As is usual in JCT contracts there are two methods for determining payments, termed ‘stage’ and ‘periodic’ payments; both of which provide for monthly payments, the difference being in the method of determining what is to be paid. The Contract Particulars giving the option for which payment method will apply for the project in question.
Payments are due monthly, 7 days after the relevant Interim Valuation Date, throughout the currency of the works up until the final payment becomes due. The first Interim Valuation Date is given in the Contract Particulars and thereafter on the same date each month.
The Contractor is required to make an application, saying what it considers to be due to be paid to it at the ‘due date’ and the basis of how it has been calculated. The provisions are therefore what might be termed a ‘payee’ driven mechanism. If the Contractor issues its application late then the ‘due date’ then becomes 7 days after the Employer receives the Contractor’s application.
Not later than 5 days after the due date the Employer must give a Payment Notice stating the amount that the Employer considers to have been due to the Contractor at the due date and how that sum is calculated.
The final date for payment of the amount stated as due in the Payment Notice is 14 days from its due date.
As drafted the contract provides that where no Payment Notice is issued then the Employer is obliged to pay the sum claimed by the Contractor in its Interim Payment Application. If the Employer intends to pay less than either the sum shown as due in either the Payment Notice, or in default of that, the Contractor’s Interim Payment Application then it must issue a pay less notice not less than 5 days before the final date for payment.
In its Guide to the Design and Build Contract, the JCT acknowledges that the payment terms are necessarily complex, being as they were drafted to comply with the Housing Grants Construction and Regeneration Act (as amended) – it also cautions users not to think about ‘tinkering’ with the printed terms without taking advice. Now that is sound thinking!
If you want advice on getting paid, C-Link’s Partner, Commercial Risk Management, can provide you with expert support at discounted rates, just visit their page here.
CREDIT: Jason Farnell, Commercial Risk Management
About Paul Heming
Paul was a Quantity Surveyor who gained 10 years experience of managing £200 million worth of flagship UK projects, including 20 Fenchurch Street and Battersea Power Station. In 2015, Paul founded C-Link with the intention of sharing his expertise of managing major projects with the SME market.