Let us assume that every contractor that reads my Blogs has ensured they have a Payment Schedule in their contract. Just to recap – this sets out the key dates for your application, the due date, the date when a pay less notice [PLN] has to be issued, and the final date for payment – the latter is critical, and it means the date your “dosh” hits your bank account.
What can you do if the money/payment does not come in?
The standard forms of Contract [JCT and SBCC] contains a provision titled Contractors Right of Suspension. I quote Clause 4.13 of the JCT Standard Building Contract below:
“4.13.1 If the employer fails to pay a sum payable to the Contractor in accordance with clause 4.11 (together with any VAT properly chargeable in respect of that payment) by the final date for payment and the failure continues for 7 days after the Contractor has given notice to the Employer, with a copy to the Architect/Contract Administrator, of his intention to suspend the performance of his obligations under this Contract and the grounds for such suspension, the Contractor without affecting his other rights and remedies, may suspend performance of any or all of those obligations until payment is made in full.
4.13.2 Where the Contractor exercises his right of suspension under clause 4.13.1, he shall be entitled to a reasonable amount in respect of costs and expenses reasonably incurred by him as a result of exercising the right.
4.13.3 Applications in respect of any such costs and expenses shall be made to the Architect/Contract Administrator and the Contractor shall with his application or on request submit such details of them as are reasonably necessary for ascertaining the amount in question.”
So, briefly here is what you do:
- No full payment by the final date, and this continues for 7 days after you have given notice of your intention to suspend, the performance of your obligations, to the Employer, ccd to the Architect/CA, you may suspend performance of any or all of those obligations.
- Make sure your notice is served properly in terms of the notice provisions in the contract.
- Sometimes this is enough for the Employer to give themselves a shake and make the payment to you.
- It is a big step to take but you are entitled to do so.
- What are the issues you might want to consider: can I suspend work on the critical path to get some real impact; what are the health and safety issues I need to consider; where will I put my operatives; what happens when I get paid in full – then you need to get back on site.
- What additional issues come into this – you can apply for an extension of time as a Relevant Event; you are entitled to recover your costs and expenses; but you must keep detailed records of these.
In my view this is a powerful statutory provision which you can, and should use, if you are not getting paid by the final date for payment.
The above relates to JCT Contracts so you should check the contractual provisions, for example from the Contractor, if you are a subcontractor, and just see there is no “fancy footwork” going on.
Remember also that if you do not pay your subcontractors on time, then they can suspend as well, so you then get into a right pickle. You might become liable for holding the employer or the contractor up.
FIS Contractual and Legal Toolkit
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