FAQs for Payments

Question 1

When is the Final Date For Payment?

Accepted Answer

Whenever the contract says, counted from the Due Date. Where the contract is silent, the Scheme's default is 17 days from the Due Date. The Final Date For Payment is the last day the money can lawfully arrive, and it is fixed by the contract as a period running from the Due Date, the date the payment obligation crystallises. The Construction Act lets the parties agree almost any period, so check the payment terms first: 14, 21, 28 and 35 days are all common, and heavily amended subcontracts sometimes stretch far longer. Where the contract does not provide an adequate mechanism, the Scheme for Construction Contracts, the statutory fallback, fills the gap with a default of 17 days from the Due Date. The date matters because other rights hang off it: the Pay Less Notice deadline counts back from it, 7 days under the Scheme, and the rights that follow non-payment, suspension after notice and statutory interest, only bite once it has passed with the Notified Sum unpaid. One more trap: the Act requires the period to run from the Due Date, so a term running it from delivery of an invoice rather than from the Due Date can fall foul of the Act and let the Scheme's timetable in.

Question 2

What can I do if payment is late?

Accepted Answer

Check the notice position first. Then the routes are a formal demand, statutory interest, suspension after proper notice, and adjudication. Start by fixing what was actually due: the Notified Sum, the amount the Payment Notice fixed, or your application where none was served, and confirm the Final Date For Payment has passed with no valid Pay Less Notice reducing it. That position decides everything else. From there the routes escalate. A short formal letter demanding the debt and stating the consequences often moves money on its own. The late payment legislation adds interest, at 8 per cent over base where the contract has no substantial remedy of its own, plus a fixed sum towards recovery costs. The Construction Act right to suspend some or all of the work opens after written notice of at least 7 days stating the ground. And adjudication, the industry's fast statutory dispute process, turns an unanswered notice position into an enforceable decision in weeks; where the payer's notices were missed, a smash and grab adjudication enforces the Notified Sum without arguing the value at all. Chasing politely for months, by contrast, has no legal effect: the rights all run from dates and documents, so the paper position is the leverage.

Question 3

Can they deduct money without a Pay Less Notice?

Accepted Answer

Generally not from this cycle's Notified Sum. Deductions from the sum due need a valid Pay Less Notice served in time. Generally no, not from the current cycle. Once the Notified Sum is established, the amount fixed by the Payment Notice or by a valid application in its absence, the Construction Act allows the payer to pay less only by serving a Pay Less Notice, a notice setting out the reduced sum and the basis of its calculation, by the contract's deadline. Set-off, the right to knock one debt off another, and contra charges, backcharges for things like attendance or alleged damage, do not override that machinery: whatever the merits of the deduction, it has to be put through a Pay Less Notice for this cycle or it must wait. If money arrives short with no notice, the shortfall on the Notified Sum is simply a debt, and the usual routes apply: a letter demanding the balance, suspension after proper notice, or a smash and grab adjudication, the fast statutory process that enforces the notice position without arguing the value. The one real exception is a deduction the contract itself builds into the calculation of the sum due, such as retention stated in the payment terms, which is part of the sum rather than a deduction from it.

Question 4

What is a Payment Notice?

Accepted Answer

The payer's statement of the sum it considers due, served within 5 days of the Due Date. A Payment Notice is the payer's written statement of the sum it thinks is due for the round, served no later than 5 days after the Due Date, the date the payment obligation is fixed by the contract. It must show the sum and its workings, so the payee can follow how the figure was reached. Served in time, that sum becomes the Notified Sum, the amount that legally must be paid by the Final Date For Payment, the last day the money can lawfully arrive, unless the payer later serves a valid Pay Less Notice cutting it down. Miss the 5 day window and the payee's application can become the Notified Sum instead, so the payer loses control of the figure. The sum can be zero, but even then show how zero was reached: serve one every round, with workings.

