Contractual Bullying: Payment Hurdles

Although you cannot avoid mandatory legislative requirements, such as the right to suspend or claim interest for late payments, some unscrupulous payers include unenforceable conditions, perhaps hoping the other does not know the law?!

Another vexatious approach is to make compliance with a legal right almost impossibly tricky, creating hurdles to deter the other party from relying on their legal rights.

Payment hurdles

One example I came across in a subcontract said:

If the Contractor fails to issue a Payment Notice then the Subcontractor may serve a default payment notice. Any such notice shall only be valid if (1) sent by recorded delivery and (2) marked for the attention of the Group Financial Director and (3) if it sets out the sum the Subcontractor considers to have been due on the due date for payment and (4) the basis of its full calculation and (5) provided it includes full supporting information which the Contractor may require.

Five hoops! If any one of those hoops is missed or stumbled over, the contractor will argue the notice is not valid and the subcontractor is not owed a penny. Shame on it!

The legislation on which this clause is based (which is hardly a model of clarity itself) says the notice needs to set out:

(a) the sum that the payee considers to be or to have been due at the payment due date in respect of the payment, and (b) the basis on which that sum is calculated s110B(2) & s110A(3) Construction Act 1996

The contract clause is deliberately intended to undermine the legislation. It is little more than playground bullying.

What should you do?

Firstly, make sure you know your rights. Read contracts and challenge anything which appears to undermine those rights – and don’t just sign them away!

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