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Construction contracts – payment terms

Sub-contractors may not realise that their agreement / contract with the main contractor constitutes a construction contract for the purposes of the Housing Grants Construction and Regeneration Act 1996 (the “Construction Act”). A majority of sub-contracts will constitute such a contract with the main exceptions being contracts for residential occupiers and contracts lasting less than 45 days.

The Construction Act requires that certain provisions are included within all construction contracts as defined by the Act. The most talked about provisions are those related to payment terms.

The Construction Act provides parties to a construction contract with a right to periodic payments throughout the works. If the contract is silent on payment provisions or in the event that the contract provides inadequate, incomplete or non-compliant payment terms the scheme set out in The Scheme for Construction Contracts (England and Wales) Regulations 1998 will apply. The Scheme is therefore a useful default mechanism for payment where the contract is not compliant with the provisions of the Construction Act concerning payment.

Some of the core features of the Scheme are that staged payments are implied into the contract for the ‘relevant period’. If the contract is silent on the relevant period, then it is to be 28 days. Further, an interim payment will fall due on the later of the date of claim by the payee or 7 days after the end of the relevant period. Final payment is then due no later than 30 days after work is completed or upon application for remittance if this dare is later. The last date for payment to be made in time is 17 days from the due date.

Tom Blake, PGM Solicitors
For further advice, contact our specialist team on 01792 468684 or email

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