Question 5

How to send a late Payment Notice

Accepted Answer

There is no way to cure it. Once the 5 days pass, your remaining move is a Pay Less Notice. You cannot. The 5 day window for a Payment Notice, the payer's statement of the sum it thinks is due, runs from the Due Date, the date the payment obligation is fixed, and is set by law, so a notice served on day 6 is not a Payment Notice at all. Once it lapses, the payee's application, or a default notice it can serve when the payer stays silent, is in position to become the Notified Sum, the amount that legally must be paid. Your remaining move is a Pay Less Notice, cutting the sum down, served up to the prescribed period before the Final Date For Payment, the last day the money can lawfully arrive; where the contract is silent, the Scheme for Construction Contracts sets that period at 7 days. Miss that too and the full Notified Sum is payable, enforceable through adjudication, the fast 28 day dispute process, so the fix is to serve the next round's notices on time.

Question 6

Can you issue a negative Payment Notice?

Accepted Answer

The valuation can be negative, but the notice states zero as the sum due. Recovering the difference needs a contractual route or adjudication. No. A Payment Notice, the payer's statement of the sum it thinks is due, cannot force the payee to send money back. The valuation, the exercise of pricing the work done so far, can come out below zero, for example where the payer has already paid more than the work is now worth, and the notice should show that full calculation, but the sum stated as due for the round is then zero. The payment rules in the Construction Act only run one way: they make sums payable to the payee, not a debt back to the payer. Any overpayment is recovered another way: through later rounds as the running valuation catches up, through an express repayment term, through adjudication, the fast statutory dispute process, or at the final account. The same applies to a Pay Less Notice, the notice that cuts a payment down: its calculation can go negative, but the sum it fixes cannot drop below zero.

Question 7

What is a Pay Less Notice?

Accepted Answer

The payer's last chance to revise the sum payable, served before the prescribed period ahead of the Final Date For Payment. A Pay Less Notice is the payer's second and final chance to reduce the sum it has to pay for a round. Once a Notified Sum exists, the amount that legally must be paid, whether fixed by the payer's Payment Notice or by the payee's application when the payer served nothing, the payer can serve a Pay Less Notice stating the lower sum it now thinks is due and its workings. It must arrive no later than the prescribed period before the Final Date For Payment, the last day the money can lawfully arrive; where the contract is silent, the Scheme for Construction Contracts sets that at 7 days. Served in good time and proper form, the reduced sum is what must be paid; served late, it counts for nothing and the full Notified Sum falls due. It only ever works downwards, so a payer happy to pay in full needs none.

Question 8

Can a Payment Notice be a Pay Less Notice?

Accepted Answer

It can, if it satisfies both sets of rules, but relying on that is a gamble; serve each separately. Sometimes. A Payment Notice is the payer's statement of the sum due for the round; a Pay Less Notice is the separate notice that cuts a sum down before it is paid. Courts judge a notice by what it says to a sensible reader, not by its heading, so one document can do both jobs, but only if served inside both windows and its figures make sense for both dates the notices are measured against. A Payment Notice is measured as at the Due Date, the date the payment obligation is fixed, a Pay Less Notice as at the day it is served, so a document that only reads as one counts as that one alone. Because getting this wrong can leave the full Notified Sum, the amount that legally must be paid, falling due, serve each notice separately, in its own window, clearly labelled.

Question 9

If my Payment Notice reduces the application, do I also need a Pay Less Notice?

Accepted Answer

A Payment Notice can reduce the application on its own. The Pay Less Notice is a separate second chance, not what a reducing Payment Notice turns into. No. A Payment Notice, the payer's statement of the sum it thinks is due for the round, can cut the sum the payee applied for on its own: the reduced figure becomes the Notified Sum, the amount that legally must be paid, and nothing further is needed. The Pay Less Notice is a different, later notice, used to pay less than a Notified Sum that already stands, either because the payer missed the 5 day window for its Payment Notice, so the payee's application became the Notified Sum, or because a new deduction cropped up after the Payment Notice, such as a set off, money withheld to cover a cross claim, or a contra charge, a cost charged back for something like putting right defective work. A reducing Payment Notice does not turn into a Pay Less Notice; they are separate steps. Some payers serve a Pay Less Notice anyway, repeating the figure, which does no harm but is not required.

