This month’s contract clinic comes from a vexed contractor whose client failed to issue a payment-on the grounds that the application was not valid. Adam Kitchin at Hill Dickinson LLP looks at the options available.
The Question
We’re fitting out a new office in the Midlands for a recruitment company. We submitted an application for an interim payment, to cover our costs, payment to be made on account. We made it quite clear this was an application for payment in accordance with the contract. The employer failed to issue a payment or pay less notice and did not pay the sum applied for. They now claim that our application wasn’t a “valid application for payment”. What can we do?
The Answer
You could commence adjudication proceedings and argue that in the absence of a payment notice or pay less notice, the application for payment became a payee notice in default, and the amount in the application (the notified sum) was therefore payable by the employer. However, you may need to respond to an argument from the employer that the application for payment was invalid.
There are many ”technical” arguments that have reached both adjudication and the courts over whether or not an application is a valid application on a technicality. This is not an uncommon scenario.
There are several requirements for an application for payment (AFP) that must be followed. If these requirements are not followed, then the AFP could be deemed to be invalid.
Requirements for applications for payment
The Construction Act, and the Scheme for Construction Contracts (if the Scheme applies to your contract) set out the key requirements for valid AFPs and those must be met to ensure any AFP is valid and capable of generating an entitlement to payment. They include:
- The sum that the payee considers is due or was due at the payment due date.
- The basis on which that sum was calculated.
- Notification to be given in accordance with the contract.
- The AFP should be clear and free from ambiguity.
There is also a requirement under paragraph 2 of the scheme to calculate the amount applied for as the value of the works carried out, less any sums paid at the point of issuing the AFP.
Read the full response in Construction Management Magazine.
If this is an issue you’re dealing with, get in touch with our team today.