Contractors can’t stop working if not paid

Contrary to what many contractors assume, there is no provision in most building contracts that would legally permit the contractor to suspend work if the employer fails to pay by the due date, nor are there contractual rights to remove materials and goods from site, says Uwe Putlitz, CEO of the Joint Building Contracts Committee (JBCC).

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JBCC is a non-profit company that represents building owners and developers, professional consultants and general and specialist contractors who all provide input for the compilation of JBCC Agreements that portray the consensus view of the committee’s constituent members.

Putlitz says if the contractor is not paid on time, he or she would need to compel the defaulting employer to honour the contract, or seek other methods of obtaining payment. “The contractor could, for example, offer the employer payment terms and, should the employer still not pay, the contractor could then have the contract cancelled and sue the employer for damages.”

Putlitz says contract payments basically fall into two categories:

  1. Interim payments, based on valuations prepared by the principal agent for work done at a given point. These are usually prepared monthly by no later than a specified date and repeated every month until the final payment. The valuations should represent the total amount of work carried out to date, including unfixed materials and goods procured by the contractor, less any amounts previously certified.

    “While the obligation to prepare the valuation and issue the certificate rests with the principal agent, the contractor is required to assist him or her to determine the valuation by preparing and supplying a claim for payment incorporating measurements and valuations based on the bill of quantities of duly completed work, and material and goods, together with relevant documents, such as invoices.

    “The valuation should incorporate the cost of work done by the subcontractors and include materials and goods supplied by them. This payment method is used in commercial and larger residential or commercial type projects,” Putlitz explains.
  1. Progress payments, based on pre-determined milestones, are payments for work completed or progress achieved. For example, when the surface bed has been cast or the roof has been installed, the contractor would be paid the amount that was stipulated in the contract schedules. This type of payment method is used where no bills of quantities have been used and is mainly employed for smaller type projects.

    Putlitz adds, “The employer is obliged to pay the amount certified, or pay the pre-determined progress payment within a reasonable time, usually seven calendar days of the date of issue of the certificate or the contractor providing the employer with an invoice for the amount certified, or for the pre-determined progress payment amount.”



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