Question 10

What happens if the payer misses the Payment Notice deadline?

Accepted Answer

The payee's application usually becomes the Notified Sum by default. The payer can still serve a Pay Less Notice; miss that too and the applied sum is payable in full. The payee's paperwork takes over. A Payment Notice, the payer's statement of the sum due for the round, has 5 days from the Due Date, the date the payment obligation is fixed. Miss that deadline, and where the contract lets the payee apply and it applied properly, that application stands as the notice by default, its figure becomes the Notified Sum, the amount that legally must be paid, and the Final Date For Payment, the last day the money can lawfully arrive, does not move. Where there was no such application, the payee can serve its own default notice after the window closes, and the Final Date For Payment is pushed back by however many days that notice was late. Either way the payer has one card left, a valid Pay Less Notice cutting the sum down, served before the prescribed period ahead of the Final Date For Payment; miss that too and the applied sum is payable in full. That last situation is the smash and grab, so serve each round's notices on time.

Question 11

What constitutes a valid Pay Less Notice?

Accepted Answer

Right sender, right window, sum plus basis of calculation, served the way the contract requires. Four things: the right sender, timing, content and service. A Pay Less Notice is the notice a payer uses to pay less than the sum otherwise due, and it must come from the payer or a specified person the contract names to give notices for the payer, such as the contract administrator or quantity surveyor. It must arrive no later than the prescribed period before the Final Date For Payment, the last day the money can lawfully arrive; where the contract is silent, the Scheme for Construction Contracts makes that 7 days. It must state the sum the payer thinks is due as at the day of service and show the workings deduction by deduction, and be served by the method the contract requires, with proof of delivery kept. Fail any one test and it is no notice at all, so the full Notified Sum, the amount that legally must be paid, falls due. Most fail on timing, or on a bare figure with no calculation behind it.

Question 12

Who issues a Pay Less Notice?

Accepted Answer

The payer, or a specified person the contract authorises. Never the payee. The payer, or a specified person the contract expressly names to give notices for the payer, commonly the contract administrator, employer's agent or quantity surveyor. A Pay Less Notice is the notice used to pay less than the sum otherwise due, and it only ever travels down the payment chain, from the party paying to the party being paid: employer to main contractor, then main contractor to subcontractor, each link a separate contract with its own payer and notices. The payee never serves one; a payee who disagrees has other routes: apply for the right figure, adjudicate, the fast 28 day process, or, after at least 7 days' warning, suspend work for non payment. A document headed Pay Less Notice coming up the chain from your own payee has no legal effect. Check the contract really gives the sender the authority, because a notice from someone without it is open to challenge whatever the figures say.

Question 13

How to issue a Pay Less Notice

Accepted Answer

Confirm the deadline, build the calculation, state sum and basis, serve by the contract's method with proof. Deadline first, calculation second, drafting third, service last. A Pay Less Notice is the notice a payer uses to pay less than the sum otherwise due, so start by finding the Final Date For Payment for the round, the last day the money can lawfully arrive, count back the period the contract requires, and treat the date you land on as fixed. Build the figure from the top down: gross valuation, the full price of the work to date, then every deduction underneath with its own amount and reason. State the sum you consider due as at the day of service, head the document a Pay Less Notice, and cite the contract, the round and the notice or application it responds to. Serve it by the exact method and to the exact address the contract lays down, and keep proof of when it arrived. If the deadline is tomorrow, a short but valid notice served today beats a thorough one served too late.

Question 14

When can you issue a Pay Less Notice?

Accepted Answer

In the window between the sum it answers existing and the prescribed period before the Final Date For Payment. In the window between the sum it responds to coming into existence and the prescribed period before the Final Date For Payment, the last day the money can lawfully arrive; where the contract is silent, the Scheme for Construction Contracts makes that 7 days. A Pay Less Notice has to answer something: fired off before the application or Payment Notice it responds to exists, it risks being treated as answering nothing, and served after the prescribed period it counts for nothing. Inside the window, later is better informed, because the notice states the sum due as at the day of service, but leaving a day or two of margin reduces the risk of an argument about service deciding the whole round against you. The window opens afresh with every Due Date, the date the payment obligation is fixed, so the counting repeats every round on every live contract.

