EP 131

Construction Contracts: Common misunderstandings, misconceptions and how to avoid mistakes that have massive consequences. (EP 131)



This week, Paul is joined by an experienced Construction Solicitor, Samuel Bawden, Partner and Head of Dispute Resolution at Holmes & Hills. Samuel is also the Chair at Constructing Excellence Essex, and like the rest of us, he is highly passionate about construction.

In today’s show, Paul and Samuel discuss common legal and commercial issues in construction contracts and the mistakes contractors often make.

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Have you ever wished you could summarise a contract in a couple of pages for yourself or your project team?

Paul mentioned the Contract Audit document that perfectly summarises a construction contract in just 3 pages. If you’d like access to that, drop Paul a line below, and he will share it.


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Paul Heming: Hello and welcome to episode 131 of the Own the Build Podcast with me, Paul Heming. Have you ever wished you could summarize a contract in a couple of pages for either yourself or for your project team? Something just to have on your desk today rather than the usual download giveaway that we do. I am going to ask you guys to drop me a line on LinkedIn or via email if you liked, and I can share with you a contract audit document that I used to have to run project. The reason why I say that today is that we’re going to be talking about this very kind of thing with today’s guest. So if you want the document, just drop me a line on LinkedIn or my profile. You’ll see that on the podcast description. Enough about that and onto today’s guest, in the studio today, we are joined by an experienced construction solicitor, Samuel Bowden, partner and head of dispute resolution at Homes and Hills. And Samuel is also the chair of constructing excellence ethics. He’s a busy man, and like the rest of us and everyone listening, he’s really passionate about construction. Sam, welcome to the show. How are you?

Samuel Bowden: Thank you, Paul. I’m really well, thanks. Yeah.

Paul Heming: I’ve just realized that I’ve said Samuel and Sam in exactly the same introduction. What do you prefer? I apologize.

Samuel Bowden: Sam’s fine.

Paul Heming: Cool. We’ll roll with Sam. I feel alright now, I feel alright. So obviously we’re going to get onto today’s show and we’re going to talk about typical misconceptions, mistakes, things that can go wrong in the contract. You obviously speak to a lot of different contractors and work and advice them on that. Before we get to that, you’ve just told me off air that you are going to be doing something very unusual this afternoon. Right after this recording, it peaked my attention. You’re going to a sand castle building competition, which I have to say sounds particularly unusual for a construction solicitor. Tell me more.

Samuel Bowden: Yeah, so there’s a local firm, a client of ours building surveyors that every year do a sand castle competition on a local beach. So you’ve got the construction lawyers going up against the contractors and the architects and the surveyors. The engineers, needless to say, like form… 

Paul Heming: Who wins, the engineers surely?

Samuel Bowden: Significantly better than we do, turning up with their form work and all the right tools. We turn up and wing it and have a great afternoon. But it’s great to be out and networking and it underscores one of the points that I frequently make and I’ve posted on this on LinkedIn about this quite frequently. When the construction lawyers get on the tools, it doesn’t necessarily go that well. Back in, I think it was about December last year, I posted a picture of the time when I managed to screw through some pipes under my floorboards. And the point being, I know when not to dabble or I should know when not to dabble in construction. The flip side of that, we see a lot of people trying to do the legals for themselves. It’s the same warning, isn’t it? You know, stick, stick to what you’re best at.

Paul Heming: And so your sandcastles, you’re not expecting great structural integrity, but you will have a claim in against potentially your competitors and your win somehow. Right?

Samuel Bowden: Yeah, we’ve joked in the office about serving notices of adjudication midway and things like that. 

Paul Heming: Stitch up the engineers. That’s what I’d say. So anyway, we’ll jump into the show now. Obviously I gave a brief introduction into you and your skillset and what you’re currently doing. Talk to us about who you are, your background, and what you are now doing and why you’re in construction.

Samuel Bowden: Right, okay. So as you said at the start, so I’m an experienced construction lawyer and I head up the wider dispute resolution department within the firm. My background, I like, quite a lot of people had a previous career before I was a lawyer, so I joined the legal profession a bit later. I came through, did a science degree and worked in science for a while.

Paul Heming: Is that normal? I would’ve thought if you go into law, you kind of say that from the outset. Like, I remember people at school being like, I want to be a lawyer. I remember thinking it’s one of the few things which you’d kind of know at the outset, lawyer, doctor, that kind of a thing. But not in your case— 

Samuel Bowden: Not necessarily. There were more and more people that come into the profession having had previous experience doing other things. And I always think that you’ve got a better-rounded individual when they join the business. So yeah, I did my law degree. I’m a proud northerner. You can probably tell from the accent, but I now live down in eastern area—

Paul Heming: Where about are you from?

