Its Wise Up Wednesday! – Some Thoughts About Getting Paid
It’s 2014 and whilst things might be looking up, we need to stay focused on doing the right things in our business, because the future isn’t certain, with no-one truly knowing what is round the corner.
These past few years have been anything but plain sailing for Specialist Contractors in the construction industry, and that’s why we have put together our Streetwise Wise Up Wednesday Guides to give you a quick burst of stuff that will help you in your business life.
Sometimes quirky, sometimes hard hitting, but always guaranteed to make you think and take no more than 2 minutes to read.
Some Thoughts About Getting Paid
After safety, payment is obviously one of the most important issues for any business and it may sound obvious, but it is essential that you understand the terms of the contract as regards payment, and what you can do if you are not getting paid.
Many contracts refer to the “due date” and “final date” and the origins of these terms are to be found in the old DOM/1 form of Sub-Contract which was first published around 1980 and in widespread use in the 80’s and 90’s. The payment provisions of that contract said;
“21.2.1 The first payment shall be “due” no later than one month after the date of commencement”
“21.2.3 The first and interim payments shall be be “made” not later than 17 days after the date when they become “due”
So, if the parties didn’t or couldn’t agree anything else, there should be no dispute as to the date that the Sub-Contractor started work, and the date by which the payment had to be “made” was readily determined from that indisputable date.
When Part II of the Housing Grants Construction and Regeneration Act 1996 (the Construction Act) was drafted they used DOM/1 as a starting point and kept the idea of a “due date” and simply converted the date by which payment should be “made” into the “final date” for payment.
And contracts have been written to comply with (or try and get round) the Act ever since.
So How Come Payment Times Been Extended?
Unfortunately in accordance with the Act, the Parties are “free to agree” the relevant time periods between “due date” and “final date”.
So guess what? The Contractors have extended and extended them ever since!
“Free to agree” means free to get screwed, if you don’t have your wits about you!
What Can I Do If I Am Not Getting Paid?
It is extremely important to understand the distinction between the various payment problems that that might otherwise get rolled up and referred to as “non-payment”.
For example non payment could be due to;
- under valuation of works or variations
- set off from monies otherwise due
- failure to comply with the contractual mechanism that trigger payment
Because understanding exactly why you are not getting paid, is key to unlocking payment.
And unfortunately walking off site is not a simple option!
Suspending work is NEVER something to be done lightly or casually, or without taking proper advice!
One of my Clients did just that, and suspended without taking my advice.
Not only did the Contractor determine his contract on the grounds of my Client’s repudiatory breach, which meant no further payment, they also hit him for £80,000 for finishing £20,000’s worth of work!
But don’t misunderstand me here.
Suspending performance of your obligations (which is much wider than just “works”), is the most powerful remedy available to you. But you need to ensure you are entitled to do so.
So, if you have a payment problem pick up the phone and give me a call.
I hope you enjoyed my Wise Up Wednesday email and that it gave you some food for thought.