Question 15

When do you issue a Pay Less Notice?

Accepted Answer

Whenever you intend to pay less than the current Notified Sum: disputed valuations, new set off, or a missed Payment Notice. Whenever you mean to pay less than the Notified Sum currently standing, the amount that legally must be paid at that point. Three situations cover most cases: you disagree with the Notified Sum, new deductions arose after your Payment Notice, such as a contra charge, a cost charged back for putting right defective work, or you missed the 5 day window and the payee's application is on course to become the Notified Sum by default. A Pay Less Notice lets you pay the smaller figure lawfully. If you agree the sum and mean to pay in full, you need none, and a Payment Notice that already reduces the application stands on its own. Simply intending to pay less, without a valid notice, does not shrink what you owe; it leaves the full sum enforceable against you.

Question 16

How long do you have to issue a Pay Less Notice?

Accepted Answer

Until the prescribed period before the Final Date For Payment. Scheme default: 7 days. Check the contract. Until the prescribed period before the Final Date For Payment, the last day the money can lawfully arrive. A Pay Less Notice lets a payer pay less than the sum otherwise due, and the contract sets how long before the Final Date For Payment it must be in; where the contract is silent, the Scheme for Construction Contracts requires it not later than 7 days before. So find the Final Date For Payment for the round, subtract the period, and check the small print: whether the contract counts calendar or working days, and how it treats a notice landing out of hours. A late notice is not merely discounted, it counts for nothing: the full Notified Sum, the amount that legally must be paid, becomes payable and enforceable through adjudication, the fast 28 day dispute process. Serving a day early every round is the simplest way clear of that risk.

Question 17

How to challenge a Pay Less Notice

Accepted Answer

Test its validity first: timing, content, sender, service. If it survives, dispute the valuation itself in adjudication. Test whether it is a valid notice first, then fight the figure. A Pay Less Notice only works if it passes four tests: sent by the payer or a person the contract names to give notices for the payer, served no later than the prescribed period before the Final Date For Payment, the last day the money can lawfully arrive, stating the sum due as at the day of service with workings shown, and served by the method the contract requires. Fail any one and it is no notice, so the full Notified Sum, the amount that legally must be paid, is due, and that can go to adjudication, the fast 28 day dispute process, on the notice point alone. If the notice survives, you can still challenge the valuation itself, including every deduction, in adjudication, where the outcome turns on contemporaneous records kept line by line. Keep applying on time while the challenge runs, and take advice on the timing before you commit.

Question 18

What is the Due Date?

Accepted Answer

The date the payment obligation crystallises for the cycle. Every other deadline counts from it. The Due Date is the date on which the obligation to pay for a round of work is fixed under the contract, and the anchor from which every other deadline is measured: the payer's Payment Notice, its statement of the sum due, runs 5 days from it, the Final Date For Payment, the last day the money can lawfully arrive, is set by reference to it, and the Pay Less Notice deadline counts back from that. It is not the day money changes hands, and under the widely used JCT contract forms it is not the same as the Interim Valuation Date, which falls a little earlier and is the point at which the work is priced and applications are expected. Under some contracts a late application can push the Due Date back, dragging the whole round of deadlines with it. Get the Due Date wrong and every later date shifts with it, so pin it down first.

Question 19

Does the Construction Act apply to my contract?