Samuel Bowden: I grew up near Manchester. And then spent nearly 10 years in Sheffield doing my first degree and then going back and doing a law degree. Met an Essex girl. The rest is history. I’m down here now, very settled. And I happened to sort of get an opportunity with the firm early on. Made a speculative application just for any job that they had going whilst I was funding the remainder of my legal training. And it rolled into a training contract and I stayed on with the firm and sort of here I am at the top table as it were. It’s been great. And through that process I specialized firstly as a litigator, so resolving disputes in quite a broad spectrum of subject matters. And over time I became very aware that the sort of clients that I liked acting for were the guys that were in the construction industry, very approachable, down to worth, most of the time just genuine, hardworking people.

Paul Heming: Stop it.

Samuel Bowden: But that fitted well with me and sort of my approach to life, my ethos. And so I started to specialize and generate more and more experience in that and pick up more clients, decided that actually there was so much interesting work out there that we could build a team around me to support me in doing that, which is what we’ve done. So more and more I moved away from a broader spectrum of litigation and specialized purely in construction. And obviously you get to a stage where you tell people you are a construction lawyer, that’s not necessarily just the disputed stuff. It’s, they want advice on contracts and training and stuff. So you morph then into the non-contentious side as well. So that’s sort of how my journey’s been and why I’ve ended up here. And it’s been absolutely fantastic. You know, really, really enjoy what we do.

Paul Heming: Fantastic. And it’s so varied and there’s so much going on in construction, but I totally, it totally resonates with me, the feel of like the kind of people that you get in construction. Because that’s exactly how I feel about it. We spoke a few weeks ago when we lined this up, about 80% of your work being contentious, roughly like disputes, et cetera, and 20% being non-contentious. Now you are head of dispute resolution at Homes and Hills. So I’m guessing contentious work is work that you do a lot of that you focus on. But you mentioned to me that you enjoy the non-contentious most of all. Why is that?

Samuel Bowden: Yeah, it’s an interesting question. It’s one we frequently get asked when we’re interviewing candidates that we want to bring into the team as well. You know, what’s my favorite part of the job? And I always say without a shadow of a doubt, it’s the non-contentious side. And it’s the training sessions we do with clients. The reason I enjoy that so much is we get to sit in a room with, it might be 5, 10, 20 people and talk to them about their business and give them legal tips on how to improve that. Now it’s the light bulb moments that you see in that session. So in the past I’ve been on training seminars where there’ll be somebody at the front lecturing, they’ve got a whole load of slides and its black and white text and it’s dull and everyone’s falling asleep. And everyone in the room is sat there thinking, well, you’re telling us all these things. You’re quoting statute and you’re quoting case law, but how does that actually apply to me on site? Because that’s not how things work on site. You can’t tell me I have to do this and that and the other because it just doesn’t work like that. Whereas we get to sit in a room with our clients and say, look, we understand that, we will give you a few sweet nuggets that you can take away, maybe start doing this, don’t do that. We recognize the limitations on what we’re telling you, you can and can’t do. So do it in this way. And the benefits you all get, let’s be truthful. It always comes down to making sure you’re going to get paid properly on time, maximizing your chances of that. So there’s usually a few key points we can give to clients and you can see their faces light up and it’s that realization when they repeat it back to you say, so if we do this and don’t do that, which is feasible in the way we present it, the outcome will be X. And you can say, yeah, that’s exactly what we’re telling you. And at that point, you see the smiles creep around the room, you see it’s brilliant. It’s such a rewarding part of the job.

Paul Heming: Yeah, it’s fascinating actually. And I can draw parallels with it, right? To, I guess the start of my career where I was really lucky, the managers that I had, the bosses that I had, they like took me to all these different events. And a lot of it was stuff that was held by construction lawyers, et cetera, where you would kind of go in and talk about a topic. And quite often it felt relatively abstract to the day-to-day of my curtain walling contract. They were very niche in some respects. And one time we had the company paid for what it sounds like you guys effectively do someone to come into the business and tailor something much more to our needs. And I do remember being sat there and thinking, I’m going to do that tomorrow. That changes my mind. I didn’t know that that’s how I could do it. And honestly, part of that feeling is almost the thesis that I have for holding this podcast, right? It’s, you talk about something, you simplify something so that people listening and hopefully the people listening get this thing, ah, I’m going to do something different tomorrow. So that totally resonates, really. I completely understand why you get so much joy out of that. Tell me why you think 80% of the time you get called when there’s a problem and you are 80/20 split, 80% of the time you get called when there’s a problem. It’s contentious work. 20% of the time is the non-contentious stuff. The stuff where you can help in advance. Why do you think we, as an industry of contracts, I’m sure it’s not just us, but why is it that we only call you when there’s a problem?

