Construction Act: Default Payment Notices

Given the flexibility in the payment provisions in the amended Construction Act, it will be important to keep an eye over the next few months on how (and if) default payment notices are used.

At present, the drafting trend seems to be to keep the payment provisions as similar as possible to the pre-October regime.  This is often achieved as follows:

  • the Employer should issue a payment notice within a fixed number of days of the Contractor's application for payment
  • If the Employer fails to issue the payment notice, then the Contractor's application for payment is deemed to be the payment notice
  • The Employer must either pay the amount set out in the application for payment or issue a pay less notice
  • A default payment notice is therefore never required in this scenario

Contractors should keep one eye out, though.  Alternative approaches may require a default payment notice in the absence of an Employer's payment notice, in which case payment may not be due until the default payment notice has been served. 

So the changes to the Construction Act might not prove to be too good for Contractors' cashflow!

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