You may have the right to interim payment. Any construction contract under which the works are to take longer than 45 days is eligible for interim payments. The parties are free to agree when such payments will fall due and the value of those payments.
However, the Act mandates that a construction contract must set out an 'adequate mechanism' for determining when and what payments become due. If a construction contract does not contain such a mechanism, the Scheme applies. The requirement for an adequate mechanism is not met if:
- the contract makes payment conditional on the performance of another contract, unless those contracts are sub-contracts; or
- the contract specifies that the due date for payment is calculated by reference to service of a payment notice (i.e. the contract provides that if a payment notice isn’t served then payment isn’t due).
We will use the SBCC Design & Build Contract 2016 (the "Contract") as an example again. The Contract provides two methods of interim payment; stage payments or periodical payments. The Contract particulars will specify which method is to be used. Stage payments are linked to completion of specified stages of work, which are to be detailed in the Contract particulars. Periodic payments are payable at regular intervals, normally monthly unless otherwise specified. Periodic payments is the most commonly used method of interim payments. Under the Contract the Contractor should submit a payment application by the relevant Interim Valuation Date.
When a construction contract does not comply with the Act, the Scheme provides for periodic payments based on the value of the work performed by the contractor in a relevant period.
To trigger interim payment under the Scheme, the contractor must make a payment claim. The due date for interim payment is either seven days after the 'relevant period' or upon the making of a claim by the contractor, whichever comes later. The relevant period is specified in the contract or calculated with reference to the contract. If the relevant period is neither specified nor calculable it is 28 days.
Next week we will look at whether applications for payment need to be issued. If you haven’t read our previous payment blogs they can be found here.
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.