Payment naivety ?

Getting paid.

A long running dispute revolving around late payment when using the JCT(16) Design and Build Standard Form of contract has now finally been settled by the Supreme Court. The case goes back to 2022 when an employer failed to pay two invoices timeously and the contractor issued a notice of termination. Since 2022 members of the legal profession have made a good living as the case has escalated from adjudication in 2023, who found in favour of the client to the Court of Appeal in 2024 who found in favour of the contractor to the Supreme Court in 2026 who found in favour of the client. Kerching!!

Briefly the details are that the contractor, Providence Building Services, entered into a JCT(16) Design and Build Contract with a housing association, Hexagon. An application for payment on account for around £250,000 was made and Hexagon was late with their payment so the contractor issued a notice giving the client 28 days in which to pay or they would down tools. As it happened the account was settled with 28 days. Subsequently, another interim payment for about the same amount was not paid on time and the contractor, who was getting pretty hacked off at this point decided they had had enough and attempted to terminate the contract on the basis that this was the second time that payments had been missed. However, the contract only allows this course of action when the first payment is not settled within the 28-day notice, leaving the contractor with no choice but to like it or lump it. The ruling clarifies how termination mechanisms in the standard JCT Design and Build Form operate, on repeat breaches such as late payment. Contractors cannot rely on one, in this case, late payment in isolation, they must first have had an accrued right to terminate, before a repetition of default provides a valid ground for termination. While the judgement has been widely welcomed by clients, I wonder what contractor’s think, was Providence just naive to expect to be paid on time ?

Duncan Cartlidge FRICS

duncancartlidgeonline.com

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