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Amendments to Act will provide more certainty

You submit an interim application for payment, including full details of your application and attach the relevant supporting documents.

If you’re lucky, you’ll get paid an amount which is less than that claimed; if you are unlucky, you may get no response until you start to chase payment.

If you’re really unlucky you may have to go to adjudication. Once you dispute the valuation, you are unlikely to receive anything until you arrive at an agreement or go to adjudication.

This is not how the Construction Act was intended to work. Under the Act, the paying party cannot withhold payment after the final date for payment of a “sum due under the contract”, unless there has been a “notice of intention to withhold payment”. Such notice has to be “effective”.

It must state the amount proposed to be withheld and the grounds for withholding, and each ground must be stated as well as the amount attributable. The notice must be given within a period before the final date for payment.

Many firms complain that they do not receive withholding notices. They often find the payer has paid less than the amount claimed, but is the withheld payment from a “sum due under the contract”?

As a result of this uncertainty, your payer is able to get away with not having to issue a notice of withholding, which undermines the Construction Act. There is no requirement in the withholding notice for the payer to state the amount that he considers to be due.

Where a payer is exercising a right of set-up as justification for withholding monies he must provide more information. When imposing a set-off, the payer is required by law to set out the circumstances and provide justification for his counterclaim.
Changes to the Construction Act will come into force on 1 October 2011, including the introduction of a notice procedure for defining the amount to be paid.

Contracts will have to state that either the payer or payee issues a notice within five days of the due date stating the amount due for payment. The payer can issue a “notice of intention to pay less”.

The contract will have to state the period in which such notice must be issued. The notice must state the “basis of the calculation”.

If a notice of intention to pay less is not issued, the payer must pay the amount stated in the initial notice. This will bring a lot more certainty and enable the payee to be certain of where he stands.

Professor Rudi Klein is chief executive of the Specialist Engineering Contractors’ Group