Introduction

With the exception of the Major Projects Forms, JCT has now issued updates to the entire suite of contracts. Whilst the changes are not as far-reaching as those brought about by previous editions, there are some important and, we consider, helpful amendments to the payment provisions.

Major changes to the payment regime

There are a number of well thought-out amendments to the payment mechanism which aim to streamline payment to ensure earlier payment for subcontractors and sub-subcontractors. Under previous editions, it is usual for the sub-contractors and sub-subcontractors to have to wait for their payment application to be included in the contractor's upstream payment to the client, delaying downstream payment by a month. Now, everything is assessed once per month and paid soon thereafter.

  • JCT have introduced the concept of a "common" Interim Valuation Date ("IVD"). This date is the same in the main contract, the sub-contract and the sub-subcontract.

  • Under the main contract, the IVD is a date chosen by the parties; if one is not chosen, the date one month following the date of possession. The contractor can make an application for payment any time before the IVD. The Due Date is 7 days thereafter and the Final Date for Payment is 14 days following the Due Date. This applies to both interim payments and the final payment (which, under previous editions, was 28 days).

  • Under the sub-contract, the IVD is the same. There is the option to require the sub-contractor to submit its payment application at least 4 days prior to the IVD to ensure that its application for payment is included in the contractor's application, up-stream to the client. The Final Date for Payment has been shortened (from 21 days following the due date to 14 days) to take account of the pushed back Due Date. The main contractor has 5 days after having been put in funds to make payment to the sub-contractor.

  • Under the sub-subcontract, the Valuation Date is the same as the IVD in the main contract and sub-subcontract. Again, the Final Date for Payment has been reduced from 24 days after to 13 days to take account of the extended Due Date. The sub-contractor has a margin of 4 days within which to pay the sub-subcontractor after having received funds.

  • The effect of these changes are most noticeable using a table:

  • Similarly to the 2011 contracts, should the paying party fail to issue a Payment Notice in time, the receiving party's payment application operates as the Payment Notice.

  • Under each of the contracts, the Pay Less Notice is due no later than 5 days before the Final Date for Payment.

Other relevant changes associated with payment

  • Interim applications are to be made up until the due date of the final payment at monthly intervals (rather than monthly up to practical completion and at two-monthly intervals thereafter). The frequency of payment applications is not altered by practical completion.

  • A notified sum is now automatically recoverable as a debt. Whilst we will have to wait and see, the effect of this may be to open up summary judgment as a faster means of securing payment, compared with adjudication.

  • A Contract Administrator/Architect must now assess a claim for loss and/or expense within 28 days of receipt (or, should an update to the initial claim be made, 14 days following this). In order to assist the CA/Architect in achieving this time limit, there is a reciprocal requirement on the contractor to submit its supporting information with the notice, or as soon as reasonably practicable thereafter, as opposed to 'on request'. The JCT Guidance Notes as well as comments from the JCT Drafting Committee suggest, however, that JCT did not intend to create a condition precedent with this requirement. Contractors should be aware of this change in the wording as to how loss and expense should be claimed.

Conclusion

The idea of these new contracts is to regularise the payments within a contract chain and facilitate payment to all tiers of the chain (contractor, subcontractor and sub-subcontractor) within 31 days of the IVD. The only potential difficulty being if the standard-form contracts include bespoke amendments which affect the contractual arrangement either up- or downstream. Care therefore must be taken to carry bespoke amendments in the main contract through to any subcontracts and sub-subcontracts to avoid creating an inconsistent payment regime.

Notwithstanding this, the 2016 JCT contracts have definite potential to speed-up payment and make the system more transparent. As ever however, keeping on top of the time-frames in the JCT contracts is of high importance, otherwise rights can be lost.