Having established that the Act applies, what does it mean to you?
The Act introduces a number of terms, these being:
(a) payment claim date;
(b) payment due date;
(c) payment claim notice; and
(d) payment claim response.
The Payment Claim Date and Payment Due Date should be found in the construction contract. You will need to check whether they comply with The Schedule .
A further term, namely commencement date, is referred to within the Act but it is not defined, therefore, it will be for the parties to agree on the commencement date, from which the Payment Claim Date and therefore when a Payment becomes due is calculated.
The Act actually treats contractors and subcontractors differently. In essence, the Contractor can agree to any payment terms with its employer. To the extent that the [main] Contract does not contain the Payment Claim Date or Due Date, the Schedule then kicks in.
Notwithstanding what the contractor agrees to in their contract, the sub-contractor terms can be no less favourable than the period set out the “schedule” which is annexed to the Act. This is effectively a 30-day cycle.
In order to comply with the Act, the sub-contractor must issue a payment claim notice not more than 5 days after the payment claim date.
Payment Claim Notice
4.— (1) This section applies where, not later than 5 days after the payment claim date, an executing party to a construction contract delivers a payment claim notice relating to a payment claim to the other party or another person specified under the construction contract.
(2) A payment claim notice is a notice specifying—
(a) the amount claimed (even if the amount is zero),
(b) the period, stage of work or activity to which the payment claim relates,
(c) the subject matter of the payment claim, and
(d) the basis of the calculation of the amount claimed.
If the sub-contractor has issued a payment claim notice within 5 days of the payment claim date, then if the Contractor does not think that all the money claimed is due, they must issue a payment claim response within 21 Days of the payment claim date.
(3) If the other party or specified person referred to in subsection (1) contests that the amount is due and payable, then the other party or specified person—
(a) shall deliver a response to the payment claim notice to the executing party, not later than 21 days after the payment claim date, specifying—
(i) the amount proposed to be paid,
(ii) the reason or reasons for the difference between the amount in the payment claim notice and the amount referred to in subparagraph (i), and
(iii) the basis on which the amount referred to in subparagraph (i) is calculated,
(b) if the matter has not been settled by the day on which the amount is due, shall pay the amount referred to in paragraph (a) to the executing party not later than on that day.
Remedies if the payment is not made in time.
Suspension of works
If you are a sub-contractor and you have not been paid what is due by the Payment Due date you can, by following the procedure set out in the Act, issue a notice to suspend works.
5.—(1) Where any amount due under a construction contract is not paid in full by the day on which the amount is due, the executing party may suspend work under the construction contract by giving notice in writing under subsection (2).
(2) Notice under this subsection shall specify the grounds on which it is intended to suspend work and shall be delivered to the other party—
(a) not earlier than the day after the day on which the amount concerned is due, and
(b) at least 7 days before the proposed suspension is to begin.
(3) Work may not be suspended under subsection (1)—
(a) after payment by the other party of the amount due, or
(b) after notice has been served by a party to the construction contract under section 6(2) in relation to a dispute relating to payment of the amount concerned.
Possible remedies if you disagree with the calculation of the payment
Some bespoke forms of construction contracts include a reference of a dispute to mediation.
The standard form construction contracts are likely to include reference of a dispute to Conciliation.
The parties have the right to refer a “payment dispute” to adjudication at any time.
The parties are more cognisant of trying to retain a relation and perhaps wanting to have a matter considered by a third party, but not willing to proceed to adjudication may consider other forms of ADR.