Samuel Bowden: I think the simple answer to that is, there are a lot of people operating in the industry that don’t necessarily have a great understanding of construction law. So they’re signing up to contracts with things that are in there that they don’t necessarily understand. They don’t know what the risk is. Maybe they think in a lot of instances, we don’t have a choice, we’re given this contract, sign it up or go. 

Paul Heming: That’s absolutely certain. 

Samuel Bowden: Yeah.

Paul Heming: Yeah. We’ve talked about that a lot actually. Look, both the main contractor will or developer or whoever, the one procurement will say sign it or someone else will. And the subcontractor or the main contractor, depending who the client is, will kind of think, if I don’t sign that, someone else will. And that’s kind of endemic to the industry. And that in itself is highly problematic, right? Like, no, stand up for what you but everyone, it’s quite common thing for lots of companies to be doing, right?

Samuel Bowden: I think so. And the point I’m getting to is that people are going into these contracts in a lot of instances quite blind to where the risk areas are. So they don’t necessarily perceive that there is a problem until it all goes wrong. And then we’ll sit with them. Because they need us then with that distressed purchase, they’ll come and talk to us about a problem. We’ll say, well, alright, look, starting point, let’s look at the contract. Let’s find out what’s happened. Nine times out of 10 will read through a contract and say, right, well, this clause says these horrible consequences for you that you’ve signed up to. And sometimes clients will say, okay, we didn’t realize that, that’s unfortunate. Normally it’s not put quite so calmly as that and that’s not fair with a few four letter words in it and things like that. But the way the law looks at it, if your two commercial parties, the courts considered you to have equal bargaining power, even if in reality you don’t. And they take it that your contracts have been freely negotiated. 

Paul Heming: Well, they have, haven’t they? I don’t know. Yeah. 

Samuel Bowden: So if you’ve signed up to something onerous, it’s on your head, be it. So we get those conversations when it’s all gone wrong and we then have to try and dig our clients out in the best way we can, which is how quickly and cost effectively can we get you out of this position, let you get back to the core activities of your business whether it’s defending a claim or bringing a claim. We just need to get you through this as quickly and cost effectively as we can. We’ll normally have a conversation at that point and say, well, look, here’s where this particular project went wrong from the legal side of it. These are the take home messages you need. And we’ll often have the conversation, look, do you want us to come in? We’ll do a training session, not just for the owners of the business, but for all the contracts, managers, and such. All the people, yet all the people who need to know how to operate the relevant clauses and how to avoid certain things being incorporated. Most of the time, there’s a kind of reluctance because it’s like, well, we had a problem but we’ve now resolved it, so we don’t want to throw more money at the non-contentious side of it. Because they still don’t necessarily perceive that to be a problem. I think anecdotally we probably have maybe anywhere, 2, 3, 4 disputes before the client says, well, actually do you know what? Maybe this training getting some contract reviews and stuff might be a good idea. It’s great when we get a client that says to us straight away, I see the value in that. Let’s do that. 

Paul Heming: It’s funny that, isn’t it? I mean, that it’s difficult, cash flows tight, margins are tight, business focused makes it challenging, but how do you market say, do you know what I mean? Because it’s almost like they only want the simple thing, once you’ve gone through hell three or four times, right? Anecdotally you’re saying. It’s almost strange. So is it a case of when you are meeting because, and we’re going to get onto that in the second half of the show, right? These golden nuggets that you’ve got for us. And I know it won’t be 100% generalizable, but how do you get, it must be so frustrating, right? To say, no, no, no, no, no, no, don’t, don’t, don’t, don’t wait. Let’s do it now. This is something that matters to you now. How do you communicate that? And it’s just must be so frustrating.

