Late payment ruling

The Court of Appeal has ruled in favour of a contractor that terminated a contract with its employer following repeated late payments.

In the case of Providence Building Services Limited v Hexagon Housing Association Limited, Lena Barnes, Senior Associate at Devonshires Solicitors, wrote in Construction Management that “the Court of Appeal’s judgment has introduced a significant risk to employers everywhere who, in the event of a specified default, will face the proverbial sword of Damocles for the remainder of the contract”.

Employers will now be subject to a ‘two strikes and you’re out’ regime. Any parties currently in contract will need to review the existing termination provisions to establish whether the standard clauses (addressed by the judgment) are incorporated.

“If they are, then – for the contractor – it means that if the employer is late making a single payment, even by one day, the contractor may be entitled to serve a default notice. If it happens again, the contractor may then be entitled to terminate – even if the previous late payment is promptly cured by the employer,” Barnes wrote. “This will be a potentially powerful tool in the armoury of a contractor who wishes to exit an unprofitable project.”

Read more at b.link/CM_payment

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