Suspension of performance in construction contracts
Construction contracts will generally require that the contractor progresses the works regularly and diligently. There is no common law right that allows suspension of performance of the works, however, there are contractual and statutory provisions under which the contractor may suspend performance.
The Housing Grants, Construction and Regeneration Act 1996 is intended to ensure (amongst other things) that payments are made promptly throughout the supply chain. Its provisions include:
- The right to be paid in interim, periodic or stage payments.
- The right to be informed of the amount due, or any amounts to be withheld.
- The right to suspend performance for non-payment.
Following the 2011 amendments to the Act, parties have the right to suspend performance of any or all contractual obligations when a required payment of a notified sum has not be made. This includes, suspension of part or all of the works, but also other contractual obligations such as the provision of insurance. They will also be entitled to payment for reasonable costs incurred in exercising their right to suspend performance, and to have the period of suspension (and any consequential periods) disregarded when calculating the competition date.
The right to suspend only in relates to the contract for which payment has not been made and the party must not suspend statutory duties. Seven days notice must be given of the intention to suspend performance and the right ceases if the payment is made.
In some forms of construction contract, such as JCT contracts, there are also express terms allowing suspension for failure to make a payment by the due date. There may also be other circumstances in which the contract allow suspension of the works. Clauses dealing with suspension tend to be similar in nature to those dealing with termination. In addition, there may be a right to terminate at end of the period of suspension or if the suspension becomes prolonged, with no prospect of re-commencing. Suspension may be permitted due to a breach of contract by the employer, the employer becoming insolvent, as a result of force majeure, or by agreement between the parties, for example if circumstances make proceeding with the works temporarily impossible, if there are difficulties in determining how to proceed with a project or if the client has difficulty in raising funds to pay for the work to proceed at the speed anticipated by the contract.
It is important to be certain that the circumstances do allow the works to be suspended, and that the correct procedures are being followed. If the employer has exercised some right under the contract to withhold or reduce payment, then wrongfully suspending the works could possibly amount to a repudiatory beach, where one party behaves in such a way that it indicates it no longer intends to accept its obligations under the contract, allowing the innocent party to terminate the contract and to sue for damages. However, in Mayhaven Healthcare Ltd vs Bothma it was found that this is not automatically the case.
The complexity of the situation means it may be necessary to obtain legal advice before suspending performance.
 Related articles in Designing Buildings Wiki
- Breach of contract.
- Extension of time.
- Force majeure.
- Housing Grants, Construction and Regeneration Act .
 External references
- BAILII: Mayhaven Healthcare Ltd vs Bothma.
Featured articles and news
3 ways the world’s fastest growing economies can close the infrastructure gap.
The sooner early warning notices can be appreciated as of mutual benefit rather than one-sided advantage, the better.
BSRIA responds to government green storage announcement.
What is phenomenology and how does it relate to the built environment?
Read about Belgrade's Brutalist landmark - the Western City Gate.
Read about the measures that can be taken by individuals to protect and minimise exposure to outdoor sourced air pollution.
Government announces leaseholds on new-build houses will be banned.
Transport Secretary announces public consultation into London's funding of Crossrail 2.
Have a look at some of the most impressive concert stage designs of all time, including Pink Floyd, U2, Rolling Stones, and more...
What is the Home Quality Mark? Find out how it can help you when buying/renting a new home.
Business Secretary launches £246m Faraday Challenge to establish UK as world leader in battery technology.
Government announces new plans for regulations to improve safety and security awareness of drone users.
Read our introductory article to the various different types of fuel.