Payment schedule
In construction, a payment schedule (or schedule of payments) is a list of dates setting out when payments will be made by one party to another under the terms of the contract between them. It can also also be linked to the completion or fulfilment of certain pre-agreed activities or stages, at which point payments must be made.
The Housing Grants, Construction and Regeneration Act 1996 was introduced with the purpose of ensuring that payments are made promptly throughout the supply chain and that disputes are resolved swiftly. Among the provisions included in the act was the right to be paid in interim, periodic or stage payments. Amendments made in 2011, established that dates for payments must be set out in the construction contract.
By including a payment schedule in the contract, setting out who needs to do what and by when, the likelihood of parties getting dates wrong (e.g. employer failing to serve a payment notice on time, or a contractor failing to serve an application for payment on the right date), can be reduced, and so disputes are less likely.
A payment schedule will usually include the following details:
- The starting date for the contract.
- The amount to be paid as an initial payment.
- The interval of other payments after the initial payment.
- The timeframe within which the project will be completed.
- The estimated total construction contract amount.
NB: In the case of Grove Developments Ltd v Balfour Beatty Regional Construction Ltd [2016] it was found that because the parties to the contract had not agreed to extend the payment schedule in the event that the works took longer to complete than expected, Balfour Beatty was not entitled to further interim payments and that the Scheme for Construction Contracts did not apply as there had been an adequate mechanism for payment.
As a result of this, contracts should set out how payments will be made if the works continue beyond the timeframe initially anticipated.
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