Last edited 28 Oct 2020

Counterclaim in construction

A counterclaim is a claim set up in opposition to another claim, that is, a claim by a party against a another party who has made a claim against them. This is not a defence to a claim, it is separate from it and proceeds even if the original claim is ended.

Counterclaims are often confused with abatement and set off.

Set off (or contra charging) is only permitted if a breach of contract by a party making a claim is so closely associated with the claim that it would not be just to consider the claim without also taking the breach into account (or where the claims are both for payment of readily ascertained debts).

Whilst set off is often accompanied by a counterclaim it is to be distinguished in that a counterclaim may be entirely different in nature to the claim, and set off, unlike a counterclaim, cannot give rise to a positive balance of claim whilst a counterclaim may exceed the amount of the initial claim.

Abatement argues that an amount claimed is incorrect because of defects in the work. If the defect is proved, then the valuation of the amount due may be reduced by the reduction in value of the works resulting from the defect.

Counterclaims can be used as tactics in legal cases, to confuse or delay proceedings, or to reduce awards. However, this has risks associated with it, and may simply result in higher costs.

Before the 2011 amendments to the Housing Grants Construction and Regeneration Act, set off and counterclaim were only permitted if a withholding notice was issued, whilst abatement did not require a withholding notice as the value of the works had been reduced and there was only an obligation to pay the amount properly due.

Since 2011 however, set off, counterclaim and abatement all require that a pay less notice is issued.