Barrister, Professor Rudi Klein, gives advice on the process and time-scales for suspending your operations should you encounter payment problems while still working on a live project.
It is now over 25 years ago that I was involved in putting together legislation – the Construction Act – to improve payment practices. You may find it surprising that at that time there was no legal right to suspend performance of your work for non or late payment.
Without such a right there wasn’t an effective way to enforce entitlement.
I wasn’t too popular when I insisted that the government should introduce a statutory right to suspend works for non or late payment.
The government – to my surprise – relented and the upshot was Section 112 in the Construction Act, which established the statutory right to suspend one’s work for non or late payment.
THE 7 DAYS’ NOTICE
The key provision is that you must issue a 7 days’ notice of intention to suspend your contractual obligations. It should be noted that the reference is suspension of your ‘obligations under the contract’. This could be wider than just suspension of the ‘works’ – you could, for example, cease carrying out any design work.
Below is a model notice of suspension:
- Suspension is generally a last resort tactic to be used where due payments are becoming later and later: this could be the result of impending insolvency on your client’s part.
- Always issue the notice – just walking off site without giving any notice is a breach of contract.
- If you have to suspend then make sure that you recover your reasonable costs.
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