Payment Notices: 5 Tips for Contractors and Consultants under Construction Contracts

Here are our top 5 tips to help Contractors and Consultants get payment notices right:

  • Understand whether your contract is a ‘construction contract’ under the ‘Construction Act 1996’?

If your contract is a ‘construction contract’ as defined under the ‘Construction Act[1]’ then it must include payment provisions that comply with the requirements of the Construction Act. Insofar as a construction contract does not fully comply with the Construction Act, the relevant payment provisions of the Scheme[2] will be implied into the contract. This will impact on the timing and content of payment notices.

  • Treat amendments to “standard forms” with caution

Where a ‘standard form’ of contract (e.g. JCT, NEC, FIDIC) has been amended by a schedule of amendments, check whether the payment provisions have been amended and understand the impact.

  • Understand the payment provisions and diarise key dates

Ensure key personnel understand the payment provisions and diarise key dates in the contractual payment mechanism, for example, the dates for the giving of payment notices and pay less notices. For example, check what the contract provides where a key dates fall on a weekend or bank holiday.

  • Issue payment notices at agreed dates or intervals

Issue payment notices at the contractually agreed time otherwise they may be invalid. Check that any contractual payment schedule setting out dates for giving payment notices is sufficient to take account of any delay to the contractual completion date.

  • Payment notices must be clear and unambiguous

Case law[3] says that a payment notice (which for this purpose includes a payment application or a payment notice in response to a payment application) must be “in substance, form and intent an [application for payment or payment notice in response to a payment application] stating the sum considered by the Contractor as due at the relevant due date and it must be free from ambiguity … it must be clear that it is what it purports to be so that the parties know what to do about it and when”.

Comply with any requirements of the contract and, where applicable, the Construction Act regarding the form, content and method of communication of payment notices. Check whether any obligations regarding payment notices are hidden away in annexures to the Contract or in the Employer’s Requirements document (e.g. a requirement to provide supporting information or a VAT invoice).

Label the document clearly as a payment notice and avoid terminology which may be confusing or suggest that the payment notice is something else such as an ‘initial assessment’.

Slater Heelis’ Construction & Engineering Team has extensive experience advising contractors and professional consultants regarding payment issues.

Please contact us on 0161 672 1255 or get in touch with our Construction & Engineering team.

 

[1] Housing Grants, Construction and Regeneration Act 1996 as amended by the Local Democracy, Economic Development and Construction Act 2009

[2] Scheme for Construction Contract (England and Wales) Regulations 1998 (SI 1998/649)

[3] Akenhead J in Henia Investments Inc v Beck Interiors [2015] EWHC 2433