When and how can you suspend work under a construction contract?
You are likely to be aware that parties to construction contracts have the right to suspend their works in the event of non-payment, but are you equipped to make sure that you are actually entitled to suspend your works and that you have done so in accordance with the contract?
Are you confident that suspension is enough to get in the money that you are owed, and that you have a sufficiently robust overall strategy for securing proper payment?
Suspension under the Construction Act
The Housing Grants, Construction and Regeneration Act 1996 provides that where a notified sum due for payment is not paid by the final date for payment, a party may suspend performance of any or all its obligations under a construction contract after:
- it has given seven days’ notice of its intention to suspend,
- that notice has to state the ground or grounds on which it intends to suspend.
The right to suspend continues until payment is made in full.
What if there are no grounds to suspend or notice to suspend is not validly given?
While suspension can be an extremely effective tool to apply pressure to secure payment, the consequences of wrongly suspending can be severe, including termination and claims for damages for breach of contract. It is therefore extremely important to make sure that suspension is done properly and in accordance with the relevant statutory and contractual provisions.
How and when can you suspend?
Before giving notice of intention to suspend, you must establish that there is in fact a notified sum and it has not been paid by the final date for payment. Doing so requires interrogation of the contractual payment provisions to establish whether they comply with the requirements of the Construction Act and whether any other provisions are instead implied.
Just because the sum that has been certified is less than applied for does not mean that you are entitled to suspend; if the amount certified is the ‘notified sum’ and is paid in time, there is no right to suspend. If, however your application for payment has been made in accordance with the contract and the paying party has not submitted a payment notice or pay less notice in accordance with the relevant statutory and contractual provisions, then your application for payment may be due in full on a ‘default’ basis.
It is also important that any contractual requirements regarding suspension are followed. For example, the contract may require that notices of intention to suspend are given to a certain person, in a certain form, or in a certain manner.
Once a properly issued notice of intention to suspend has expired, you can suspend if payment has still not been made.
Can I suspend work if my payment applications are being undervalued?
No – you cannot suspend just because you disagree with the amount in the other party’s payment notice or there is a big difference between their valuation and what you have applied for in your payment application . If they have paid the amount in the notice, there is no entitlement to suspend.
However, as above, if the contract permits or allows you to make payment applications, your application for payment has been made in accordance with the contract, and the paying party has not submitted a payment notice or pay less notice in accordance with the relevant statutory and contractual provisions, then your application for payment may be due in full on a ‘default’ basis. If that is the case, then you may be entitled to suspend if it is not paid by the final date for payment.
Can I claim additional time and money when suspending my work under a construction contract?
When suspending you should also you claim any other entitlements that accrue as a result. The Construction Act provides that you are entitled to an extension of time and the costs and expenses reasonably incurred as a result of the suspension.
How we can help
CCC are specialists in construction contracts and construction dispute resolution and can advise you on your rights in relation to suspension, identifying whether you are in fact entitled to suspend, advising how to suspend in accordance with the relevant requirements, drafting notice of suspension, and looking at the wider commercial picture to put together a strategy to recover the money that you are owed. We pride ourselves on providing prompt assistance and straightforward advice.
Free initial enquiry
We offer a free one hour consultation for clients , so please do not hesitate to contact us by phone, email or using our contact form to discuss how we can help you in relation to suspension or payment issues more generally.