Samuel Bowden: Yeah, it’s all about educating people, isn’t it? And it is difficult because the last thing I want to do is, go around knocking on contractors’ doors going, do you realize this is going to go wrong and that’s going to go wrong? We try and be positive rather than spreading doom everywhere. But the reality is, it’s educating people to the scale of the risks that they’re exposed to. Because in a lot of instances, we’re talking about huge sums of money riding on a project. And if things go wrong, it can easily be make or break for a company. And I think it is that reluctance to spend out when they don’t perceive there to be an immediate problem. But what we’re trying to do is get in there and avoid those problems from arising in the first place. So it’s just trying to educate clients as to, I suppose the fact that a modest amount of money spent on training contract reviews is far better commercially than hemorrhaging loads of money on a, trying to resolve a dispute.

Paul Heming: Not have any cash in your bank. Yeah.

Samuel Bowden: Yeah. And potentially not getting the outcome that you really want or deserve in respect to that dispute because you haven’t dotted the I’s and crossed the T’s in the way that we would teach you to. So it can be far more damaging if you let it go to a dispute. We always say prevention’s better than cure. And to add to that, it’s usually an awful lot cheaper.

Paul Heming: Yeah. It’s just that you don’t, you’re only spending, it feels like you’re spending money on nothing I guess at the outset, even though that’s obviously not the case versus, oh, we’ve got to allocate X amount now to this dispute because it’s happened. So what I want to do is kind of in the second half of the show, like I said, let’s talk about those golden nugget almost take me inside the training room. And we can have like a mini session there. We can talk about it. But we will do that right after this break.

So Sam, what I want to do in the second half of the show is almost regressed 10 years to when I was sat in a trading room, getting explained common misunderstandings, problems or challenges that you can face in a contract and kind of almost go back inside that room, which I was in, where I had those aha moments, but also get those golden nuggets from you imagining that me and you are kind of in this training session that you enjoy holding so much. So I guess my first question, and this might be quite a broad and open question, is what is it that contractors, people, project managers, contracts managers, et cetera, most commonly misunderstand about construction contracts and where do you start educating them? Big smile across his face.

Samuel Bowden: Yeah. So conscious of the time we’ve got for the podcast.

Paul Heming: Six hour podcast, talk about this all strap in.

Samuel Bowden: Yeah, we’d normally do a training session over sort of half a day. I think that’s a decent amount of time that people can still hold their attention if we are good at what we’re doing, but you’re not giving them so much information that they get overloaded. So a few of the sort of headline points that I see recurring time and time again and the things that we will always try and address in a training session is understanding whose terms you’ve contracted on and how that process happens. So it’s the thing we call in the legal world, the battle of the forms. There can often be a huge amount of confusion about whose terms were incorporated. And not just your set of standard terms, but also what other documents are incorporated in the contract specifications, drawings and so forth. Pre-Start meeting minutes. Another really, really big area of confusion is about how the payment process works in construction contracts. 

Paul Heming: Just before we go on to payment though, Sam, just scale back a tiny bit, battle of the forms, hone in on that a little bit more for me, right? You know, offer acceptance, we’ve talked about that on the show, but just talk to me about what you actually mean, what people should be really thinking about.

Samuel Bowden: Yeah, certainly. So the basic principle in formation of any contract is there’s this process of offer and acceptance. So I might say to you, I would like you to come and erect X amount of scaffolding and here’s what I will pay you for that.

Paul Heming: And then I’ll say to you, I’ll do it for 25 grand and I’m going to do it over 10 weeks or something like that.

Samuel Bowden: Exactly. So I’ve made an offer to you, you could have accepted that offer and we’d have formed a contract, but actually what you did is you came back with a counter offer. So now it’s back with me to either accept your counter offer or to make another counter offer. And you have this back and forth. Somebody described it to me recently actually as a game of ping pong, which I thought was quite a good analogy. And it’s whoever scores the point at the end of that rally of pinging pong. So who’s the last person to put forward an offer which is then accepted that forms the contract? Now that can be a written contract, so an exchange of written offers or it can be verbal, it can be a bit of both and it can happen at any point up until the project starts. And lots of the common misconceptions that people have, well, I didn’t sign the contract. Doesn’t matter. You can still accept it by your conduct. 

Paul Heming: So, taking our, let’s play pinging pong here, right? Let’s take our example. You asked me to price this scaffold. I return and say 25k, I’m going to do it for 10 weeks. I don’t accept LEDs, I don’t accept retention. Payment terms need to be 14 days. You return my return and you say, yeah, no problem. That’s all good with me. I agree with you. A couple of weeks go by, I start on site, I think, yeah, he’s agreed to my terms and conditions and then bang, you send me over a contract which says in it 25k, 10 weeks are the two things that I really, really, really care about. And I look at it and I go, yeah, that’s probably alright, which is like a process that happens a lot between maintenance subcontractor, right? Often it’s get on site, let’s crack on. Has the main contractor just delivered a hammer below of a return to and has now won that game of ping pong.

