“Pay less” notices: the contractor’s payment prerogative?19/03/18
The payment provisions of construction contracts can often lead to disputes between property developers and contractors.
This insight considers the impact of two recent Court cases which have tested the application of pay less notice clauses.
Overview: recent case law
- Adam Architecture v Halsbury Homes provides that a paying party should serve a pay less notice if it wishes to challenge any claimed contractual sum. Failing that, they should pay the stated sum and then bring a challenge later, rather than attempting to withhold payment.
- Grove Developments Ltd v S&T shows that a paying party who has not served a valid pay less notice may still seek to challenge the “true” value of sums which are stated to be due under construction contracts after they have been paid.
- Both cases suggest that a paying party should either serve a pay less notice or pay sums which are stated to be due (in respect of both interim and final accounts) and challenge their “true” value at a later date.
- Service of an invalid pay less notice will not preclude the paying party from later bringing a challenge, although the contractor will (validly) demand that they first pay the claimed sum.
What's the impact?
Contractors are likely to rely on these cases in seeking immediate payment of contractual sums where no valid pay less notice has been served. This increases the importance of understanding the payment provisions of your construction contracts and knowing when it might be necessary to serve a pay less notice. Our insight considers the impact of these recent cases in more detail.
How can we help?
- We have experience of assisting clients to challenge the “true” value of sums which are claimed by contractors.
- We have successfully negotiated settlements of disputes between clients and contractors regarding sums due under JCT contracts, avoiding the need for drawn-out legal proceedings.
- We can help you to navigate the law and understand your contractual obligations.