Accepted Answer

If the contract is for construction operations in Great Britain, usually yes. The main exception is work for a residential occupier. Usually, yes. The Construction Act, the law that sets minimum payment and dispute rules for the industry, applies if the contract is for construction operations carried out in England, Wales or Scotland, whatever it is called and whether written or agreed by word of mouth. The main exception is a contract with a residential occupier, a homeowner, for work mainly on the home they live in or intend to live in; other carve outs include drilling for oil and gas, mining, some work on process plant, and supply only deals where you provide materials but do not install them. Where a covered contract has no payment terms, or terms that fall short of the Act, the gaps are filled by the Scheme for Construction Contracts, a set of fallback rules the law imposes, and that Scheme is where the default dates in this FAQ come from. If the Act does not apply, none of this machinery exists: no Notified Sum, no statutory notices, no fast statutory adjudication, and whatever the contract says is all you have.

Question 20

What makes a payment application valid?

Accepted Answer

On time, in the contract's form, stating the sum and basis clearly enough that it can stand as the Notified Sum by default. Four things, applied strictly. A payment application is the payee's request for payment for a round, and to count it must be served by the contract's date, clearly against the correct round, in the required form to the named recipient, state the sum the payee thinks is due as at the Due Date, the date the payment obligation is fixed, with workings shown line by line, and read plainly as an actual application rather than a draft, forecast or for information figure. The courts are strict because of what is at stake: where the contract allows applications, a compliant one stands as the Notified Sum, the amount that legally must be paid, by default if the payer fails to serve its own notices in time. Judges read any ambiguity against the payee, so tie every application explicitly to its round and attach the supporting detail when you send it, not later once a dispute has started.

Question 21

Who can issue a Payment Notice?

Accepted Answer

The payer, or a specified person the contract names. Authority matters; it is not just paperwork from anyone. The payer, or a specified person the contract names to give notices for the payer, such as the contract administrator, architect, employer's agent or quantity surveyor. A Payment Notice is the payer's statement of the sum it thinks is due for the round, and the power to give it comes only from the contract naming the person, so check the clause not the letterhead: a notice from a consultant with no notice giving role under the contract is open to challenge however accurate its figures. Some contracts flip this and make the payee give the Payment Notice; on those, the payer's only remaining protection is the Pay Less Notice cutting a sum down, which raises the stakes on serving that one correctly and on time.

Question 22

What needs to be included in a Payment Notice?

Accepted Answer

The sum considered due at the Due Date and the basis of calculation, shown line by line. Even a zero needs its arithmetic. Two things: the sum the payer thinks is due as at the Due Date, the date the payment obligation is fixed, and the workings behind it, shown line by line so the payee can follow the arithmetic. A Payment Notice is the payer's statement of the sum due for the round, and that sum can be lower than the payee applied for, or even zero, but a zero still needs its calculation set out. Serving nothing because the sum is nothing is the costly mistake, because silence lets the payee's application stand as the Notified Sum, the amount that legally must be paid. Head the document a Payment Notice, cite the contract, round and the application it responds to, and date it. The classic content failure is a bare figure with no workings, or deductions asserted without any calculation.

Question 23

Can you re-issue a Payment Notice?

Accepted Answer

Inside the 5 day window, yes, a corrected notice can replace the first. After the window closes, no; the route is a Pay Less Notice. Yes inside the 5 day window, no after it. A Payment Notice is the payer's statement of the sum it thinks is due for the round, and within 5 days of the Due Date, the date the payment obligation is fixed, the payer can serve a corrected one, clearly marked as replacing the first, and the corrected figure stands. Once that window closes nothing can be repaired, replaced or backdated: a correction on day 6 counts for nothing, and the notice served in time, or the payee's application if none was, fixes the Notified Sum, the amount that legally must be paid. If the mistake made the sum too high, a Pay Less Notice in its own later window can bring it down. If too low, the notice binds for this round and the shortfall is picked up in the next round's valuation, the running pricing of the work.

Question 24

What is the difference between a Payment Notice and a Pay Less Notice?

