Payment due date in the construction industry
The Housing Grants, Construction and Regeneration Act (also known as the Construction Act) includes provisions to ensure payments are made promptly throughout the supply chain.
Section 110A(6) of the Act defines the “payment due date” as “…the date provided for by the contract as the date on which the payment is due”.
The payer must issue a payment notice within five days of the due date for payment, even if no amount is due, setting out the sum that the payer considers to be or to have been due at the payment due date, and the basis on which that sum is calculated. Alternatively, if the contract allows, the payee may make an application for payment, which is treated as if it is the payment notice. The payer must issue a pay less notice if they intend to pay less than the amount set out in the payment notice, setting out the basis for its calculation.
The contract must also provide for a final date for payment in relation to any sum which becomes due. The parties are free to agree how long the period is to be between the date on which a sum becomes due and the final date for payment. The payer must pay the notified sum on or before the final date for payment.
If payment is not made on or before the final date for payment the payee can give notice under Section 112 of the Act to suspend performance of the contract.
Under the Scheme for Construction Contracts, if a construction contract fails to provide an adequate mechanism for determining when a payment becomes due, the payment shall become due, that is, payable on the later of 7 days after the assessment date or the making of a claim by the payee. The final date for payment is 17 days after the date that payment became due.
Under the Late Payment of Commercial Debts (Interest) Act 1998 the payment due date is referred to as an 'agreed payment day'.
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Comments
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The 'payment due date' and the 'final date for payment' should not be confused.
Please refer to the defiinition contained in Section 110A(6) of the Housing Grants, Construction and Regeneration Act 1996 'payment due date' means 'the date on which the payment is due' and not the date on which the payment process is invoked. The 'payment due date' is the date by which the payee should receive payment.
The 'final date for payment' is the date after which the payee can give notice under Section 112 of the Act to suspend performance of the contract because the payee has not received payment.
Under The Scheme for Construction Contracts, if a construction contract fails to provide an adequate mechanism for determining when a payment becomes due, the payment shall become due, that is, payable on the later of 7 days after the [assessment date] or the making of a claim by the payee. The 'final date for payment' is 17 days after the date that payment became due.
Moreover, under the Late Payment of Commercial Debts (Interest) Act 1998 the 'payment due date' and not the 'final date for payment' will be an 'agreed payment day' from which statutory interest will begin to run.