Clause Text
As a Condition Precedent to payment, the sub-contractor must add the following statement to all interim applications: "The Sub-Contractor accepts that this Application for payment is not and shall be deemed not to be a Payment Notice for the purposes of the Sub-Contract section 110A of the Housing Grants, Construction and Regeneration Act 1996."
Why is this clause problematic?
It seeks to create a payer-led payment mechanism but in the event that the Contractor fails to issue a Payment Notice on time, arguably the Contractor could rely on the clause as a basis on which not to make payment to the Sub-Contractor.
What were the cost consequences?
In the event of a failure to issue a Payment Notice, an avoidable costly dispute is likely to arise. The Contractor would be seeking to rely on its breach of the Sub-Contract as the basis of its non-payment, i.e. the Contractor would seek to benefit from its own breach. The Clause creates lots of unnecessary ambiguity that could easily lead to disputes and delayed payments. It is likely the clause would be found not to be compatible with the HGCRA or the Sub-Contractor could issue a default Payment Notice without the prescribed wording on its face, but until tested in adjudication the Sub-Contractor will not know which.
Amendment to Standard Form
No, this is from a Contractor's bespoke form of Sub-Contract.
Associated Clauses
None
Relevant Case Reference
The courts have consistently held that if the contract or the document itself says the application is not a payment notice, then it will not count as one. In Jawaby Property Investments Ltd v The Interiors Group Ltd [2016] EWHC 557 (TCC), Carr J emphasised that an interim application must clearly and unambiguously state that it is what it purports to be, otherwise it cannot trigger the statutory regime ([17]; citing Henia Investments v Beck Interiors [2015] BLR 704).
Contract Type
Subcontract
Jurisdiction / Region
England & Wales
Risk Type
Ambiguity / Poor Drafting
Unclear or Disputed Trigger Event
Non-Payment / Late Payment
Imbalanced / One-Sided Terms
Undefined / Poorly Defined Terms
Potentially Unenforceable Clause
Known outcomes?
Led to dispute
Adjudicated
Clause BEE Score
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