is entitled to recover from the party by whom payment ought to have been made a fixed sum of the amount specified in subsection (3) in relation to the debt.

(3)

The amount of the fixed sum is the higher of—

(a)

£40;

(b)

the sum that is 50% of the retention debt.

(4)

A contract term is void so far as it purports to exclude or vary the
implied term described in subsection (2) .

(5)

If the interests of justice require it, the fixed sum under this section
may be remitted in whole or part.

(6)

A party’s entitlement to a fixed sum in accordance with this section
is in addition to any entitlement the party has to the following in relation to the retention debt—

(a)

statutory interest within the meaning of the Commercial
Payments and Interest on Late Payment Act 1998;

(b)

any sum mentioned in section 5A of that Act (compensation
arising out of late payment).

(7)

The implied term described in subsection (2) applies in relation to
construction contracts entered into before the transition period began or during that period (as well as construction contracts entered into after the end of that period).

(8)

In this section—

“
contract term” means a term of the construction contract or any
other contract term binding the parties (or either of them);

“
the transition period” means the period of two years beginning
with the day on which section 113B comes into force.”

After section 2 of the Enterprise Act 2016 insert—

“Adjudication scheme

2A SBC adjudication scheme

(1)

The Commissioner must, in accordance with regulations under section 2G , establish, maintain and administer a scheme (in this Part referred
to as the “SBC adjudication scheme”) under which the Commissioner, or another person appointed by the Commissioner, adjudicates relevant payment disputes.

(2)

A small business (but no other type of person) may refer a relevant
payment dispute to adjudication under the scheme at any time (subject to any provision of regulations under section 2G of the kind mentioned in subsection (2) (a) of that section (steps required before referral)).

(3)

“Relevant payment dispute” means a dispute (including any difference)
which is—

(a)

about amounts owing to a small business by a larger business
under an express or implied term of a contract to which this section applies, and

(b)

not excluded from the SBC adjudication scheme (see section 2E ).

(4)

This section applies to a contract, entered into on or after the
commencement date, to which the Commercial Payments and Interest on Late Payment Act 1998 applies (see sections 2 and 12 of that Act).

(5)

Any term of such a contract, or any other agreement between parties
to such a contract, is void so far as it purports to—

(a)

exclude or restrict the right of a small business to refer a
relevant payment dispute to adjudication under the SBC adjudication scheme;

(b)

disapply any provision of this section, section 2B or 2C , or
regulations under section 2G , or vary the effect of any such provision.

(6)

Subsections (7) and (8) set out the effect of a decision determining a
relevant payment dispute under the SBC adjudication scheme.

(7)

If, at any time, the parties agree in writing to accept the decision as
finally determining the dispute, it has that effect.

(8)

In the absence of such agreement, the decision is binding on the parties
unless and until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by the parties reaching a different agreement in writing.

(9)

In subsection (4) , the “commencement date” means the date on which
this section comes into force.

(10)

In subsections (7) and (8) , references to the parties are to the parties
to the contract to which the relevant payment dispute relates.

2B The adjudication and decision

(1)

In adjudicating a relevant payment dispute, the adjudicator must act
fairly and impartially as between the parties, giving each party a reasonable opportunity of putting their case and dealing with that of the other party.

(2)

The adjudicator may take the initiative in ascertaining the facts and
the law necessary to determine the dispute.

(3)

The adjudicator must decide the amounts that the larger business owes
to the small business in accordance with the law which applies in relation to the contract to which the dispute relates.

(4)

If the adjudicator decides that an amount is owed, the decision must
set out how and by when, or over what period, payment must be made.

(5)

The adjudicator must give written reasons for the decision.

(6)

Paragraph 17 of Schedule 1 (exemption from liability in damages)
applies in relation to a person appointed by the Commissioner to adjudicate a relevant payment dispute in relation to the exercise, or purported exercise, of their functions in adjudicating the dispute as it applies to the persons mentioned in that paragraph in relation to the exercise or purported exercise of their functions.

2C Enforcement of adjudicator’s decision

(1)

An amount payable to a small business in accordance with an
adjudicator’s decision is recoverable—

(a)

in England and Wales, as if it were payable under an order of
the county court;

(b)

in Scotland, in the same manner as an extract registered decree
arbitral bearing a warrant for execution issued by the sheriff court of any sheriffdom in Scotland;

(c)

in Northern Ireland, as if it were payable under an order of a
county court.

(2)

Subsection (3) applies where a small business brings legal proceedings
to recover an amount payable by a larger business in accordance with an adjudicator’s decision and the larger business seeks to challenge the decision in those proceedings.

(3)

The decision may be challenged on the following grounds only—

(a)

the decision was in excess of the adjudicator’s jurisdiction;

(b)

the decision was reached in such a procedurally defective way
as amounts to a fundamental breach of natural justice;

(c)

to enforce the decision would assist in the perpetration of a
fraud.

