Wise UP Wednesday: No Pay Don’t Stay – Suspend!
We are all familiar with the thousand and one excuses provided as to why the payment which was due hasn’t arrived.
Securing payment is more difficult than at any time in living memory, and yet another insolvency is announced today as Scottish steel fabricator Rippin Limited has gone into administration with the loss of 25 jobs.
The general feeling among Specialist Contractors experiencing difficulties with payment is that they should down tools and walk off the site until payment has been made.
In other words; “No Pay Don’t Stay”
Whilst this is a natural reaction, it is important to understand that whilst under the Construction Act there is an overriding entitlement to stop work if payment hasn’t been made on time, it comes with a set of rules which must be followed.
If the Contractor delays payment or refuses to pay you altogether, you may be entitled to suspend the performance of your obligations. If your contract is subject to the Construction Act then section 112, allows you to suspend performance when you have not been paid.
Section 112 is implied into every ‘construction contract’ (as defined in the Construction Act) It provides the right to suspend performance where a sum due to you under the contract is not paid in full by the Final Date for payment and no effective Payless Notice has been given.
It is important to check that the Construction Act applies to your contract. The Act covers agreements in writing for the carrying out of “construction operations” (as defined in the Act) which include the construction, alteration, repair, maintenance, extension, demolition or dismantling of buildings.
The Act sets out some exceptions such as mining, petrochemical, power generation, water treatment and contracts with residential occupiers (where one party intends to occupy the dwelling as his residence).
The notice of suspension must always be given in writing and include the ground(s) on which you are suspending work i.e. non-payment.
The right to suspend performance is incredibly powerful, but you must ensure that you have fulfilled your obligations under the contract as regards notice etc.
Suspension At A Glance
- It is a powerful tool for applying pressure on the Contractor to pay in full
- Partial payment is insufficient – only full payment will eliminate your right to suspend
- The completion date is, in effect, extended by the period of suspension
- It may bring the matter to the attention of the Employer / Client which may help to resolve the situation
- Advance notice of 7 days (or more if your contract requires it) must be given after the final date for payment has passed
- You cannot suspend if a valid Payless Notice has been served on you
Wrongful suspension will almost certainly amount to a breach of contract on your part, so you must take care to ensure the right to suspend has actually arisen.
If you are in dispute with a Contractor about the value of variations that does not entitle you to suspend. It is exactly that a dispute about valuation” not “payment”.
It is necessary for you to serve a written warning notice on the Contractor and if seven days (or the period in the contract) have elapsed and payment still hasn’t arrived, you are then entitled to suspend work.
Without the warning notice, you will find that it is you that is in the wrong and on the receiving end of all sorts of claims, despite the Contractor’s failure to pay on time.
The best advice we can give is take advice from Streetwisesubbie before taking action!
The Threat Of Suspension
If your work is on the critical path, the threat to suspend work often results in the arrival of the money.
But you must do it correctly to get maximum effect.
Where you correctly suspend work, there is an entitlement to an extension of time for completion. You are also entitled to receive payment for the loss and expense incurred as a result of the suspension and time to re-mobilise.
As we have said before, learning the “Payment Law” in the form of the Construction Act is not difficult, so please don’t be put off by thinking it’s legal mumbo jumbo that only lawyers can understand.
This all gives you a good start in the battle to get paid properly, and if you need us, our experienced professional Consultants are here to help you get paid what you are owed and on time.
I hope you enjoyed my Wise Up Wednesday email and that it gave you some food for thought, and if you haven’t yet taken action now might be a good time to pick up the phone and give us a call.
I sincerely hope to speak with you soon.
P.S. Please remember if you have a problem, take action sooner rather than later. If you’re not sure what to do or just want a second opinion, please give us a call on 01773 712116, or email email@example.com (please do not click reply to this email).