Samuel Bowden: Right. So if you’ve already started on site and you get sent a contract that that game of pinging pong has finished when you start on site. So we say it’s whoever fired the last shot. So if I’m the last person to put forward a set of terms, if you don’t come back to me and say I don’t accept those, but you start on site, you’re deemed to have accepted my terms. If somebody puts forward a contract after that, then it’s only going to be incorporated and take precedence over whatever the previous terms were. If the other party expressly accepts it, so signing it and returning it, which we know happens a lot, you get told get on site, we’ll send you the contract later and then you get told things like you’re not going to get paid unless you sign the contract and all these sorts of things.

Paul Heming: Well, you pre precisely right. So, I think this is actually a really interesting working example that we now have. So you then say to me, oh sorry, here’s the contract. I know you’re on site, sign that. And I could brazenly say to you, I don’t need, I’m not going to sign it. You accepted my terms, but thanks anyway. And then you would say, well, if you don’t sign it, I can’t pay you because blah, blah, blah. And we never talked about payment terms. That’s the payment term and it’s a condition precedent that you sign this contract, otherwise I can’t pay you. I’ve been in the right for a while, I’m now in what can only be described as a pickle. What would your advice be to me?

Samuel Bowden: Yeah. And this is all where we balance the commercial realities with the legal principles. So you are on site, I send you a contract, you say, I don’t have to sign that because we’ve already got a contract. And I say to you, well, if you don’t sign it, I’m not going to pay you. You are well within your rights to say that’s completely inappropriate. I’m on site, we’ve got terms— 

Paul Heming: We’re going to court right now. 

Samuel Bowden: You have to pay me according to those terms that were agreed. Yeah. Now great. I can tell you that, and you and every other contractor, particularly subcontractors that we act for, we’ll turn around and say, yeah, great… 

Paul Heming: Can’t do that. 

Samuel Bowden: But as soon as I say that, I’m not getting any more work from them, I’m forced to sign up to these terms and that’s a conversation we have week in, week out. And that’s our position is, well, look, we can tell you what the law says, but it’s a matter of your commercial judgment whether you want to do that. So I’ll tell you what, let’s have a look at those terms that they’re asking you to sign up to. How much risk are you actually taking here? If the contract is, it’s always going to be onerous for you, but if it’s a level of risk that you are prepared to take as a business, fine. If you want to sign up to that to protect that commercial relationship and keep doing business with them, fair enough. But actually if we go through it and say, why on earth are you signing up to any of these terms? They are the worst terms you could possibly sign up for. Actually, do you really want that ongoing business relationship because you are going to lose out at every stage of this? It’s a commercial judgment.

Paul Heming: Yeah, it’s funny, isn’t it? I think we’ve almost just stumbled on perhaps why you have that 80-20 as well, right? Because what we’ve just described in that peculiar working example or simple working example is probably something that resonates with a lot of the listeners. They’ll think, yeah, I’ve experienced that and you can’t really be non-contentious and forward thinking about that if you are the subcontractor, if you are me because like you think you’ve kind of got things working and then all of a sudden it unravels and then you have all of a sudden you have this contentious position which you’re trying to work your way through. So it’s interesting though, that’s we’re definitely… 

Samuel Bowden: I’ve got an interesting…

Paul Heming: Go on.

Samuel Bowden: Sorry. Yeah, I was going to say I’ve got an interesting view on that though. You talk about subcontractors, they can say I’ve got no choice. I have to sign up to these terms. So what’s the point in me getting any training? There are two things there, fair enough, you might never win the battle of the forms because you’re always forced to sign up to these terms. But actually there will be that occasion where you can win the battle of the forms and we can give tactics on how to do that. And secondly, our training will go beyond that and we’ll start saying, well, look, if you are signing up to these onerous contracts, what are the real dangerous areas for you? What are the red flag clauses that we need you to be aware of? What do they mean? How badly do they buy it? And what can you do not just legally but practically to mitigate your risks there? So again, it’s about recognizing that there’s the commercial reality of, look, we’ve got to take some risk here as a business. Every business has to, firstly, what are those risks. 

Paul Heming: Exactly precise… 

Samuel Bowden: At least you know what they’re… 

Paul Heming: Yeah, you’ve got to manage them. 

Samuel Bowden: Yeah. 

