• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Alston Asquith

Leading Technology & Commercial Law Firm

  • Home
  • Services
    • Commercial
    • Commercial Property
    • Construction
    • Corporate
    • Data Protection
    • Dispute Resolution
    • Employment
    • Insolvency
    • Intellectual Property
    • Tax
    • Technology
  • People
  • News
  • Insights
    • Commercial Law
      • Shareholders Agreements
      • What is a Partnership Agreement?
      • What is a promissory note?
    • Corporate Law
      • What is an Asset Purchase Agreement?
      • What is a Share Purchase Agreement?
    • Dispute Resolution
      • Estoppel: a guide on the facts and uses
      • Unmasking the anonymous with Norwich Pharmacal orders
      • The Law of Tracing
    • Injunctions
      • Springboard Injunctions
      • Freezing injunctions: a practical guide
      • Injunctions
    • Insolvency
      • How to issue a winding up petition
      • What is a statutory demand?
  • About Us
  • Join Us
    • Join Us
    • Careers
  • Contact Us
    • London Office
    • Hertfordshire Office
  • Show Search
Hide Search

Construction contract payments must be a fixed period of time from the due date

Friday, 26 February 2021, 14:52 By Alston Asquith

A recently published judgment from the Technology and Construction Court (TCC) in Rochford Construction Ltd v Kilhan Construction Ltd [2020] EWHC 941 (TCC) has found that the final date for construction contract payments must be a fixed period of time from the due date.

The court held that a provision which made the final date for payment dependent on the provision of an invoice, or, for that matter, any other event, was non-compliant with the Housing Grants, Construction and Regeneration Act 1996 (as amended) (the Construction Act) and therefore invalid.

The Court’s findings were obiter, but the Court commented that, “Pegging the final date to service of an invoice, which is itself pegged to a payment certificate, is simply impractical” and that if the Court had to deal with the point “the final date has to be pegged to the due date, and be a set period of time, and not an event or a mechanism”. The point may be open to challenge, but if correct, is likely to require a significant rethinking of payment mechanisms across the industry.

Implications on construction contract payments

This decision has the potential to have a significant impact on the construction industry as it highlights that a construction contract that seeks to link the final date for payment to anything other than a number of days from the due date is likely to fall foul of the Construction Act. The most common occurrence of this issue is where the final date for a construction contract payment is stated to be a number of days after an invoice is supplied by the payee.

Construction contracts which contain these provisions may be susceptible to attack, with the result that the statutory time period of 17 days from the due date contained in the Scheme for Construction Contracts 1998 (the Scheme) will apply. In many cases, this period will be shorter than the contractual period that the parties had previously agreed on, which in turn may result in failure by the paying party to submit pay less notices on time. That could mean the payee is entitled to payment in full for the amount stated in any payment notice or, if no payment notice was issued, their payment application (if it is a valid payee’s default payment notice).

The right to suspend (and claim de-mobilisation and mobilisation costs) is triggered by a failure pay the sum due by the final date for payment. If the Scheme applies then the right to suspend could arise earlier than expected. A valid suspension under the Act could have an impact on the wider programme and could result in a paying party being liable for liquidated damages up the contractual chain and/or liable to compensate other subcontractors affected by the suspension.

Parties entering into new construction contracts should take note of the risk that final dates for payment linked to invoices or other events may not be compliant with the Construction Act. In light of this judgment, it is recommended to take legal advice as to how this will affect any construction contract payments that you are paying or being paid.

For existing contracts, the parties should consider what would happen if the final date for payment was calculated using the Scheme i.e. 17 days from the due date for payment. It may be prudent for the payee to adopt that date, in practice, as the final date for payment for the service of any pay less notice to avoid a later argument as to whether a pay less notice was served late and so is invalid.

This was an article by Adriana Badescu, Senior Consultant Solicitor at Alston Asquith specialising in construction law.

Do you require assistance with construction contract payments? We have offices in London and Hertfordshire and can arrange a call to provide some initial advice.

We pride ourselves on our relationship with our clients as well as the service we provide. View some of our feedback on Trustpilot.

Visit our contact page to find out how we can help.

construction contract payments to be affected by new judgment

Read more

Construction Law
Lease Forfeiture – Is there an avalanche coming when the moratorium ends?

Filed Under: Construction News

Primary Sidebar

Latest Legal News

First reported successful judgement on COVID-19 commercial rent claim for a premises in Westfield Shopping Centre, West London

First reported successful judgement on COVID-19 commercial rent claim

Wednesday, 21 April 2021, 15:34 By Alston Asquith

European Super League set for mammoth legal dispute with UEFA

European Super League set for mammoth legal dispute with UEFA

Tuesday, 20 April 2021, 16:57 By Alston Asquith

Marks & Spencer take on Aldi over Colin the Caterpillar trademark infringement

M&S takes on Aldi over Colin the Caterpillar trademark infringement

Monday, 19 April 2021, 16:47 By Alston Asquith

Follow Alston Asquith

  • E-mail
  • Facebook
  • LinkedIn
  • Phone
  • RSS
  • Twitter
45 Moorfields
Moorgate
London
EC2Y 9AE
Get Directions
+44 (0)20 3950 3538
info@alstonasquith.com

Alston Asquith Limited Copyright © 2023

  • Navigation
  • Home
  • Services
  • People
  • News
  • Insights
    Legal and Regulatory
  • Accessibility
  • Legal Notices
  • Cookies
  • Privacy Policy
  • Terms of Engagement
  • Modern Slavery Act
  • Facebook
  • Twitter
  • LinkedIn
  • Instagram
  • About Us
  • Contact Us