Payment arrangements in construction contracts can sometimes be challenging to grasp, leading to unexpected situations. In this comprehensive guide, we’ll shed light on crucial details about payment provisions in construction contracts, helping you navigate the process with confidence and ensuring you understand your rights and obligations.

Understanding the Construction Contracts Act (CCA)

The Construction Contracts Act (CCA) lays down important provisions concerning payment arrangements and claims within construction contracts. To avoid any disputes or complications, it’s essential to grasp these provisions and the impact they have on your construction project.

Defining ‘Construction‘ in the CCA

The definition of ‘construction‘ under the CCA is broad, encompassing a wide range of activities. It includes:

1. Construction, erection, installation, alteration, repair, restoration, renewal, maintenance, extension, demolition, removal, or dismantling of buildings or structures.
2. Installation of various fittings, such as heating, lighting, air conditioning, and more.
3. Internal or external cleaning during construction.
4. Site clearance, foundations, and excavation.
5. Erection, maintenance, and dismantling of scaffolding or cranes.
6. Painting, decorating, and design/engineering work.
7. Quantity surveying related to construction.

Prohibiting Conditional Payments

The CCA strictly prohibits conditional payment provisions, often referred to as “pay when paid” or “pay if paid” clauses. This prevents situations where payment to one party depends on another party receiving payment.

Default Payment Arrangements

When there’s no written contract or the contract lacks specified payment terms, the CCA provides default mechanisms for payment. These arrangements empower contractors with the right to receive progress payments.

Progress payments are calculated based on the relevant period, the value of construction work, and provisions in the construction contract. The relevant period typically starts when construction work begins and extends for one month (“first period”). Subsequent progress payments occur monthly.

Key Aspects of Payment Claims

A valid payment claim must adhere to specific criteria, ensuring a smooth process:

1. Be in writing.
2. Identify the construction contract.
3. Specify the construction work and the relevant payment period.
4. State the claimed amount and its due date.
5. Explain the method used to calculate the payment.
6. Explicitly state that the claim is made under the CCA.

Clients Who Fail to Pay

If a client fails to pay the claimed amount or doesn’t initiate a payment process, contractors have the right to pursue legal action to recover the claim, including legal fees. They can also suspend work after providing notice to the client. Importantly, such suspension does not constitute a breach of contract.

No Exclusion of Payment Rules

The rules outlined in the CCA are not subject to exclusion in any contracts, even if both parties attempt to agree otherwise. Any contract provision seeking to exclude these rules is void and ineffective.

Seek Legal Advice

To ensure the effectiveness of your payment arrangements and safeguard your construction project, early legal advice is essential. Legal professionals can guide you through the intricate details, helping you make informed decisions at every stage of your construction project.