Linking the final date for payment to receipt of an invoice is not likely to be compliant with the Housing Grants, Construction and Regeneration Act 1996 (the “Construction Act”)

In the recent case of Rochford Construction v Kilhan Construction ([2020] EWHC 941 (TCC)), the Technology and Construction Court has said (albeit obiter) that the final date for payment cannot be determined by reference to the receipt of an invoice and must be determined by reference to a set period of time from the due date.

Section110(1) of the Construction Act provides that all construction contracts must a) provide an adequate mechanism for determining what payments become due under the contract, and b) provide for a final date for payment in relation to any sum which becomes due.

The contract in this case provided that the final date for payment of any sum would be 30 days from the date of service of a relevant invoice.

The court felt that there was a  key distinction between setting the methodology for determining the due date for a payment, where an adequate mechanism has to be provided, which could be an invoice,  whereas the final date for that payment has to be pegged to the due date. The judge also made the practical point that this provides the payer with some certainty as to how long they have to serve a pay less notice if necessary.

So, be careful when setting out the final date for payment and don’t peg it to the provision of an invoice.

Rochford Construction Ltd v Kilhan Construction Ltd [2020] EWHC 941 (TCC) (12 March 2020) (Cockerill J)

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