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pool&SpaIndustry AUG 2010 spN
How to get paid in a difficult economic climate
Stuart Thwaites from Wright Hassall Solicitors outlines a number of steps you can take to increase your chances of getting paid the right amount at the right time
I
n the current economic climate more and more SPATA members are encountering problems with getting paid the right amount, at the right time. Members are not alone in
this respect, as it is a problem across the construction industry in general. Clients come up with various reasons to pay either a reduced amount or in some cases nothing at all. Sometimes there are genuine problems which need to be resolved, but especially in today’s climate often there is a desire simply to reduce the price of the works or delay payment. There are however various steps you can take
to improve your chances of getting paid the price you agreed and on the date(s) you agreed.
1.Make sure you get a contract in writing. This may seem obvious, but there are many disputes where parties do not enter into a written contract, or where the contract does not set out all the relevant terms. This gives fertile ground for argument, as it will often turn on contested oral evidence – who said what, to whom, and when, and what was agreed. SPATA already produces a set of contract
terms and conditions for members, which we drafted for them. However for those who prefer to draft their own contracts, here are some examples of key terms to include in your contract, and some terms to try and avoid if presented with a contractor’s proposed terms.
2. Payment dates. It is not enough to say that you will get paid on a certain date. You need to make clear what date payment becomes due on, and the final date for payment.
3. Set off provisions. When acting as a subcontractor or supplier to another contractor, watch out for set off provisions. These enable the contractor to set off against money it owes you on one project, monies it
claims against you in another unrelated project you are also working on for them. Without such a clause, the contractor cannot do this.
4. Set out the payment process. For example will you be paid on your application, or will there be a payment certificate issued.
5. The right to suspend. Make sure you include the right to suspend due to non payment. For contracts where the Housing Grants, Construction and Regeneration Act (“the Act”) applies, you will automatically have that right. But where it does not apply (such as a contract with a person in relation to their residential dwelling), you will need a written clause to that effect.
6. Notices of intention to withhold payment. If the client wants to withhold payment from monies due to you, they must set this out in a notice. Again, where the Act applies you already have that right, but otherwise this must be expressly agreed, preferably in writing.
7. Additional works. If additional works are instructed, set out how they will they be valued.
8. Dispute resolution. Set out how disputes will be resolved. The default option is of course litigation. However consider also a clause entitling you to also adjudicate your dispute. Again where the Act applies, you automatically have that right. But where it does not apply, it would be beneficial to you to include the contractual right to adjudication in your contract. An adjudicator will give a binding and
enforceable decision within 28 days of the dispute being referred to him, and each party bears their own costs of the process (which reduces your risk exposure if your claim does not succeed). By contrast, litigation through the courts can take a year or sometimes more,
and there is the risk that if you lose you could be liable for the client’s legal fees (though there are steps you can take to protect yourself on this). As a result adjudication is a quicker and
often more cost effective way to get an enforceable decision on whether money is owed to you. If the client will not comply with an adjudicator’s decision, it can be enforced through the courts by a special expedited process known as summary judgement.
9.What if the client says he cannot pay you? If a company cannot pay its debts as they fall due, this is evidence of insolvency. The issue of a statutory demand can often result in payment. Very often when a company says it “cannot” pay you, it does not necessarily mean it has absolutely no money. Rather, it may mean they will only pay out to those who press hardest for payment. Beware of taking steps to wind a
company up. This can be a powerful tool in persuading a company to pay you. However if the debt is not disputed, the insolvency court will not wind the company up and you may be faced with a large bill for the client’s legal costs.
There are of course alternative forms of dispute resolution, the most familiar being mediation. This can produce a successful negotiated settlement to a dispute, but beware that the client does not use it as a further delaying tactic. In this article there is only very limited space to
go through these issues. However as a benefit of SPATA membership we provide 20 minutes of free initial advice on any dispute to SPATA members.
i for fUrthEr iNforMatioN
F wright hassall llp ( 01926 884690 :
stuart.thwaites@
wrighthassall.co.uk
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