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Getting paid is ‘all in the paperwork’

A construction law expert is warning of the importance of making sure that parties involved in a construction contract adhere to payment terms or risk serious consequences.

Leigh Child, solicitor in the Construction & Engineering team at North West law firm Napthens, explains that commercial construction contracts are required by law to contain adequate payment provisions. These deal with issues such as how and when payments are made, and the final date for payment.

If these provisions are missing from a contract, a statutory scheme comes into force.

Now Leigh is warning that recent court cases have illustrated the importance of observing payment provisions. In one case, the courts ruled that because an employer didn’t follow the contract, they were liable for the contractor’s costs, and would have to defend a costly winding-up order which, if unsuccessful could leave the business insolvent.

Leigh warned: “Ensuring that a business follows payment provisions does not have to be difficult.

“There are a few easy steps they can take: such as ensuring the contract contains payment provisions setting out how and when a contractor is to be paid – and if not, make sure to be familiar with the default statutory requirements.

“Next, stick to any payment provisions whilst works are ongoing, and clearly label all payment correspondence.

“Finally, adhere to any payment timetable set out in the contract or, if appropriate, as agreed between the parties at a later date.

“Businesses in any doubt should contact their legal advisor for further advice.”