Accepted Answer

The Payment Notice opens the cycle's response and sets the Notified Sum; the Pay Less Notice is the later, second chance to reduce it. Different windows, different reference dates. They are two separate notices with different jobs, deadlines and reference dates. The Payment Notice is the payer's reply to the payee's application: served no later than 5 days after the Due Date, the date the payment obligation is fixed, stating the sum due as at that Due Date, and its figure becomes the Notified Sum, the amount that legally must be paid. The Pay Less Notice is the payer's reply to that Notified Sum: served no later than the prescribed period before the Final Date For Payment, the last day the money can lawfully arrive, which is 7 days under the fallback Scheme for Construction Contracts where the contract is silent, stating the sum due as at the day of service, and it only ever reduces the figure. Both must show their sum and its workings. Whichever notice is missing when its deadline passes, the sum standing at that point is what must be paid.

Question 25

What needs to be included in a Pay Less Notice?

Accepted Answer

The sum considered due at the date of service and the basis of calculation, with every deduction itemised. Two things: the sum the payer thinks is due as at the day of service, and the workings behind it, with every deduction listed separately, each with its own amount and reason. A Pay Less Notice lets a payer pay less than the sum otherwise due, and because it speaks as at the day of service it can take account of deductions that only arose after the Payment Notice, such as a set off, money withheld against a cross claim, or a contra charge, a cost charged back for something like defective work. The sum can be zero if the figures genuinely reach zero. Head the document a Pay Less Notice and cite the contract, round and the notice or application whose sum it reduces. A single lump sum deduction with a one line label invites the challenge it will get, and the notice can only reduce the sum, never push it up.

Question 26

Can you re-issue or withdraw a Pay Less Notice?

Accepted Answer

Inside the window, a further notice can supersede the first. After the deadline, the served notice stands and nothing can be repaired. Yes inside the window, no after it. A Pay Less Notice lets a payer pay less than the sum otherwise due. Up to the prescribed period before the Final Date For Payment, the last day the money can lawfully arrive, a further valid notice can replace the first, restating the sum as at its new day of service; say plainly that it supersedes the earlier one, because two conflicting live notices tend to be read against the payer. After the deadline, the notice served in time stands exactly as served, and no revision, replacement or withdrawal changes it. A payer with second thoughts about a deduction can always pay more than the notice states, because the notice sets the floor on what the payee must receive, not a ceiling on what the payer may pay.

Question 27

Can an email be a valid Pay Less Notice?

Accepted Answer

It can, in principle, if the content is right and the contract's service rules allow it. The contract's notice clause decides. Yes, in principle. A Pay Less Notice lets a payer pay less than the sum otherwise due, and the Construction Act lays down no particular format. Courts judge a notice by what it says rather than its form, so an email or attachment that states the sum the payer thinks is due as at the day of service, shows the workings, and reads to a sensible recipient as a notice of intention to pay less can do the job. In practice the deciding factor is the contract's own notice clause: where it names a method of service or an address, follow it to the letter, because serving by email when the clause requires post is exactly the sort of point that loses an enforcement case. So serve by the method the contract states and copy it by email, labelled identically, keeping the delivery receipt.

Question 28

What is a smash and grab adjudication?

Accepted Answer

An adjudication enforcing the Notified Sum where the payer served no valid notice in time. It is decided on the notices, not the value of the work. A smash and grab is an adjudication, the fast 28 day dispute process construction contracts must offer, in which the payee enforces the Notified Sum, the amount that legally must be paid, because the payer served neither a valid Payment Notice nor a valid Pay Less Notice in time, so the sum the payee applied for became payable in full. The adjudicator, the independent person who decides the dispute, is not asked what the work was worth, only whether the notices were served on time, which is why these are among the most common and quickest adjudications. The courts in England and Wales have settled the running order: the payer must first pay that Notified Sum, and only then start its own adjudication over what the work was really worth for that round. To stay off the wrong end of one, serve a valid notice every round, with workings shown.

Question 29

How do you defend a smash and grab adjudication?

