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Apply for your payments on time, to the right person or pay the price
Sub-contractors... if you don't apply for your payments during a contract by the date given, in the right way, you might not have a leg to stand on legally when it comes to getting paid.
Don't let massively important terms buried deep in a lengthy contract cause you financial pain, like what happened recently to a drylining sub-contractor.
Their dispute came to court in November and involved the sub-contractor failing to issue its payment application to the contractor by the date stated in the contract. And when it did apply, it was for a "valuation period" that was never agreed.
On top of that, the payment application was not sent to the email address as advised in the contract, just the sub-contractor's usual contacts.
Late payment application, wrong valuation period, wrong email address used...
You can imagine what happened next. The contractor subsequently refused the application and terminated the contract shortly afterwards.
That wasn't the end of the case though. Through what's known as a 'smash and grab' adjudication, the sub-contractor did actually get paid - happy days for the sub-contractor you might think.
However, this wasn't the end of the case as far as the contractor was concerned. It took the case to court where the validity of the application for payment under the terms of the sub-contract between the two parties was looked at again. In particular, the court had to determine whether or not the application could be relied on to recover monies in the absence of any Payment Notice or Pay Less Notice.
Contractor wins the case - sub-contractor is out of pocket
The court concluded that an application for payment must be:
- "In substance, form and intent an Interim Application", and
- Any late application "must be clear and unambiguous".
So, he overturned the earlier adjudication and ruled in favour of the contractor, saying that the sub-contractor's application:
- Was not only late, but also failed to value the works up to a date consistent with those in the payment schedule
- Did not comply with the requirements of the sub-contract
- Was not clear or unambiguous, and
- Was therefore invalid.
What does this mean for sub-contractors?
The main lesson for sub-contractors is this - if you don't apply for payment in line with the terms of the contract you might not get paid. These are not 'technicalities' - they are the difference between financial gain and pain.
To avoid losing out, as the drylining sub-contractor did in this case, our advice to sub-contractors is:
- Make your application for payment by the dates stated in the contract
- Make sure you use the agreed valuation period for your application, not one you think might be right, and
- Submit your application to the contractor using the right email address!
Understand your contract from the outset
Knowing what you're signing up for starts with simply reading the contract, but it is not always easy to spot onerous terms and areas where a sub-contractor could be at risk of losing out.
This is where Quantum CPM's Contract Vetting service helps sub-contractors. For a fixed fee, our team of quantity surveyors and project management specialists will review your contract and provide clear advice, so you know what you are agreeing to.
To find out more call 0161 974 6655 or email .