Paul Heming: No, no, I completely agree with you. Okay. So I think we’ve proven how complex and how much education is needed on this by just talking about one topic, which we’ve kind of got to the legal position and then realize that there’s all this complicated commercial decision making risk management from there. So none of this is simple and that is clear. I stopped you on payment, didn’t I? I mean I pulled you back to the battle of the forms and you were just running onto payment. Talk to me about payment then another red flag, another area to focus on. 

Samuel Bowden: Yeah. I just think it’s a very misunderstood process. So we’ve had the construction act, as we call it, has been in place since 1996, but it is one of the most confusing bits of legislation I think. 

Paul Heming: I agree. 

Samuel Bowden: Any new construction lawyer is going to take some time to get their head around how it all works. 

Paul Heming: Let alone a QS project manager.

Samuel Bowden: Exactly. And without being disrespectful to anybody, it’s a complicated thing to get your head around and lots of people think they understand it, but don’t and to be fair… 

Paul Heming: Oh, that’s right. Sorry to interrupt you. 

Samuel Bowden: No, that’s fine. 

Paul Heming: Didn’t you do a post about what does the due date mean under the construction act? You kind of like put it out there to the world and got a whole array of different answers, right?

Samuel Bowden: I did. Yeah. And I was wondering how many people would be brave enough to answer it on a public forum, but the purpose of me asking the question was to highlight how… well, the breadth of different answers I would get. And that in itself shows me how poorly understood the concept. 

Paul Heming: Yeah, it’s not simple, is it?

Samuel Bowden: Yeah. Well, a local surveyor friend of mine admitted to having plugged the question into Chat GPT and come up with an answer and that was wrong. 

Paul Heming: Oh god. 

Samuel Bowden: its due date. I mean it’s one of my biggest bug bears actually. It stems from a term in the construction act, which parliament, when they enacted the legislation, decided they would use the term due date, which in normal English to anyone would mean the date when a payment is due to be paid, when are you going to get your money? And it doesn’t mean that. And that confuses so many people and I see contracts drafted all the time that seem to work on the basis that they’re thinking due date is when they’re going to get the money. And it doesn’t mean that.

Paul Heming: On purpose do you think? Do you think like that’s a good way to…?

Samuel Bowden: I don’t think it is on purpose most of the time I just think its, people don’t understand the terminology or necessarily the mechanism of how things work under the construction act…

Paul Heming: Because the due date is effectively the date that kind of not in the center, but is the middle ground, you have your application, X days after it, you’ve got your due date, X days after or before you’ve then got payment notice, pay less notice, and then from, I can’t remember what it’s in the app, it’s let’s say 14 days or whatever from the due date, you then have the final date for payment. When you’re talking about or do you want to correct me? Feel free to go. That was a big…

Samuel Bowden: No, I was poised to give you my analysis of what I would say the due date means. So… 

Paul Heming: Go for it. Go for it.

Samuel Bowden: I would say it as simply as this, the due date is just a date. It is whatever date the parties to the contract agree. So they can choose any date within the month. And the purpose of having that date, its only purpose is, you use it to add days on or take days off to get to all of the other relevant dates. So dates when you should get a payment notice, final date for payment, date for a pay less notice. All of those are calculated from the due date, but the due date can be any date you want it to be.

Paul Heming: But this is what I remember learning about it and being like, please explain this on a diagram. There’s all those flowcharts with the act et cetera and the due date, why can you not calculate the final date for payment or the payment notice or the pay less notice from the application date that I just all, it just seems peculiar to me. What’s the reason? 

Samuel Bowden: Well, you could do why it’s not been drafted that way. We’d have to go back to the nineties and talk to the drafting committee. The reality is, if that’s how you wanted to operate it, you could say, in your construction contract when you draft it, applications must be in by the final day of the month and that is also the due date. No reason why you can’t do that. You know, as I said… 

Paul Heming: That’s the point, you still have to put the due date in, you still have to reference the due date because…

Samuel Bowden: Well yeah, except we have a thing called the scheme for construction contracts. So with anything like this due dates, dates for payless notices, final dates for payment, if we don’t agree what they’re going to be and put it in the contract, then the scheme implies those dates and all I would say on due dates, and this is the thing that I try and hammer home to absolutely everybody, if you haven’t agreed what the due dates are and expressly put that in your contract, I personally think the scheme is very confusing when it comes to how you calculate what the due date is. So do yourself a favor if you’re going to put anything in the contract about payment, set out clearly what the due dates are? And as I said, it can be any date you want in the month, it’s just drawing a line in the sand and working out, we’ve got to add X number of days on to get to the final date for payment, calculate back X number of days for when we’re going to put our application in.

