The contract must set out an adequate mechanism for determining when payments become due. There is no requirement for the final payment mechanism to be different to the interim payment mechanism.
Under our example contract, the contractor must submit a final statement within three months of practical completion. The due date for payment is one month after the latest of three triggering events: (1) the end of the rectification period, (2) the date of completion of making good, or (3) the date of submission of the final statement. Depending on the project, the date of final payment may be some time after submission of the final statement. The employer is entitled to give the contractor notice disputing anything in the final statement.
Conversely if the contractor fails to provide a final statement, the employer can issue a final statement, having first given the contractor two months' notice of their intention to do so. The contractor may give notice to the employer challenging anything in that final statement.
The final payment is particularly important under our example contract as it provides that interim payments are not conclusive evidence that work undertaken by the contractor is in accordance with the contract. The final statement however, is conclusive evidence that:
- the quality of materials and workmanship are to the employer's reasonable satisfaction (this does not impact the employer's rights relating to any latent defects which are later discovered);
- that any extensions of time due have been given; and
- the reimbursement of any loss or expense due to the contractor is in full and final settlement of all claims arising from a relevant matter.
Parties can go through dispute resolution on the final statement, which will suspend the effect of it until the proceedings are concluded however such proceedings must be commenced within 28 days of the final statement being issued.
If the contract does not make any specific provision for final payment, any contractual terms on payment will apply, so long as they are compliant with the Act. If there are no payment terms, or they are non-compliant, the provisions of the Scheme.
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.
