Problem: Problem with construction delays and interim payments:
My building company was approached by a local business in 2017 and asked us to price for building an extension to an existing warehouse. Having submitted a price, we were subsequently informed that we were in the running for the construction contract and a meeting was arranged to discuss and agree on certain terms, such as the start on site.
During the meeting, we also discussed payment. The form of contract agreed was the JCT Intermediate Form, and the client proposed that payment dates as opposed to payment periods, which was something to do with the way the client’s business accounts were set up. We, therefore, agreed the dates, which worked out roughly every 5 weeks, with the final date being in May 2018, which coincided with the completion date.
However, the contract has been severely delayed and come July, we wanted to make a further application for monies on account and although initially, the contract administrator said he would process this payment, the client has since stated that we are due no further interim payments until we complete the whole of the works, because the contract stipulated dates for payments and not periods.
Our company’s cash flow is really suffering because of this building dispute. What can we do?
Response: Construction dispute resolution advice:
The very issue of a contractor’s entitlement to interim payments was decided in the High Court case between Grove Developments Limited and Balfour Beatty Regional Construction Limited in 2016, and the outcome was not in your favour.
In that case, the parties had agreed to a payment schedule and when the works were delayed, the contractor sought monthly payments and relied on part 2 of the scheme for construction contracts.
Unfortunately for the contractor, the court held that where a payment schedule was agreed, this satisfied the requirements of the Housing Grants, Construction and Regeneration Act 1996 (also known as the Construction Act) (as amended), insofar that the contract contained an adequate mechanism for determining when payments become due. It is immaterial that the parties had agreed to a payment schedule that ignored delays.
Unfortunately, therefore, you are not entitled to any further interim payments until you complete the works.
© Michael P. Gerard
The advice provided is intended to be of a general guide only and should not be viewed as providing a definitive legal analysis.