It鈥檚 best to serve payment and pay less notices on time, especially in a climate where insolvency is common
Different kinds of work always seem to come along like London buses - you don鈥檛 see anything of a particular type for ages and then all of a sudden you get a spate of that kind of job. One of the issues now arising revolves around payment notices and pay less notices under the new Construction Act regime, particularly in the context of this economic climate. The issues seems particularly prevalent and appears to bite harder when there is an insolvency in the equation.
In brief terms, the problems that a number of commentators highlighted with the new legislation was that in the absence of payment notices and/or pay less notices (according to the exact contractual framework) there becomes an obligation to pay the amount applied for or the amount valued without any deduction or set-off. Ordinarily, a number of paying parties seem to consider that this is a risk they can manage because they can 鈥減ut things right鈥� in the next payment cycle.
The two obvious difficulties with this approach are where the payment in question is the last or final payment of the cycle or when the party receiving the money goes into administration or liquidation. At that point, the administration or liquidation almost certainly means the performing party will not be carrying out further work and will not be making a further application for payment or become entitled to a further payment.
Some paying parties consider that when the other party is in administration or insolvent, a clause saying that there is no obligation to pay any further monies will save them from the absence of timely notic