Accepted Answer

Attack the application's validity, look for a document that worked as a notice in substance, test service, and know the true value route if those fail. Attack the paperwork the claim is built on. A smash and grab is an adjudication, the fast statutory dispute process, in which the payee enforces the sum it applied for because the payer served no valid notices. The referring party must show both a valid application and the absence of valid notices, so test the application first: served by the contract's date, against the right round, in the required form, stating the sum and workings, free from ambiguity, which is read against the payee. Then hunt through everything sent inside the notice windows for a document that, whatever its heading, worked as a notice in substance, because courts judge documents by how a sensible reader would take them, and recount every date from the contract, since these claims sometimes rest on the other side's own miscounting. If the defence fails, the Notified Sum, the amount that legally must be paid, must be paid before any true value adjudication can begin, so take advice quickly: the timetable runs in days, not weeks.

Question 30

What is a true value adjudication?

Accepted Answer

An adjudication deciding what the work was actually worth, available to the payer only after the Notified Sum has been paid. A true value adjudication is an adjudication, the fast statutory dispute process, that decides what the work was actually worth rather than what the notices happened to say: the adjudicator, the independent decision maker, prices the whole account, including variations, which are changes to the agreed scope of work, and any deductions, then directs a balancing payment whichever way the figures point. For a payer that lost the notice battle in a smash and grab it is the route to put things right, but on the case law in England and Wales the Notified Sum, the amount that legally must be paid, must be paid by the Final Date For Payment before a true value adjudication over that round can be started. Payees use them too, for example where a valid Pay Less Notice fixed a low figure, because a notice only decides the cash paid for the round, never the underlying entitlement. These disputes are won on contemporaneous records, the notes, measurements and photos kept line by line while the work was being done.

Question 31

Can I suspend work for non-payment?

Accepted Answer

Yes, if the Notified Sum is unpaid at the Final Date For Payment and you give at least 7 days' written notice first. Yes. If the sum due has not been paid in full by the Final Date For Payment, the last day the money can lawfully arrive, and no valid Pay Less Notice, the notice that cuts a payment down, reduced it, the Construction Act gives you the right to suspend, meaning to stop, some or all of your work until you are paid. The right only arises after you give written notice of at least 7 days saying you intend to suspend and on what ground, and it lasts until the money owed is paid; once you have properly suspended, the Act also lets you recover the reasonable extra costs the suspension causes and claim an appropriate extension of time, more days to finish. Suspending without that notice, or over a sum that was never actually due, risks being a breach of contract by you, so check the paper trail and the exact contract wording before you down tools.

Question 32

Are pay when paid clauses enforceable?

Accepted Answer

Generally not. The Construction Act outlaws them, with one narrow exception for upstream insolvency. Generally no. A pay when paid clause says you only get paid once the party paying you has itself been paid by someone further up the chain. For contracts covered by the Construction Act such a term is ineffective, with one narrow exception: where the party up the chain who was meant to pay has become insolvent, unable to pay its debts. Later amendments closed a related trick too, so a term tying your Due Date, the date your payment obligation is fixed, to events under a different contract, such as a payment being certified higher up the chain, is also ineffective in most cases. Where knocking out such a clause leaves no proper way of working out payment, the fallback Scheme for Construction Contracts fills the gap. So being told to wait because the employer up the line has not paid is usually the other side managing its own cash flow, not something the contract entitles it to do.

Question 33

Can I claim interest on late payment?

Accepted Answer

Yes. If the contract has no substantial interest remedy, statute implies 8% over base plus a fixed recovery sum. Usually, yes. Most business to business construction debts fall under the Late Payment of Commercial Debts (Interest) Act 1998, a statute that, where it applies, automatically adds interest at 8% above the Bank of England base rate on money paid late, plus a small fixed sum for each debt and, where your reasonable costs of chasing the money exceed that sum, the extra too. Your contract can set its own interest term instead, but only if it is a genuine, substantial remedy; a token rate set deliberately low to make paying late cheap can be struck out, letting the statutory 8% rate back in. Interest is rarely the reason to run a dispute on its own, but claiming it in an adjudication, the fast dispute process, or in negotiating the final account, the settling up at the end of the job, is routine, and puts a real price on the other side's delay.

FAQs for Payments, Claims & Disputes

Frequently asked questions

The payment cycle