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Wise Up Wednesday: Adequate Payment Mechanism?

Payment Mechanisms

This week’s Wise Up Wednesday Guide for Specialist Contractors is about the all important topic of getting paid.

Adequate Payment Mechanism?

Every construction contract (as defined in the Construction Act) must have an “adequate” payment mechanism.In very simple terms it must have a:

  • Payment Due Date – when the work must be valued
  • Payment Period – time between Payment Due Date and Final Date for Payment
  • Final Date for Payment – latest date when payment can be made In any event,
  • Mechanism that clearly determines the Payment Due Date and the Final Date for Payment.

If the contract payment terms do not meet these requirements, the provisions from the  Scheme for Construction Contracts will apply.

Payment Notices

There are strict requirements for both payer and payee to issue and manage payment notices which operate the payment mechanism.

All Notices must state the amount and the “basis” of calculation. So, you must be certain of what the Payment Due Date is as there is an absolute requirement to serve a Payment Notice up to 5 days after the Payment Due Date. If this time period is missed it is a breach of contract with consequences.

Good News For You

This is all good news for you, because the vast majority of the time you are going to be the payee. And if the Contractor/Client payer is in breach by failing to serve a Payment Notice in 5 days, you can serve a Default Payment Notice.

However, most contracts require you to submit an application for payment, and in that case your application for payment automatically becomes the Default Payment Notice.

If a Default Notice is served there is no defence to the amount claimed if a Payless Notice is not served in the time specified.

Valid Payless Notice?

A Payless Notice is a final chance for the payer to value the works and withhold monies trumping the Payment Notices or Default Payment Notice. However, the Payless Notice must be valid and must state the amount and basis for calculation.

The key thing about Payment Notices is that timing and content is critical to their validity, and if these Notices are not managed properly by the Contractor/Client you are entitled to challenge them.

This all gives you a good start in the battle to get paid properly, albeit that you can’t automatically it to the bank!

I hope you enjoyed my Wise Up Wednesday blog post and that it gave you some food for thought, and I sincerely hope to speak with you soon.


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