Paul Heming: And so going back to our golden nuggets in the training session, we’re back in the room now and you are talking about payment, is the golden nugget, what you’ve just said, i.e. I want to make sure you know what the due date is or is it explaining application due date, notice date, final date for payment, explaining that sequence and then centering the due date so that then the person knows, alright, by the act it should be this. And that’s almost what you need to look out for in a contract. And that’s just the fact that it’s confusingly called the due date. Some contractor could go and have a look and saying, now I get paid nine days after the due date. Its nine days after the application date, happy days. I was hoping for 14 day payments, but I won’t mention that now. Because nine days works for me. Actually turns out that they’re on 45 days or whatever to, so it’s confusing, isn’t it? So what is your advice really around payment other than what you’ve just explained?

Samuel Bowden: Yeah, so, I would always focus any session around making sure that everybody in the room understood the principle of what the due date is. From that we build out and we say, well, look, here’s how you calculate final dates for payment. Here’s when you’re supposed to get payment notices and talk about payless notices. It depends on every training session is tailored to the individual client and some know more than others already, but we’ll get some clients that don’t necessarily understand the difference between a payment notice and a Payless Notice, why there are both, there will be some that do. We’ll talk about common amendments we see to contracts. So amending the date for getting a payless notice in. It’s not uncommon for us to see contracts that say… 

Paul Heming: Day before the final date.

Samuel Bowden: If you put a Payless notice in one day before the final date. Yeah. You know, things like that. Conditions precedent as well. If you’re submitting a payment application, it’s only valid if you’ve submitted it on pink paper delivered by carrier pigeon to our office in Barbados. Just daft things like that. That actually the hoops you’ve got to jump through.

Paul Heming: Yeah, absolutely. And actually, like you say, you could talk about this for four hours, which would be usual training session. I realize we’re trying to squeeze this into a 20 minute half almost. So I’m mindful of that. But you’ve segued me onto the final, if we’re going to cover three points, I think battle of the forms payment and what you’ve just touched on there, condition precedent. Just talk to me about, you just came up with a facetious example of you’d have to do it on pink paper, blah, blah, blah. What is condition precedent and why is that something that I know you flag in these sessions?

Samuel Bowden: Yeah, so a condition precedent clause is a clause that requires you to do something and if you don’t do it, you lose an entitlement. So it’s usually…

Paul Heming: I.e. pink paper and carrier pigeon. 

Samuel Bowden: Yeah, it’s usually you lose a right to extra time or a payment. So it tends to come up in things like, it’ll be a condition precedent that you notify of delays within so many days or hours of becoming aware or when you might reasonably have become aware of a situation. Also in relation to loss and expense, conditions precedent about the form and method of service of payment applications. Sometimes we see it flipped the other way for a pay less notice to be valid, it has to be on the pink paper by carrier pigeon. Those sorts of things. You see some really onerous ones. I’ve come across conditions precedent that will say, if you don’t submit this piece of paper by email to the following email address, it won’t be valid. And that email address deliberately contains a typo.

Paul Heming: What?

Samuel Bowden: Yeah, first and foremost the person issuing the notice or the application might not necessarily pick up that it’s a condition precedent and it has to go to a specific email address. So if you send it by post or to a different email address, it’s not valid. But even if they do notice that it’s to go by email, they think it’s a typo. So they send it to the address they think it should go to and it’s not been validly served. So it’s sort of no effect. 

Paul Heming: But Wait, wait, wait, wait, wait, wait, wait… That is particularly onerous. That particularly onerous is a very, very polite way of framing that and I appreciate how polite you’re being. But on a serious note, if you ended up going to court about that, it’s me and you again, I’m the scaffolder, you are the main contractor. Would the, whoever is adjudicating or arbitrating on that particular case, would they not be like, yes, I realize that your two commercial entities who both have the right to negotiate something, would they not be like hotnail.com or hotgale.com or whatever be like, that’s ridiculous. Obviously the intent was that it would be @hotmail.com.

Samuel Bowden: Well, I think I would look at that and say, well look, let’s take the example of Hotmail, if that was a genuine email address, which has been set up for the purpose of receiving these applications, which would have to be, if it’s not been sent to that address, then it’s not been validly served and it, you might have sympathy from a judge or an adjudicator, but if it’s a genuine email address used by that party and you haven’t sent it to that address, then you haven’t complied with the clause.

