When was the last time you really read your T&C? It can be a shocking experience.
One of my favourite exercises, in my Contract Awareness workshop, is to ask a company to review in detail some of the potential showstoppers in typical T&C that they have signed. This often leads to wide-eyed gasps when the delegates try and answer simple questions like “when will you get paid?”
Here are some sample clauses for you to interpret (anonymised to protect the guilty):
Not later than the date which is four weeks after the Practical Completion Date, the Contractor shall provide to the Employer for discussion purposes his draft final account… Such draft final account shall not constitute a payment notice… The due date for the final payment shall be the date falling eighteen months after the original target date for completion of the Works, or if later the due date for the final payment shall be the date when the Contractor has finally performed his obligations in relation to defects… The final date for payment of the final payment shall be forty five days from its due date.
Payment of the contractor’s final account will be nearly 600 days after practical completion. The contractor was astonished – not only did it not realise that this was the effective payment period, but it seems the employer didn’t either (as it regularly paid within 4-5 months).
The effect of this clause is to encourage the contractor to increase its penultimate application, so there is less money held over for 20 months! It is effectively an extra retention, without the money being held on trust or any guarantee of it ever being paid. Why should the contractor grant this length of credit for free?
The specific dates for the Contractor’s applications and the Employer’s valuations/payments are shown in the Appendix.
- For every day the application is received late the Employer reserves the right to extend the final payment date by the same amount of days the application is received late
- The due date for the Employer’s valuation shall be 7 days post-date of application being received unless stated otherwise in the Appendix
- The final date for the Employer’s payment notice/valuation certificate to be provided to the Contractor is 7 days post the due date unless stated otherwise in the Appendix
- The final date for the Employer to issue a payless notice to the Contractor shall be no later than 1 day before the final date for payment unless stated otherwise in the Appendix
- The final date for payment to the Contractor shall be no later than 28 days following the due date unless stated otherwise in the Appendix
The repeated references to ‘final dates’ is entirely unnecessary and confusing. The Construction Acts 1996 and 2009 require construction contracts to include final dates for payment, but not final dates for notices or valuations.
Unless otherwise detailed any payment of periodic payments shall become due 29 days after the making of a claim for payment by the Contractor… The final date for the making of any payment under the Contract shall unless otherwise stated is 31 days from the date that payment becomes due.
Although these two clauses are easy to read together (as they are successive clauses), the use of the passive voice means that it is not clear who is carrying out the relevant acts of making a claim and paying.
What should you do?
Frankly, this sort of convoluted drafting has no place in an industry striving for fair payments, collaborative relationships and a long-term integrated supply chain. You can stamp out these practices by spotting these showstoppers and asking for the periods to be changed.