Can they take liquidated damages without a Pay Less Notice?
No, not from a sum already notified as due: to pay less than that, your main contractor must give a Pay Less Notice in time.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
The answer
Liquidated damages are no exception. The rule is in section 111 of the Housing Grants, Construction and Regeneration Act 1996. Your main contractor must pay the notified sum by the final date for payment, unless it has given a Pay Less Notice. That notice must be given within the period the contract sets before that date. It must state the sum your main contractor considers due and how it was worked out. So check which notice carried the deduction. If your main contractor's own Payment Notice already showed the damages and how they were worked out, the notified sum is the lower figure. If the notified sum is your application, or a Payment Notice that did not show them, a Pay Less Notice in time was needed. Your subcontract may also require its own notices before damages can be deducted at all. A missing notice decides that payment cycle, not whether damages are due in the end. That can still be argued in a later cycle or in the final account.
Example
Illustrative example. The scenario and figures are invented.
The facts
No Payment Notice is given against a subcontractor's application for £62,000, so the application stands as the notified sum. The subcontract requires any Pay Less Notice at least 7 days before the final date for payment.
What happens
- The main contractor emails 2 days before the final date, saying it will deduct £15,000 of liquidated damages, and pays £47,000.
- The subcontractor writes that no Pay Less Notice was given in time, and demands the £15,000 as part of the notified sum for that cycle.
- The main contractor pays the £15,000 and keeps its damages argument for the final account.
The outcome
The £62,000 is paid in full for the cycle. Whether any damages are due is argued separately at the final account, against the completion date as extended.
A missing notice decides the payment, not the damages.
Our Delay Damages Claim service tests the notices behind a deduction as well as the arithmetic.