Top Tips For Ensuring You Are Paid (Or Pay) The Correct Interim Amounts

Ensuring the correct payments are made for works completed at each interim stage are one of the major areas of dispute in construction contracts. Here are our top tips for ensuring you are paid (or pay) the correct amounts:

1. Know when all Payment Due Dates and Final Dates for Payment are under the Contract.

The dates for both the contractor and the employer to serve relevant payment notices are calculated by reference to these dates (either pursuant to the terms of the contract or implied by statute). It sounds obvious but if you do not know when these dates are, you risk missing the deadlines for issuing relevant notices (which can have the effect of crystallizing the amount that is payable by default).

2. Make sure all Notices relating to payment are issued on time.

If the Contract does not provide for specific dates, you must ensure you are aware of the dates imposed by statute. If notices are issued late, they will be invalid. For example, if an employer issues a Pay Less Notice late, it will be of no effect and the employer will, by default, be bound to pay the amount set out in any previous Payment Notice/Default Payment Notice.

3. When issuing any Notices relating to payment, make it clear what those documents are intended to be.

If you fail to properly identify those documents, perhaps in the hope that you will be able to sneak them past the other party and obtain their benefit by default, you risk a Judge holding that they are not what you intended them to be (and consequently that they do not have the effect you desire).

4. Consider including a contractual clause which allows for negative interim valuations and repayments.

Without that, if the employer fails, for whatever reason, to issue a valid Pay Less Notice in respect of an interim valuation which it considers to be inflated (and the contractor therefore becomes entitled to payment of the full amount set out in a previous Payment Notice/Default Payment Notice) the employer will have no ability to recover any perceived overpayment until the Final Account. By including a clause that allows for negative interim valuations and repayments, this opens up the possibility of the employer recovering any overpayment at the next interim payment stage.

5. Do not rely on the other party’s previous flexibility regarding the dates for issuing notices; stick rigidly to contractual deadlines.

Where parties have previously been lax about the dates on which relevant notices are issued, the Court has discretion to hold that such course of dealings amounts to a variation of the terms of the contract between them (in other words, an agreement that notices may always be served late). However, whether or not the Court finds such a variation will be highly fact sensitive. It would be extremely dangerous to assume that where a party has previously accepted a notice that was issued late, they will continue to accept all notices late or, if they do not, that the Court will find that they ought to accept them late. Avoid the risk by complying with the contractual deadlines for issuing notices.