By Darren Cayton, Director at Knowles Ltd
Introduction
People of a
certain age will remember the darker days of contracting when ‘pay-when-paid’
and ‘back-to-back’ payment provisions were rife. It is hard to imagine that not
so long ago an employer/contractor (payers) could strike its red pen through a contractor/subcontractor’s
(payees) application without producing a payment certificate.
Nowadays, the
strict payment regime imposed by Part II of the Housing Grants, Construction
and Regeneration Act 1996 (as amended) and assisted by the Scheme for
Construction Contracts as the fall-back position, has gone a long way to
redress the balance.
Indeed the main
requirement’s imposed by the Construction Act mean construction contracts must
contain ‘due dates for payment’ and ‘final dates for payment’, whilst it
prohibits ‘pay-when-paid’ or ‘pay-when-certified’. Additionally the Act imposes
a regime for providing payment notices (s.110A(1)), default payment notices
(s.111B) and payless notices (s.111).
Despite this,
over the past year or so there have been several cases which have caught
unsuspecting parties out, particularly with the payment application process.
Be clear what you agree to
It is important
that you understand, particularly with specific payment arrangements, what you
are agreeing to. In Grove Developments
Ltd v Balfour Beatty Regional Construction Ltd [2016] the parties had
agreed to incorporate in their contract a schedule dealing with the making of
23nr interim applications and payments, but failed to provide a default
provision for what would happen should the project overrun.
In court, the
judge held that Balfour Beatty had no contractual right to make or be paid in
respect of their interim application nr. 24 (or any subsequent application),
and no contractual right to apply for further payments until the contracts
final payment mechanism kicked in after practical completion.
It is therefore
vital for payees (receiving payment) to ensure that there is a continuing right
to payment if a schedule of dates is included in the contract.
Payment Applications: Don’t be too early or too late
Although there
is no mechanism in the Construction Act, many contracts require the contractor/subcontractor
to submit applications for payment. It is important that they are submitted
within the time frame stipulated within the contract.
In Caledonian Modular Ltd v Mar City
Developments Ltd [2015] the court held that an application issued half-way
though a payment period and outside of the agreed contractual payment mechanism
was not a valid application as its status was not clear.
The judge
helpfully suggested that contractors should ensure their payment claims were
clear and that they give the employer reasonable notice that the payment period
has been triggered.
Similarly, in Henia Investments Inc v Beck Interiors Ltd
[2015] the judge stated that the due date should be stated on the application
for payment.
Make it clear
The importance
of clarity is equally important when it comes to the applications themselves.
In Jawaby Property Investment Ltd v The
Interiors Group Ltd and another [2016] Carr J considered the validity of
The Interiors Group’s [TIG] purported interim application. The issue concerned
TIG’s seventh application for payment made in January 2016. The procedure which
had been followed for the first six applications was that TIG would send a
valuation by email, complete with a spreadsheet and back up sheets, and a
statement of the sum applied for. Each valuation was up to the 8th
of the month (as required under the contract) and would state that the
valuation was for ‘approval’ or ‘consideration’.
This time
though, Jawaby started the ball rolling with an email on the 5 January 2016
requesting a valuation for the next day. TIG responded on 7 January 2016 saying
‘[p]lease see our initial assessment for
Valuation 007’. On 15 January 2016 following a site visit Jawaby issued a
Certificate for Payment. The valuation was low and a dispute arose.
As to the
validity of TIG’s application for payment, the court agreed with Jawaby in
particular that TIG had described its valuation as an ‘Initial Assessment’, the court found that it could not be
construed as a statement by TIG of what it considered it was due. The
impression of provisionality was also supported by the incorrect labelling of
the summary sheet, and the fact that the valuation went up to the 7 January,
and not the 8 January 2016.
The court held
that TIG’s interim application was invalid because it differed from previous
applications in several respects; most notably it was named ‘initial
assessment’.
Such
applications must be an application in ‘substance,
form and intent’ and must be clear and unambiguous in their terms.
Conclusion
Although the
Construction Act (as amended) and the Scheme provide a mechanism to enable a
clear payment regime, Contractors and Subcontractors must ensure that they
adhere to the strict requirements of the contract when making applications for
payment.
You must ensure
that you have a contractual entitlement to submit an application for payment.
The checklist
below will assist Contractors and Subcontractors in making sure applications
are submitted in the correct manner:
- State the sum due at the relevant due date and include all back-up information
- Submit applications at the correct intervals/dates as set out in the contract
- Make sure that they are issued in the right manner (post/email etc and sent to the nominated person) as stated in the contract
- Ensure they are clearly identified as an interim application for payment
Please note that
this information provided is for general knowledge only and therefore specific
advice should be sought for individual cases.
Hi everyone!!!
ReplyDeleteI'm so excited share this testimony here about how i got my ex husband back after a break up. I'm Clara 28 yr old from USA, Am a woman who love and cherish my husband more than any other thing you can imagine on earth continent. My husband was so lovely and caring after 3 years of marriage he was seriously ill and the doctor confirm and said he has a kidney infection that he needed a kidney donor, that was how I start searching for who can help, doctor has given me a periodic hour that he will live just 24 hours left, that was how I ask the doctor if I can be of help to my husband that was how he carried out the text, the confirming was successful, I was now having this taught that since 3 years now we got married I have not be able to get pregnant can I be able to get bring again? That was the question I ask the doctor, he never answer his response was did you want to lost your husband? I immediately reply no I can't afford to lose him. After the operation my husband came back to live and was healthy I was also OK with the instruction given to me by the doctor, after 3 months my husband came home with another lady telling me, that is our new wife that will give us kids and take care of us, that was how I was confused and started crying all day, that was how my husband ran away with his new wife cleanable. Since then I was confuse don't know what to do that was how I went back to the doctor and tell him everything, he told me that, this is not just an ordinary it must be a spiritual problem that was how he gave me this Email: Ahmedutimate@gmail.com that I should tell he all my problem that he can help that was how i contacted he and I do as instructed. After 22 hours and I have done what he ask me to do, my husband start searching for me and went back to the doctor, that was how we well settle he also told me not to worry that I will get pregnant, this month making it the fifth Month I contacted he am now 3 months pregnant. These great spell cater is a great man,
if you have any kind of problem you can contact him here on his
Email: Ahmedutimate@gmail.com or call/whataspp +2348160153829
Save Your Crumbling Relationship
http://www.thepetitionsite.com/takeaction/725/523/869/
moncler jackets
ReplyDeleteray ban glasses
christian louboutin outlet
coach factory outlet online
coach factory outlet online
ugg boots clearance
michael kors bags
louboutin shoes
adidas nmd runner
gucci outlet online
zhi20161224
I am getting expertise all the time by reading such pleasurable posts.
ReplyDeletesuccessful home based businesses