This issue has been considered by the English courts in the case of Grove Developments Ltd v Balfour Beatty Regional Construction Ltd. The contract provided for 23 interim payments but didn’t say what would happen if the contract overran. The court decided that the contractor had no right to apply for or be paid any further interim payment after the 23 contractual interim payments. The contractor could only then apply for payment under the final payment mechanism after practical completion had occurred.
The court took the view that the contractor had made a bad bargain and it wasn’t for the court to relieve the contractor of their failure to negotiate more protective payment terms. The contractor appealed but the Court of Appeal upheld the decision. The court confirmed that the lack of provision for payments in the event of the contract overrunning was not reason enough for the Scheme provisions to kick in and allow further payment. The court also rejected the contractor's argument that there was a fresh contract for monthly interim payments after the expiry of the original payment schedule.
The Court of Appeal suggested that a payment schedule specifying payment being due on a date of the month rather than the specific date and month, might get round the issue in Grove. There is no reason to believe that the Scottish Courts would take a different view. Each case will of course turn on the terms of the contract itself.
We recommend that parties agree a non-exhaustive schedule of valuation dates. Parties should also take care to ensure that any payment schedule is clear, accurately reflects what has been agreed and reflects the deadlines for service of payment and pay-less notices. Parties should also ensure there is a payment schedule incorporated into the contract, as failure to do so may engage the terms of the Scheme in relation to payment due dates and final dates.
Should you require assistance with any aspect of a construction contract, we have a large and experienced construction team who would be happy to discuss this with you.