2D Power to decline to adjudicate dispute

(1)

The Commissioner may decline to adjudicate a relevant payment
dispute if the Commissioner considers that any of the grounds in subsection (2) apply in relation to the dispute.

(2)

The grounds are—

(a)

that the referral is frivolous or vexatious;

(b)

that the dispute—

(i)

has previously been referred to adjudication under the
SBC adjudication scheme;

(ii)

is part of a wider dispute and cannot be resolved
separately;

(iii)

involves a point of law that would be better determined
by a court or tribunal;

(iv)

is the subject of ongoing legal proceedings;

(c)

that the small business that referred the dispute—

(i)

has not suffered, and is not likely to suffer, any loss as
a result of the matter under dispute;

(ii)

is seeking a decision which the Commissioner does not
have power to make;

(d)

any other ground specified in regulations under section 2G .

(3)

The Commissioner may decline to adjudicate a relevant payment
dispute at any time before a decision is given determining the dispute.

(4)

In this section, references to the Commissioner include a person
appointed by the Commissioner to adjudicate a relevant payment dispute.

2E Excluded disputes

(1)

A dispute is excluded from the SBC adjudication scheme if the
dispute—

(a)

has been finally determined by a court or tribunal or by
arbitration;

(b)

falls within the jurisdiction of an ombudsman, regulator or
public authority (other than the Commissioner, a court or tribunal);

(c)

is a dispute which the small business that could refer the
dispute to the scheme has a statutory right to refer to another person for adjudication or arbitration (other than a court or tribunal);

(d)

is about the appropriateness of the contract price (absent any
dispute about a breach of contract);

(e)

is of a description specified in regulations under section 2G .

(2)

In subsection (1) (a) , the reference to a dispute having been finally
determined by a court or tribunal is to it having been finally determined ignoring any possibility of an appeal.

(3)

In subsection (1) (d) , “contract price” has the same meaning as in the
Commercial Payments and Interest on Late Payment Act 1998 (see section 16 of that Act).

2F Use of information

(1)

Information given to the Commissioner for the purposes of, or in
connection with, the adjudication of a relevant payment dispute (including information given to the Commissioner following a request under subsection (2) ), may be used by the Commissioner for the purposes of, or in connection with, the exercise of any of the Commissioner’s functions under this Part or any other enactment (and see section 8 of this Act and Part 9 of the Enterprise Act 2002 for provision about the disclosure of such information).

(2)

The Commissioner may request that a person appointed by the
Commissioner to adjudicate a relevant payment dispute gives the Commissioner specified information in relation to that dispute.

(3)

In subsection (2) “specified” means—

(a)

specified, or described, in the Commissioner’s request, or

(b)

falling within a category that is specified, or described, in the
request.

2G Regulations about the SBC adjudication scheme

(1)

The Secretary of State may by regulations make further provision
about the SBC adjudication scheme.

(2)

The regulations may, among other things—

(a)

require a small business to take steps in relation to a relevant
payment dispute before the business may refer the dispute to adjudication;

(b)

specify grounds for the purposes of section 2D (grounds for
declining to adjudicate dispute);

(c)

specify descriptions of dispute for the purposes of section 2E (excluded disputes);

(d)

restrict the onward disclosure of information and documents
provided in connection with an adjudication;

(e)

impose time limits in relation to the referral of a dispute and
at each stage of an adjudication;

(f)

permit such time limits to be extended in specified
circumstances;

(g)

permit an adjudicator to—

(i)

direct parties to provide evidence or submissions;

(ii)

meet and question parties;

(iii)

hold hearings;

(iv)

appoint experts, assessors or legal advisers;

(v)

proceed with an adjudication in the absence of a party
or in the absence of evidence or submissions from a party;

(vi)

draw such inferences as the adjudicator considers
appropriate from any failure by a party to comply with a direction given by the adjudicator;

(vii)

give any other direction or take any other step that the
adjudicator considers appropriate to enable the fair adjudication of the dispute;

(h)

permit the adjudication of related disputes together;

(i)

permit the Commissioner to recover costs incurred in
connection with an adjudication.

(3)

Regulations under subsection (1) may not permit the Commissioner
to recover costs as mentioned in subsection (2) (i) from the small business that referred the dispute to adjudication unless the Commissioner considers that the referral was frivolous or vexatious.

(4)

Before making regulations under subsection (1) , the Secretary of State
must consult the Commissioner and such other persons as the Secretary of State considers appropriate.”

For section 3 of the Enterprise Act 2016 substitute—

“3 General advice and information

(1)

The Commissioner may publish, or give to businesses, general advice
or information about matters relating to—

(a)

transactions between businesses;

(b)

transactions between businesses and public authorities.

(2)

General advice or information published or given under subsection (1) may include general advice or information about—

(a)

principles of the law of contract;

(b)

other sources of rights and obligations;

(c)

compliance with legal obligations;

(d)

voluntary schemes offered by the Commissioner;

(e)

available training (see section 3A );

(f)

the resolution of disputes;

(g)

other persons who may be able to provide advice, information
or assistance to businesses.

