Arbicon ADR Ltd
RICS

Payment Issues

The Construction Acts provide an absolute, statutory right to payment for work carried out under a commercial construction contract and clauses that restrict or block payment are illegal. The payment must also be calculated and notified by the payer in strict time limits otherwise the payee gets every penny of what he asks for. The law is very strict on this.

Illegal payment clauses by example are pay-when-paid payment terms, or no payment if a contract is not signed. The only exception is an insolvency of the Employer clause, which is when the Employer goes bust the Contractor does not have to pay the sub-contractors. There must be a clause though!

Construction payment clauses must also have an "adequate payment mechanism", where the key components for payment must be present, being how do payments become due and when are they paid. If there is no terms or an "inadequate payment mechanism" the Scheme applies.

Payment Issues arise through problems with the works, overpayment, underpayment, damages/loss or simply an unwillingness to pay. There are numerous reasons for issues some of the common ones are:

  • Payment Notice failure
  • Design failure
  • Retention not released
  • Quality of Work
  • Quantity of Work
  • Variations - Liability and Quantum
  • Scope of Work non-compliance
  • Delay in delivery of the works
  • Liquidated Damages
  • Defects
  • Termination / Suspension / Repudiation
  • Human error - miscalculation, incompetence, acts or omissions
  • Pay-when-paid
  • Insolvency
  • Late Payment Interest and Costs

Any late payment will entitle the injured party to late payment interest, the extent of recovery including costs for pursuing the late payment will depend on what is agreed or not as the case may be.

If you have any payment issues, call one of our experts for a free consultation today.

Call us on 01733 233737  Peterborough

0207 406 1494 London

0121 262 4086 Birmingham

Or email us via our contact form here.