Payless notices – Revisited!

In a recent TCC case[1] the Court had to decide what happened where there was a schedule of dates for interim payments which ran out.  This is a scenario that is pretty common and therefore you might think that the Court would imply a term into the contract that simply extended the payment schedule so that the contractor was entitled to additional interim payments beyond the last date in the payment schedule.

That was not to be. The Court decided that the twenty three interim valuation payment dates provided for in the contract were the only basis on which the contractor had a contractual right to make an interim application.

Somewhat surprisingly perhaps the Court decided that the contractor was not entitled to further interim payments beyond the dates fixed in the interim payments schedule.  The contractor argued that a term should be implied into the contract that it was entitled to further interim payments beyond the dates in the interim payment schedule through to the date the works were actually completed.  The Court rejected this argument noting that it had been open to the parties to negotiate the terms of the contract and make express provision for the possibility of delay in dealing with the payment provisions.

The contractor also argued that, if it didn’t have any right to make an interim application after the last date in the interim payment schedule, that would fall foul of the Construction Act**.  In other words, the contractor said that there would be no adequate payment mechanism and therefore the provisions of the Scheme should be implied into the contract.

You might think that there is a logic to this. However, the Court didn’t like the argument and decided that the parties had been free to agree that interim payments would stop at the end of the interim payments schedule.  On this basis, the Court decided it was unnecessary for the scheme to be implied to “fill the gap”.

What should contractors and sub-contractors do now?

Clearly, it is crucial to check that the payment terms are adequate, in particular, that any interim application payment schedules include a provision for extending the payment dates for the actual duration of the works in the event of any delay occurring.

For more information, email blogs@gateleyplc.com.

[1] Grove Developments v Balfour Beatty Regional Construction Limited [2006] EWHC168(TCC)

[2] Housing Grant Construction and Regeneration Act 1996, Section 109


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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.