(3)

The powers conferred on the Commissioner by this section to publish
or give general advice or information may be exercised by making arrangements with any other person in accordance with which that person publishes or provides that advice or information.

(4)

The Commissioner may make recommendations to the Secretary of
State about the publication, or provision to businesses, by the Secretary of State of advice or information of a kind which the Commissioner is authorised to publish or give under this section.

(5)

Where a recommendation is made under subsection (4) , the Secretary
of State must inform the Commissioner whether anything is to be done in response to the recommendation and, if it is, give details of the action to be taken.”

After section 3 of the Enterprise Act 2016 insert—

“Training

3A Training

(1)

At the request of a business, the Commissioner may—

(a)

prepare and deliver training about the matters mentioned in
section 3 (1) ;

(b)

arrange for another person to prepare and deliver training
about such matters.

(2)

The Commissioner may charge a fee for preparing and delivering
training.”

After section 12 of the Enterprise Act 2016 insert—

“Transfer of functions

12A Transfer of functions

(1)

The Secretary of State may by regulations transfer some or all of the
Commissioner’s functions to—

(a)

the Secretary of State, or

(b)

a body exercising public functions (prior to any transfer of
functions under this section).

(2)

If regulations under subsection (1) transfer all of the Commissioner’s
functions, the regulations may also abolish the office of Small Business Commissioner.

(3)

Before making regulations under subsection (1) , the Secretary of State
must consult—

(a)

the Commissioner, and

(b)

such other persons as the Secretary of State considers
appropriate.

(4)

Regulations under subsection (1) may amend or repeal this Part or
any provision made by or under any other enactment, whether passed or made before or after this Act, for the purpose of—

(a)

giving effect to a transfer of functions;

(b)

giving effect to the abolition of the office of Small Business
Commissioner.

(5)

In this section, “public function” means a function that is a function
of a public nature for the purposes of the Human Rights Act 1998.

12B Transfer schemes

(1)

The Secretary of State may, in connection with regulations under
section 11 (abolition of the office of Small Business Commissioner following review), make one or more schemes for the transfer of property, rights and liabilities (a “transfer scheme”) between the Commissioner and the Secretary of State.

(2)

The Secretary of State may, in connection with regulations under section 12A (1) (transfer of Commissioner’s functions), make one or
more schemes for the transfer of property, rights and liabilities (a “transfer scheme”) between the Commissioner and—

(a)

a person to whom some or all of the Commissioner’s functions
are being transferred;

(b)

the Secretary of State.

(3)

The things that may be transferred under a transfer scheme include—

(a)

property, rights and liabilities that could not otherwise be
transferred;

(b)

property acquired, and rights and liabilities arising, after the
making of the scheme.

(4)

A transfer scheme may, in particular—

(a)

create rights, or impose liabilities, in relation to property or
rights transferred;

(b)

make provision about the continuing effect of things done by,
on behalf of, or in relation to, the Commissioner in respect of anything transferred;

(c)

make provision about the continuation of things (including
legal proceedings) in the process of being done by, on behalf of, or in relation to, the Commissioner in respect of anything transferred;

(d)

make provision for references to the Commissioner in an
instrument or other document in respect of anything transferred to be treated as references to the transferee;

(e)

make provision for the shared ownership or use of property;

(f)

make provision which is the same as or similar to the Transfer
of Undertakings (Protection of Employment) Regulations 2006 (S.I. 2006/246);

(g)

make supplementary, incidental, transitional or consequential
provision.

(5)

A transfer scheme may provide—

(a)

for modifications by agreement;

(b)

for modifications to have effect from the date when the original
scheme came into effect.

(6)

For the purposes of subsections (3) and (4) —

(a)

references to rights and liabilities include rights and liabilities
relating to a contract of employment;

(b)

references to the transfer of property include the grant of a
lease.

(7)

For the purposes of subsection (6) —

(a)

an individual who holds employment in the civil service is to
be treated as employed by virtue of a contract of employment, and

(b)

the terms of the individual’s employment in the civil service
are to be treated as constituting the terms of the contract of employment.”

After section 12B of the Enterprise Act 2016 (inserted by section 23 ), insert—

“Duchy of Lancaster and Duchy of Cornwall

12C Duchy of Lancaster and Duchy of Cornwall

(1)

Subject to subsection (3) , any reference in this Part to a business
includes a reference to a Duchy business.

(2)

A “Duchy business” means—

(a)

a business in which His Majesty has an interest in right of the
Duchy of Lancaster;

(b)

a business in which the Duke of Cornwall (or the possessor
for the time being of the Duchy of Cornwall) has an interest in right of the Duchy of Cornwall.

(3)

References to a larger business in sections 2H to 2P do not include
references to a Duchy business.”