C-Link

1 December 2017

Payment Provisions – JCT Subcontracts

Blog Image

The sub-contract is drafted with the intention that valuations regime under the sub-contract should be linked to the Main Contract application dates, commencing with the Interim Valuation Date immediately following the commencement of a sub-contractor’s work on site. The due date for payment is 12 days from the main contract Interim Valuation Date; barring any bespoke amendments to the printed timescales the payment cycle under the main contract has a 5 day cushion against the sub-contract cycle.

The main contract now provides that Interim Valuation Dates will be on the same date each month as the first Interim Valuation Date given in the Contract Particulars – this should mean that even where there are project over-runs there should be a valid payment cycle for the duration of the project.

In the sub-contract particulars there is an option to select whether the sub-contractor is required to issue an application for payment to the contractor each month, meaning that the payment mechanism may, by election, be either a ‘payee’ or a ‘payer’ driven – it is important for both the sub-contractor and the contractor to know which applies.

Saying this, the sub-contractor may make an application even where the option does not apply, either four days before the Interim Valuation Date, or at any time where the contractor fails to issue a Payment Notice.

The ‘due date’, confusingly, may vary depending on the timing of receipt of the sub-contractor’s application in relation to the main contract Interim Valuation Date; with the due date for applications received later than four days before the Interim Valuation Date being 16 days from their actual receipt by the contractor.

The valuation of the work is up to the due date, which on a practical level means that at the time that an application is made a forecast of work to be done two weeks in advance will need to be made.

In compliance with the Housing Grants Construction & Regeneration Act (as amended) payment and pay less notices are required to be issued by the contractor 5 days from the due date or 5 days before the final date for payment respectively. The sub-contractor’s default payment notice will have the effect of postponing the final date for payment by the same period as the sub-contractor’s payment notice is issued after the expiry of the 5 day period in which the contractor should have issued its Payment Notice.

Curiously, where, in respect of the final payment due under the sub-contract there is in fact a balance owing from the sub-contractor to the contractor, shown in the Final Payment Notice then the obligation to issue a pay less notice is reversed and the sub-contractor must notify the contractor if it intends to pay back less than the sum shown in the Final Payment Notice.

The operation of the payment provisions needs to be closely managed, both pre- and post-contract to ensure that you are not disadvantaging yourself through delaying the collection of money which has been earned.

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

Paul Heming