In Grove Developments Limited v Balfour Beatty Regional Construction Limited [2016] EWHC 168 (TCC) the Court determined that the contractor was not entitled to further interim payments beyond the set number of interim payments that the parties had agreed pursuant to the building contract.

Summary

The parties entered into a JCT Design and Build Contract, 2011 edition with bespoke amendments. The parties agreed a payment schedule which provided for interim applications, valuations and payment dates in 23 instalments ending on the date of practical completion (as set out under the building contract).

The works failed to reach practical completion by the date set out in the building contract and the contractor issued an interim application number 24 (i.e. a further application outside of the agreed payment schedule). The parties had not agreed the mechanisms regarding future payments.

The employer argued that the contractor was not entitled to issue further applications beyond interim application 23

TCC decision

The TCC declared that the contractor was not entitled to issue any further interim applications than the 23 provided for under the building contract. In coming to this conclusion, Mr Justice Stuart – Smith commented as follows:

a) such a term could not be implied into the building contract, despite the contractor’s contention that it was commercially sensible to do so, on the basis that the possibility of further interim payments in the event of a delay (howsoever caused) was open to the contractor to negotiate at the outset in first agreeing to the payment schedule. He further noted the employer’s position in that its ability to refuse further interim payments could be used as a means of exercising commercial pressure on the contractor to finish on time.

b) the payment procedure set out in the Scheme for Construction Contracts did not apply for future payments as the parties had agreed the payments were to be made pursuant to the agreed schedule and in light of the correspondence between the parties with regard to payments beyond number 23, a revision to those terms was a “pre-condition to a concluded and binding agreement”.

Comment

On this basis, the contractor was not entitled to further interim payments. In such a scenario where the contractor may still be liable to pay sub-contractors in line with more usual payment mechanisms, this will undoubtedly affect the contractor’s cashflow, furthering the importance of ensuring that all eventualities (including delay, howsoever caused) are captured when agreeing a fixed payment schedule.

This article was published to the internet by Nabarro on 08 February 2016

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