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[ Focus: Late payment ]


You have not suspended work properly and have now breached your contract. The consequences will be expensive; you are unlikely to see any of the outstanding payment and could incur further costs as well. To effectively suspend (or partly suspend) work due to non- payment, a notice in writing must be given to the non-payer (unless an effective pay less notice covering the full sum applied for has been issued by the contractor). The notice period required may vary from job to job, depending on the period stated in each subcontract. Suspension is a legal right, and when a contract lacks a suspension clause, under the Construction Act seven days notice must be served.


A Q


and must pay in accordance with its terms, regardless of his own situation. These are provisions of the Construction Act and Amendments 2009.


A


It is to your advantage that he has issued a payment notice. Now that the fi nal date for payment has passed, and there is no dispute about the sum stated in the notice, you can sue him, using that notice to establish a straightforward debt.


Use the ECA Debt Recovery Service – contact Effective Credit Collections, giving the brief details required. They will write to the debtor (letter before action) and ask for payment on your behalf. This action alone by a third party often results in payment. The letter before action for your debt is paid for by the ECA as a membership benefi t. If payment is not made, Effective will advise on further action. Any service carried out beyond the fi rst letter is payable by the member, at a preferential rate previously negotiated by the ECA.


Interest may be charged on late payment, but ensure that the correct procedure is used. Most contracts now have a provision to charge interest when payment is not made by the fi nal date for payment. The rate of interest is normally stated as a percentage over and above the current bank rate. If this type of clause is in your contract, then you are bound by it and that is the procedure to use.


Q A


When there is not a contractual clause for interest, the


terms of the Late Payment of Commercial Debts (Interest) Act 1996 and Supplement becomes an implied statutory term in your contract. Before charging, you must serve notice on the other party that interest will be charged. Interest is chargeable on late payment, from the fi nal


I am continually receiving payment late and this is costing me money. Can I charge interest when they pay me late and, if so, how much?


I’m working on a project and everything’s going well. I applied for payment properly and the contractor issued a payment notice, reducing my


claim slightly, but I have no argument with that. Now the fi nal date for payment has passed and I haven’t received payment. When I call, he makes excuses about staff being on holiday and not having been paid himself – what can I do?


There are two points to make. Firstly, the fact that he hasn’t been paid or issued with an interim certifi cate is no concern of yours – he is in contract with you


Don’t accept pathetic


excuses without challenging them


date for payment and at the rate of 8 per cent above Bank Rate, as notifi ed on 31 December and 30 June each year. This is currently 8.5 per cent. ECA members are informed of the rates every six months via circulars and The Source. In addition to interest, the Act provides for payment of fi xed compensation sums on debts as follows:  Up to £999.99 – £40;  From £1,000 to £9,999.99 – £70; and  Over £10,000 – £100.


Don’t accept pathetic excuses without challenging them – the contractor will be unable to defend these comments against logical arguments and will hopefully drop any pretence in future. When you have the facts, demonstrate in writing that the cheque could not have been in the post, as it was raised and posted after your conversation.


Q A


so I wasn’t entitled to payment. I thought the contractor was supposed to send the payment notice to me. What is he talking about?


after 1 October 2011.


Q A


About the author


Ken Tracey Ken Tracey is the ECA’s head of Commercial, Contracts and Legal.


The sequence is that the subcontractor’s application is submitted in accordance with the requirements of the subcontract. The due date can be established with reference again to the subcontract. The contractor has the opportunity to issue a payment notice to the subcontractor, stating the sum he intends to pay; if he does not issue the payment notice within fi ve days of the due date, then the subcontractor must immediately issue his own payment notice back to the contractor (this will state the value of the sum originally applied for). The subcontract may provide for the application alone to become the subcontractor’s payment notice if the contractor should default. In this case, no further notice is required.


The sum stated on the notice is the sum due unless a


notice to pay less is issued by the contractor to reduce it. The pay less notice must be issued an agreed number of days before the fi nal date for payment.


July 2012 ECA Today 41


He is referring to the payment procedure covered by the Amendments to the Construction Act 2009, which applies to construction contracts entered into


The contractor is passing on his cash fl ow problems to you. The fi nal date for payment means what it says: it is the contractor’s contractual responsibility to get payment to you by that date.


The problems and excuses surrounding cheque payments can be eliminated by switching to BACS for making and receiving payments.


I submitted my payment application on time, but when I chased the contractor for payment he said that I hadn’t submitted a payment notice,


When I complain that I haven’t been paid, the contractor makes excuses such as ‘the director is on holiday and can’t sign the cheques’, or ‘the cheque is in the post’. When I’m fi nally paid, I can see from the dates on the cheque and postmark that it was not in the post when I spoke to them. What can I do to speed payment up?


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