Stage payments / instalment payments under construction contracts

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Facts

Grove appointed Balfour Beatty on JCT Design and Build 2011 with bespoke amendments including a schedule of 23 dates of valuation and payment ending on the date of practical completion.  The work however carried on beyond the period covered by that payment schedule and Balfour Beatty made a 24th interim application for payment.  The Employer’s position was that the Contractor had no right to further interim application but had to finish the overall job before any further entitlement to payment fell due.

Held:

  1. Section 109 of the Construction Act 1996 provides that all construction contracts should include provisions for instalment or stage payments where the work is going to last more than 45 days, but the parties are free to agree the amounts of those payments and the intervals at which they become due.
  2. If the parties do not come to such an agreement then the statutory Scheme for Construction Contracts imposes an entitlement to instalments every 28 days but in this case there was an agreement for instalments, and therefore the statutory scheme did not apply.
  3. There was no entitlement on the Contractor to receive any interim payments beyond the 23 which he had negotiated and agreed at the formation of the contract. Grove were granted a Declaration that Balfour Beatty had no right to make a 24th interim application and had to finish the works before further payment entitlement arose.

Comment

There is a lot of confusion about the precise operation of the provisions of the HGCRA Act and there is an assumption that wherever there is perceived to be a gap in the parties’ contractual arrangements, the Scheme steps in.  In fact the Scheme only applies where the parties have failed to reach agreement upon the topics which it covers.

The fact that that agreement may not work very well is irrelevant.

For more information, contact Robert Langley on 0191 211 7957 or at [email protected].