What are the Commonly Used Terms in the Construction Contract Payment Process?

• "days" - calendar days not working days, unless expressly specified to be working days.
• "due date" - does not mean the date when a party is paid but is a reference date for calculating the sum to be paid.
• "final payment" - the final payment due to the contractor which will occur after practical completion of the project and will include the final release of retention.
• "interim payment" - payments which are to be made at regular intervals or after specified stages of work are completed.
• "notified sum" - the amount due for payment stated in the payment notice.
• "payee" - the party receiving payment.
• "payer" - the party making payment.
• "payment notice" - the notice the paying party (usually the employer or contract administrator) must give to the party receiving payment within 5 days of the due date;
• "pay less notice" - the notice the paying party must give to the party receiving payment in order to pay less than the notified sum.
• "pay when paid" - this is often seen in sub-contracts and is an attempt to link the payment under the sub-contract to payment under the main contract.  This type of provision is prohibited.
• "pay when certified" - this is often seen in sub-contracts and is an attempt to link the payment under the sub-contract to a certificate being issued under the main contract.  This type of provision is prohibited.
• "retention" - a contract will allow a certain amount to be retained from each payment to give protection for defects.  Half the retention will normally be released at practical completion with the remainder not being released until the end of the defects liability period and the final account being prepared.
• "the 1996 Act" - the Housing Grants, Construction and Regeneration Act 1996. Also referred to as "the Construction Act".
• "the Act" - the 1996 Act as amended by the Local Democracy, Economic Development and Construction Act 2009.
• "the Scheme" - the Scheme for Construction Contracts (Scotland) 1998 (as amended) which steps in where a construction contract doesn’t comply with the Act.

Next week we will look at non-compliant payment provisions.  If you haven’t read our week one payment blog it can be found here.

Should you require assistance with any aspect of a construction contract, we have a large and experienced construction team who would be happy to discuss this with you.