Paul Heming: You see, I think that’s the sort of the naturally really frustrates me and my experience subcontracting was that I’ve never heard of that as an example, which makes me laugh just thinking about it. But there was always these things that were there set up to help you trip over basically. And the way I managed it, I talked about the top of the show was I would do a contract audit from a QSs or a commercial manager’s perspective almost, where I would say, okay, so it’s conditioned precedent for EOT or for loss in expense, whatever, that I have to do something every five days. And just knowing that would allow me to set up my project team in the way that we would rather than doing notice, you’d almost say, right, we’re going to do a weekly report every day, every week at this time and it’s going to include X, Y, and Z and that would be our project mission as that’s how we get over X, Y, and Z. Do you know, you talked about the commercial implications of understanding the contracts, you then say, okay, it is pretty onerous, but we can deal with that by doing a report once a week or whoever. Right? And I think that all of these things really highlight the importance of a simple way to navigate understanding the contract quickly. Right? And that’s what you’re advocating for at the very start, not just contract education. It’s like these are the 10, 20 key things that you’ve got to be thinking about as a minimum before you sign a contract. Right? How does that make you feel?

Samuel Bowden: Yeah, so what we advocate for all of our clients, we say, look, we’ve given you all the scare stories about what may be in your contract and what the effects of that might be. 

Paul Heming: hotnail.com.

Samuel Bowden: Yeah. So print yourself out a one side sheet of A4, put it on the front of the contract and it has the headlines points, extensions of time. How quickly do we need to notify, who do we notify, what do we need to send with that supporting documents. Loss and expense, the same thing, payment applications, when have they got to go, who do we send them to? So it’s got all of that basic information just on a sheet on the front of the contract. So any conditions precedent, it’s flagged up, you know what’s on there and you get it, you just get it diarized, you make sure every relevant member of the team knows, and this, again, it comes back to the commercial realities of things. You’ll be getting things happening on site that perhaps need to be reported within a very short window to whether it’s the main contractor or the employer, otherwise you lose that right for extra time or money. So it’s making sure all of the people who are on site that need to know what they need to report back to the office and how quickly.

Paul Heming: I completely and utterly agree and that’s why… and again, I was a little plug for, if everyone wants to have that contract audit document that I used to do, feel free to get in touch, but it’s just first you’ve got to comprehend the realities, which is the contract education piece, right? You’ve got to understand the realities and I’m talking about that hobnail example and saying, come on, that’s ridiculous. And you’re saying, no, it’s not ridiculous. That’s kind of like, it may be ridiculous, but that’s how things would play out.

Samuel Bowden: On that hot nail example, I would always say to client’s but—

Paul Heming: I can’t believe we’ve got stuck on this. 

Samuel Bowden: Well yeah, but my pragmatic advice there would be, well, if you think that is a typo, send it to that address, but send it to Hotmail as well. Send it to both.

Paul Heming: But I think a lot of what holds people back ties back to what you’ve said at the very start about the kind of people that are in construction. Its people who are pragmatic, want to get the job done, think, come on, that’s absolutely mental, obviously that’s not what was meant. I’m going to crack on and in doing that we end up in spaces I guess as companies, as professionals where you do end up in the contentious side, which bringing it back to what you said, focus on that non-contentious, focus on the education piece and you’ll be in a much better place. Right?

Samuel Bowden: Very much so. We love to do the adjudications. I’m a definitely a fighter by nature, but I just like seeing the smiles when you give people the tools to avoid the dispute as well. 

Paul Heming: Yeah, well I’m absolutely certain that people will be listening to this and we’ve touched on three elements of construction, law construction contracts, right? And in each of those components, I’m certain there’ll be people listening to this going, oh yeah, that’s made me think slightly differently or I didn’t know that I’m going to act differently. So I feel like we could go on for four hours. Sadly, we’re at the end of the show, Sam, but it’s been— 

Samuel Bowden: Easily, easily… 

Paul Heming: It’s been great to have you on the show. I’ve really, really enjoyed it. I’m sure everyone else has. So thank you for coming on and joining us. 

Samuel Bowden: Thank you very much.

Paul Heming: Absolutely. No, it’s my pleasure. 

Samuel Bowden: Thank you very much. 

Paul Heming: Yeah, my pleasure mate. And like I said, guys, if you do want that contract audit document, give me a shout. Otherwise, as always, I will speak to you next week. Have a great week ahead and speak to you soon.

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