This week’s “Wise Up Wednesday” is about a topic close to every Specialist Contractor’s heart; Getting Paid.
If you don’t get paid your business fails. It’s that simple.
Ask any insolvency practitioner and they will confirm that lots of otherwise profitable businesses fail because they don’t collect what’s owed to them.
Of course actually getting paid is sometimes easier said than done, and it’s one of the problems StreetwiseSubbie are most commonly asked to help our members with – and one which I have personally been advising Specialist Contractors about for the last 27 years.
So, don’t get angry, get paid, by understanding these key points;
- The payment provisions of a contract should be clearly established and fully understood
- Prior to the Construction Act (where it applies) you had no automatic right to interim payments, and no payment notices, no suspension, no adjudication etc., so despite it being a bit complicated the Act is good news for Specialist Contractors
- Most standard form contracts have provisions entitling you to interim payments, with clear rules set out as to how these should be calculated and when they should be made
So, first things first please make sure you understand the contract and whether or not it complies with the Act
Be aware that the Construction Act does not apply to all contracts, there are certain types of project to which the Act does not apply, these include supply only contracts, process industry and power generation sites etc. (a full list is set out in the Act and you can download a copy from our web site)
Understanding The Rules Is Crucial
Unless the Act applies or the contract provides for it, there is no common law right to suspension of the works in the event of non-payment’ therefore, unless there is an express provision in the contract, or the Act applies you will be in breach of contract by stopping work.
However, once you’re certain the terms of your contract provide the right of suspension, then this can be the most effective weapon in the fight to get paid on time.
The Act and in particular the 2011 amendments introduced some key rules about payment;
- Contracts are required to be clearly establish the “Due Date” and “Final Date for Payment” – confusingly the Due Date isn’t when the money is due to be paid, but the Final Date is the last date by which you must be paid
- The act does not preclude lengthy timescales – negotiate them!
- The contract must also provide for Payment Notices to be issued by the paying party, and if they are not provided there are favourable default provisions
But, watch out because most Contractors will try and bend the rules in their favour by way of their own terms or amendments to the Standard forms such as JCT and NEC/3.
Speaking Of Different Rules
Watch out for contracts that are completely different from the norm. For example, the NEC/3 is so different from any other contract that you will have used previously it is a real challenge.
Please don’t ignore the problems that the NEC/3 creates for you as a subcontractor, and please get advice from the outset, because it really will save you a fortune.