Contractors beware! What happens when you run out of dates for interim payment - Royds Withy King Solicitors

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4 February 2016 0 Comments
Posted in Construction

Contractors beware! What happens when you run out of dates for interim payment

Posted by , Partner

Partner Andrew Ash looks at the latest ruling in Grove Developments v Balfour Beatty, and what this means for contractors.

In a recent decision of the Technology and Construction Court, Grove Developments Limited v Balfour Beatty Regional Construction Limited [2016] EWHC 168 (TCC), Mr Justice Edwards-Stuart decided that the contractor’s entitlement to receive interim payments under the Housing Grants Construction and Regeneration Act was not necessarily co-extensive with the actual duration of the works.

In this case, which concerned a JCT Design and Build Contract, the works were delayed well beyond the last date stated in the agreed schedule of dates for interim payments. The contractor continued to submit applications for interim payment believing they were entitled to do so. Indeed, the employer’s team continued to issue payment notices in response to these applications.

However, in his decision Mr Justice Edwards-Stuart said:

“While I can accept that the default position if the scheme provisions on payment are imported and apply in full may be that interim payments will continue throughout the carrying out of the works so as to cover the work as it is done during the entirety of the contract period, that does not affect the ability of the parties to contract on a different basis if they chose to do so”.

In this case, the parties had agreed a series of dates for interim payment and by doing so, in Mr Justice Edwards-Stuart’s view, had agreed an adequate mechanism for determining when interim payments fell due. The fact that the parties had then run out of dates while the works were still being completed did not render this contractual mechanism “inadequate” for the purpose of sub-section 109(3) of the Housing Grants Construction and Regeneration Act.

In these circumstances, the contractor was not entitled to make any further interim payment applications, even though there was still some way to go to complete the works.

This is rather a startling decision – certainly for contractors. In light of this, contractors will be well advised to make sure that if they are asked to agree a schedule of dates for interim payment, then express provision is also made for what should happen in the event that the duration of the works lasts beyond the last date stated in the schedule. Otherwise, the contractor could be in for a very nasty and rather costly surprise.

For advice on construction and engineering legal issues, contact our team of experts

0800 923 2063     Email usconstruction.enquiries@roydswithyking.com

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