Payment provisions: the importance of clarity

United Kingdom

This article was produced by Nabarro LLP, which joined CMS on 1 May 2017.

We have recently commented on the TCC's strict interpretation of payment provisions under construction contracts when reviewing provisions relating to Payment Notices and Interim Applications for Payment. A further decision issued by the TCC on 14 August 2015, Henia Investments Inc v Beck Interiors Ltd [2015] EWHC 2433 (TCC), considered interim applications further and pay less notices.

Key principles arising from the case are as follows:

  • Applications for payment "must be clear and unambiguous that an application relating to a due date is being made"; and
  • A pay less notice can be used not only for deducting liquidated damages but can also be used where the employer does not agree with the contract administrator's valuation of the works; and
  • (obiter) failure by the contract administrator to comply with the liquidated damages provisions in a contract does not preclude the ability for the employer to be entitled to such damages.

Mr Justice Akenhead acknowledged that the statutory requirements in the Housing Grants, Construction and Regeneration Act 1996 (as amended) "have led to unnecessarily complex provisions, not least those dealing with the consequences of failure to comply with timing provisions." 

The TCC's comments surrounding contract administration relating to payment provisions are consistent with recent case law and further emphasise the need for strict compliance with payment terms and clarity in applications and notices alike.