Joint Contracts Tribunal (JCT) contracts are the most commonly used standard construction contracts in the UK. JCT payment terms aim to provide a fair, uniform, and predictable framework for the payment of contractors and subcontractors operating in the construction industry. Paradoxically, however, JCT payment terms are a frequent cause of disputes.
Disputes arising from JCT payment terms must be carefully managed to avoid them escalating and threatening a business’s solvency or derailing the project. At Altion Law, our construction dispute solicitors specialise in this niche, complex area of law. We have represented countless construction clients involved in JCT payment terms disputes, securing excellent results on their behalf.
For a confidential free discussion, call us today on 01908 414990, alternatively email us at Hello@altion-law.co.uk or complete our Free Enquiry Form and we will call you back.
What are JCT Payment Terms?
All JCT contracts contain detailed procedures for payments that fall due under them.
At the heart of JCT payment terms is the concept of interim payments. Interim payments are designed to ensure a regular flow of funds to the contractors involved in a project as work progresses.
Some common JCT payment terms include the following:
- Valuation Dates, which are periodic agreed-upon dates when the value of the work undertaken so far will be assessed.
- Interim Applications/Certificates, which are when the contractor submits an application for payment, or a third party, such as a surveyor, issues an interim certificate stating the value of the work undertaken so far.
- Payment Notices, which are notices issued by the payer stating the sums they believe to be due for the work undertaken so far.
- Pay Less Notices, which are notices under which the payer states that they believe they should pay less than the amount detailed in the Payment Notice and explains the reasons for the deduction.
- Final Date for Payment, which is the deadline by which payment must be made.
What are some common problems with JCT Payment Terms?
JCT payment terms are a common cause of disputes between businesses operating in the construction industry. Examples of just some of the types of disputes on which our construction dispute lawyers frequently advise our construction clients include the following:
- Disputes arising from a party’s failure to issue valid notices on time.
JCT payment terms include strict deadlines by which the parties must serve the various notices under the contract. If a party fails to do so or serves an incorrect notice, they may be liable to pay a sum that does not accurately reflect the value of the work done.
Technical breaches of JCT payment terms have given rise to what are known as ‘smash and grab’ adjudications. ‘Smash and grab’ adjudications are when a party to a JCT contract takes advantage of another’s technical breach in not serving a payment notice or, more often, a pay less notice and refers the matter to adjudication, claiming an amount not warranted by the work they have carried out.
- Disputes arising from the parties’ failure to future-proof their JCT payment terms.
JCT payment terms must be carefully considered and future-proofed. If they are not, the chances of the parties becoming embroiled in a dispute are high.
For example, some JCT payment terms state the number of interim payments that will be made during the contract term. If the work remains unfinished when these interim payments run out, the contractor undertaking the work may not be entitled to any further interim payments for the additional work they have undertaken.
- Disputes arising from unclear or contradictory JCT payment terms.
Contracting parties usually amend the JCT payment terms to tailor them to their particular situation. However, disputes can arise when those amendments are unclear or at odds with the original JCT payment terms which are left intact.
For example, the parties may agree to annex a payment schedule to the contract. If the dates and deadlines detailed in that payment schedule do not match those set out in the JCT payment terms in the body of the contract, uncertainty arises over which provisions should prevail. That uncertainty can cause significant disputes between the parties.
How can we help?
JCT payment terms provide businesses operating in the construction industry with a fair and predictable payment framework that ensures cash flow and apportions risk appropriately. However, their implementation is fraught with challenges.
When a dispute over JCT payment terms arises, it must be addressed promptly and decisively to prevent it from escalating and disrupting your cash flow and the project. Our construction dispute solicitors have decades of experience in JCT payment disputes, and we are ideally placed to help you achieve your desired result quickly and cost-efficiently.
For a confidential free discussion, call us today on 01908 414990, alternatively email us at Hello@altion-law.co.uk or complete our Free Enquiry Form and we will call you back.
