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The payment dates in the subcontract I've signed don't add up

We have signed, and the payment clause, the schedule of dates and an amendment each give a different due date.

Updated: . By Jack Butler-Kettle, Construction Claims Consultant.

What's happening?

Payment terms come from several places: the clause itself, a schedule of dates, the particulars and any amendments. When each is written separately, they can disagree. One can set a due date before the application. Another can fix the final date for payment by a clause the amendments deleted. A notice period may be impossible to meet on the dates given.

This is not a detail. The dates decide when your main contractor must send a payment notice. They also set the deadline for a pay less notice, the notice it must send if it plans to pay you less than it said. They decide when you can suspend work for non-payment, and when the sum you applied for becomes the sum due. If nobody knows the dates, nobody on either side knows when those rights arise.

If the payment terms in a construction contract are inadequate, the Housing Grants, Construction and Regeneration Act 1996 can replace them. The replacement terms come from Part II of the Scheme for Construction Contracts (England and Wales) Regulations 1998. Which terms govern your subcontract is a question for your solicitor. Working out which dates the paper actually gives, and where they conflict, is not.

The solution

Put every payment term in one place, from each document that states it. That means the application date, the due date, the notice dates, the final date for payment and the retention dates. Mark where they conflict or cannot be met. Test the result on a real month of your programme before the first application goes in. Then write to your main contractor proposing the dates you will both work to, and keep the reply.

Post-Signing Contract Review sets out what you have committed to and flags the terms that may not work as written. Your team gets a cheatsheet and a diary of every date.

Example

Illustrative example. The scenario and figures are invented.

The facts

A groundworks subcontractor signs a £760,000 subcontract. The payment clause makes each payment due 14 days after the application. The schedule of dates says applications go in on the 25th of each month. An amendment makes the due date the day the main contractor receives its own valuation.

What happens

  1. The subcontractor sets the three side by side. The clause gives a due date of the 8th of the following month. The amendment gives a date the subcontractor cannot see.
  2. The amendment ties payment to the main contract. The subcontractor flags it as a term that may not work as written and sends it to its solicitor.
  3. Using the clause's dates, it works out the final date for payment, 21 days after the due date, for each month of the programme. It does the same for the pay less notice deadline.
  4. It writes to the main contractor proposing the 25th and the 8th as the dates both sides will work to. The main contractor agrees in writing.

The dates the paper gave for a 25 March application

DocumentDue date
Payment clause8 April
Schedule of datesNone given
AmendmentWhen the main contractor's valuation is received
Agreed in writing8 April

The outcome

The first application goes in on 25 March. The due date, the notice deadlines and the final date for payment are already in the diary. The team knows the day each notice is due, on either side.

Sources

  1. Housing Grants, Construction and Regeneration Act 1996, Part II (Construction contracts), as amended by the Local Democracy, Economic Development and Construction Act 2009, Part 8. legislation.gov.uk.
  2. Scheme for Construction Contracts (England and Wales) Regulations 1998, SI 1998/649, Schedule, Part II (Payment). legislation.gov.uk.