Payment

Below is an introduction to the topic of payment. You can also search for your specific topic using the Search box at the top of the page or click on any of the following keywords and phrases: Construction Act; Construction Act review; Housing Grants , Construction and Regeneration Act; payment notice; pay when paid; Scheme; suspension; withholding.

Payment in construction contracts in the United Kingdom is regulated by the 'Construction Act' (Part II of the Housing Grants, Construction and Regeneration Act 1996). The law requires that every construction contract shall provide for the giving of a notice by a party not later than 5 days after the date on which a payment becomes due from him specifying the amount (if any) of the payment and the basis on which that amount was calculated. To the extent that a contract does not contain such provisions, default conditions, the Scheme for Construction Contracts, will apply.

There are also provisions requiring payment by instalments for all but the smallest contracts, allowing parties to suspend their obligations where payment is not made on time (subject to certain conditions) and outlawing 'pay when paid' clauses except in the case of the insolvency higher up the contractual chain.

Part 8 of the Local Democracy, Economic Development and Construction Act 2009 will change the payment regime radically when it comes into force.  This is expected to be in April 2011.

Extent
The Construction Act applies only to construction projects carried out in England, Wales and Scotland and in Northern Ireland by virtue of The Construction Contracts (Northern Ireland) Order 1997.