The result of legal action by AMW Plumbing and Heating against Zoom Developments has highlighted the fact that standard retention provisions do not consistitute an adequate mechanism for determining when these are to be released.
AMW was initially awarded a contract by Zoom Developments to install plumbing and heating equipment on a development of 65 new build flats in Cumbernauld in three separate blocks.
Blocks one and two were completed, but Zoom then decided to delay work on the third block, which it felt entitled to do under a clause in the contract.
Payment had been made to AMW for its work on the first two blocks, apart from a retention of 5 per cent, which the contract said would be reduced by half on completion of the development.
With no prospect of work commencing on the final block, AMW demanded its retentions, which Zoom refused, resulting in the court action.
Announcing the decision, the Sheriff Principal said: “I fail to see how it can be deemed adequate for contractors to have to wait for their employers to take a particular step which they alone control before the contractors can receive payment for work properly carried out in comformity with the contract.
“In the present contract Zoom control when practical completion can be achieved and thus when the retention falls to be paid.”
The contractual clause was supplanted by the Scheme for Construction Contracts, comprised as a fall-back when a contract fails to conform to the requirements of the Construction Act.
The Specialist Engineering Contractor Group states that this decision is of direct and immediate relevance to most sub-contract provisions, explaining that the case has provided sub contractors with the ammunition to challenge retention provisions that result in delays to the release of retentions.
The provisions will be outlayed on 1 October 2011 when amendments to the Construction Act come into force, says SEC.